Dan Maudlin. Mark Comerford. Investor Presentation, September th Quarter. President and Chief Executive Officer

Transcription

1 Investor Presentation, September th Quarter Mark Comerford President and Chief Executive Officer Dan Maudlin Vice President and Chief Financial Officer

2 Haynes International, Inc. The information contained in this presentation, and in the oral statements made as part of the presentation, may include forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. You should keep in mind that any forward looking statements made by us speak only as of the date on which we make it. Our actual results or actions may differ materially from those discussed in forward looking statements. We have no duty to, and do not intend to, update or revise the forward looking statements in this presentation except as may be required by law. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward looking statements, please refer to our most recent filings with the Securities and Exchange Commission, including the Company s Annual report on Form10 K. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Copyright Presentation and contents of this presentation are copyrighted by Haynes International, Inc. All rights reserved. Copying of this presentation is forbidden without the prior written consent of Haynes International, Inc. Information in this presentation is provided without warranty of any kind, either expressed or implied, including but not limited to the implied warranties of merchantability, fitness for a particular purpose and the timeliness of the information. Presentation and contents of this presentation are not an offer to buy or sell securities of Haynes International, Inc., and Haynes International, Inc. is not soliciting any offer to buy or sell any such securities. 1

3 We operate in the specialty high performance alloy market Nickel and cobalt based b high performance h alloys Primarily flat product producer Specialty high performance alloy flat product sector is 200 million lbs versus a total metals market in excess of a billion tons U.S. producer supplying products to a global customer base Producer of over 50 different alloys in a variety of product forms 19 U.S. patents and approximately 200 foreign counterpart patents High growth, technically demanding end markets Aerospace Land based gas turbine Chemical processing Emerging markets: Solar Power, Ultra Supercritical Boilers, Nuclear, Fuel Cells Positive industry dynamics and customer requirements Direct to customer sales model Recurring MRO business Increasing customer demand for value added processing services 2

4 Our products We are an innovative, market leading producer of high performance nickel and cobalt based based alloys used in corrosion and high temperature applications. Revenue by Alloy Application (FY 2014) Revenue by Alloy Product Forms (FY 2014) 25% 75% Hightemperature Alloys 42% Corrosionresistant Alloys 58% Flat Product (sheet, plate, coil) Forgings, Billet, Bar, Wire, Tube Our products serve in demanding applications in corrosive or high temperature environments. We provide a variety of product forms with a majority being flat products including: sheet, coil, plate and shapes that are cut to customer specifications. 3

5 We have a unique business model Manufacturing support at mill level Distribution through service centers Cultivate closer customer relationships to help customers solve technical issues Increase value added capabilities Net Revenues by Route to Market (FY 2014) 22% Moving up the customer supply chain Faster response times 78% Facilitate MRO business Create barriers to entry Our service centers allow customers to outsource non core activities iti Working capital management Material processing/cutting Technical support Problem solving New application development New alloy development Direct to Customer Sales Distribution & Sales Agents Net Revenues by Mill/Service Center (FY 2014) 33% Mill Direct Sales 67% Service Center Sales Our unique business model generates strong customer relationships and results in high customer retention ti rates 4

6 Global presence facilitates superior customer service Our locations are well positioned to supply value added services to both existing and emerging areas of growth Only high performance alloy manufacturer operating its own service centers with locations in North America, Europe and Asia Our Facility Locations U.S. Production Facilities Kokomo, Indiana Arcadia, Louisiana Mountain Home, North Carolina Europe Service and Sales Centers Openshaw, England Cedex, France Zurich, Switzerland Milan, Italy Openshaw, England La Mirada, CA Houston, TX Lebanon & Kokomo, IN Windsor, CT Mountain Home, NC Arcadia, LA Cedex, France Zurich, Switzerland Milan, Italy Shanghai, China Tokyo, Japan U.S. Service Centers Lebanon, Indiana Windsor, Connecticut Houston, Texas La Mirada, California Chennai, India Singapore Asia Service and Sales Centers Shanghai, China Singapore Chennai, India Tokyo, Japan 5

7 We have exposure to diverse set of worldwide markets Geographic diversity of sales offsets risk of regional performance Approximately 43% of net revenues are to customers outside of the U.S. International sales / growth through strategic positioning of service and sales centers Market diversity offsets risk of individual market performance Net revenues balanced over multiple end markets Other markets increasing promotes more diverse market exposure Net Revenues by Region (FY 2014) Net Revenues by End Market (FY 2014) China 8% ROW Other 13% Europe 13% 22% Land based Gas Turbines 19% United States Chemical 57% Processing 25% Aerospace 43% Other reflects 3% of non product revenue. 6

8 Aerospace is our largest market Commercial airplane build rates are the primary driver of OEM demand Commercial aerospace backlogs are at record levels MRO market provides a recurring base of business which is increasing Global passenger air traffic projected annual growth rate: 5.0% (1) ; Global cargo air traffic projected annual growth rate: 4.7% 47% (1) Asia/China are expected to be the major growth zones (1) Boeing Current Market Outlook 2014 Haynes Annual Revenue and Pounds Shipped Commercial Aircraft Engines in Service In Millions $250 Revenue $200 $160.0 $150 $138.4 $ $50 $203.5 Pounds $ $197.1 $ Engines in service 70, ,000 50,000 40,000 $0 FY09 FY10 FY11 FY12 FY13 FY , Source: FY2013 and FY2014 Form 10-K Source: Airline Monitor July

9 Aerospace market trends Solid Potential for both Short term and Long term Outlook Airbus & Boeing have a combined backlog The commercial aircraft fleet is expected to of about 11,000 aircraft (7 8 years). (1) grow an average 3.6% per year and double in size from 20,910 aircraft today to 42,180 Increased fuel efficiency and reduced emissions driving new engine technology. Hotter engine cores requiring more advanced alloys are being developed. in (2) The industry will need 36,770 new aircraft at $5.2 trillion needed over next 20 years (2) (1) Airline Monitor, June 2014 (2) Boeing Current Market Outlook

10 Our alloys are used in a strong suite of Aerospace applications Hot Section rings, seals, cases Hot Section rings seals cases HAYNES 214, 242, 263, 282, 625, 718, HASTELLOY X and Waspaloy alloys Diagram by Jeff Dahl used courtesy of under GNU Free Documentation License v.1.2 Exhaust section Combustors 25, 188, 282, 625, 718, X, Waspaloy and HAYNES 230, 188, 263, 617, 625, and R 41 ll R 41 alloys HASTELLOY X alloys 4th Qtr. FY2014 9

11 Chemical Processing Industry Large, existing North American, Asian and European markets driving a base MRO business Demand largely follows GDP growth however global chemical industry growth will be led by US low prices for natural gas and natural gas liquids The American Chemistry Council reports that the cost benefit from low cost shale gas in the US is propelling a wave of new chemical capacity. Following a decade of lost competiveness, American chemistry is reemerging as a growth industry. The trade balance in chemistry has reversed from a deficit position to one of surplus 135 chemical projects announced in the US worth more than $90 billion Haynes Annual Revenue and Pounds Shipped Global Capital Spending $B/Yr. In Millions $250.0 Revenue Pounds $200.0 $150.0 $150.0 $109.7 $134.6 $124.1 $113.4 $100.0 $ $ $0.0 FY09 FY10 FY11 FY12 FY13 FY $325.6 $385.3 $413.3 $438.8 $467.7 $504.3 $542.7 $580.4 $ Global Capital Spending $B Source: FY2013 and FY2014 Form 10-K Source: American Chemistry Council December

12 Chemical processing applications and alloys HASTELLOY C-22 alloy for centrifuge pharmaceutical processing HASTELLOY G-35 and G-30 alloys for phosphoric acid evaporators HASTELLOY B-3 and C-276 alloys in acetic acid plant HASTELLOY C-2000 alloy reactor for pharmaceutical processing 11

13 Land based gas turbine market Over the next 10 years, 11,613 gas turbines (excluding microturbines) are forecast to be built at a value of almost $146.9 Billion. (1) Continued emphasis on increasing efficiency and reduced emissions. Higher operating temperatures require more advanced alloys. Readily available natural gas has created a major shift in the power industry, with most major power producers expecting to more generation from natural gas. (2) By 2038, natural gas will account for 50.5% 5% of U.S. power production, up from 25% this year, while coal's share of the generation pie will drop to 21%, down from 39% in (2) (1)Reference: Forecast International, September 2013 Data (2)Reference: Russell Ray, The Shift to Natural Gas: Steady but Slow, Power Engineering, 16 May 2014 Haynes Annual Revenue and Pounds Shipped Siemens press picture SGT5 4000F Land Based Gas Turbine HASTELLOY X alloy and HAYNES 718 alloy World Installed Capacity by Fuel Type In Mllo Millions $250 Revenue Pounds 20 $200 $150 $100 $50 $0 $119.2 $102.0 $ $98.2 $86.7 $ FY09 FY10 FY11 FY12 FY13 FY Source: FY2013 and FY2014 Form 10-K 12

14 Land based gas turbine applications and alloys HAYNES HR 120 and 230 alloys for micro turbines HAYNES 263 alloy transition section for hot gas path HAYNES 230 alloy hot gas casing HASTELLOY X alloy combustor can 13

15 Emerging technologies applications and alloys HASTELLOY C 22HS alloy for oil and gas production Photograph courtesy of SolarReserve 2013 Used by permission HAYNES alloys enable advanced concentrated solar power plants to provide environmentally clean and efficient electricity into the evening hours after sunset. HAYNES 230 and 625 alloys selected for solid oxide fuel cell systems. 14

16 Leader in developing new alloys and identifying new applications Competitive advantage Industry leader in developing new high performance alloys Since 2000, our technical programs have yielded eight new proprietary alloys. We have new alloys under development New applications represent potential future commercial value Solar power Fuel cells Automotive diesel turbo chargers Fuel injectors Aerospace/power generation Pharmaceutical Solid oxide fuel cells Nuclear Sulfuric acid coolers Calciner applications Oil & gas Fasteners Ultra supercritical boilers 15

17 Strong relationships across broad blue chip customer base Customers are industry leaders with proven, sustainable business models Supply chain initiatives, service center support and value added service Provide new products, material solutions, technical support, forming and fabrication know how through a direct sales force Aerospace Chemical Processing Land Based Gas Turbines Boeing BASF ALSTOM General Electric Pratt & Whitney Rolls Royce Snecma Bayer British Petroleum Dow Chemical DuPont Eli Lilly General Electric Rolls Royce Siemens Solar Turbines No customer accounts for more than 10% of sales, and in fiscal 2013 the top 20 customers accounted for approximately 34% of sales 16

18 Manufacturinghigh performance superalloys Superalloys demand a longer and more complex multi stage manufacturing process than commodity stainless grades and carbon steels Certain alloys may undergo 40 or more distinct stages of production Tight controls We are one of the few manufacturers with the requisite know how and facilities to produce superalloys Our four high steckel mill is one of the most powerful mills used to roll highperformance superalloys We are uniquely positioned to supply customers with value added products that meet demanding precise specifications Competitive advantage Higher margin potential Haynes s Kokomo mill is capable of generating approximately 12 million pounds of separating force and rolling plate and sheet up to 72 wide. 17

19 Our manufacturing process Basic Steps Product Form Melt/ Re melt Forging Forgings/ Billet Bar/Wire Tubular/ Fittings All products go through melt and re melt Round/long products go through forging 4 Hi Rolling Mill/Reheat Furnaces MKW 100/Annealing Furnaces Hot rolling process for sheet and plate (other than finishing) Plate Plate capacity at current market mix is approximately 6.0 million pounds Product Form Coil Sheet Cut Parts Sheet capacity at current market mix is approximately 12.0 million pounds 18

20 Capital improvements are expected to yield substantial benefits Strategic Capital Spending Projects Fiscal Years 2012 through 2015 Process Projects $MM Tubular Arcadia Flat Product Kokomo IT System Global Pilger Mill Vacuum Furnace Ultrasonic Testing Equip Furnaces Furnace Controls (all) ESR upgrade Plate stretcher $37 24 Growth Capital Tubular revenue $50.0 million plus Flat product 4.0 million pounds ROIC in excess of 40% Gross margin percentage improvement of 200 to 400 basis points IT System Upgrade Singe Global Financial Reporting System Scalable/versatile support of manufacturing, distribution and service Improved production planning and finite scheduling capability Distribution (Sheet Processing) Stretch level line Global l System Upgrade Cut tto length Finance 12 Laser and Waterjet Manufacturing All projects increase efficiency and improve working capital management Reduced operating and maintenance costs Improved quality Accelerated product flow 19

21 Financial overview and strategy Strong financial position with flexibility to fund growth Capacity and margin expansion potential Built strong balance sheet with positive cash flow $45.9 million of cash and no debt as of September 30, 2014 Revolver with availability of over $100 million Working Capital High performance alloy industry has long production cycles/working capital cycles. Long term inventory strategic plan initiated to improve inventory turns New capital programs designed to increase capacity and expand margin Lean manufacturing and spending improvements implemented over all business Creating value for the future Continued capital investment New alloy development Initiated and increased dividend Focus on increasing shareholder value Backlog Dollars Pounds 10.0 Backlog ($ milli ons) $ Pounds (000 0s) Business conditions are improving. Backlog increased 32.8% during fiscal We are seeing strength in most of target end markets. 20

22 Quarter over quarter P&L trends Trend of Quarterly Profitability for Fiscal 2010 (dollars in millions) Dec 31, 2009 Mar 31, 2010 Jun 30, 2010 Sep 30, 2010 FY 2010 Net Revenues $81.0 $94.6 $101.3 $104.6 $381.5 Gross Profit Margin $ 6.8 $10.2 $ 16.9 $ 19.9 $ 53.8 Gross Profit Margin % 8.5% 10.8% 16.6% 19.1% 14.1% Net Income $ (1.3) $ 1.0 $ 3.7 $ 5.5 $ 8.9 Trend of Quarterly Profitability for Fiscal 2011 (dollars in millions) Dec 31, 2010 Mar 31, 2011 Jun 30, 2011 Sep 30, 2011 FY 2011 Net Revenues $106.4 $139.1 $143.1 $154.3 $542.9 Q1 Q2 FY14: reduced demand and selling prices due to nickel market prices and intense competitive pricing. Customer demand is beginning to solidify, Gross Profit Margin $ 17.9 $ 20.6 $ 25.3 $ 30.0 $ 93.8 Gross Profit Margin % 16.8% 14.8% 17.7% 7% 19.4% 17.3% destocking within the Net Income $ 5.2 $ 6.2 $ 8.4 $ 11.3 $ 31.1 aerospace and landbased Trend of Quarterly Profitability for Fiscal 2012 gas turbine supply (dollars in millions) Dec 31, 2011 Mar 31, 2012 Jun 30, 2012 Sep 30, 2012 chains has subsided, and FY 2012 the market price of Net Revenues $128.9 $158.9 $141.6 $ $579.6 nickel increased. Gross Profit Margin $ 23.5 $ 34.5 $ 32.4 $ 30.4 $ Margin compression in Q1 FY14 began to lessen in the Q2 and Q3 due to increased volumes Gross Profit Margin % 18.2% 21.7% 22.9% 20.2% 20.9% Net Income $ 8.4 $ 15.2 $ 13.7 $ 12.9 $ 50.2 Trend of Quarterly Profitability for Fiscal 2013 (dollars in millions) Dec Mar Jun Sep FY 2013 processed through the ( ) Dec 31, 2012 Mar 31, 2013 Jun 30, 2013 Sep 30, 2013 FY 2013 Net Revenues $114.3 $129.2 $123.6 $115.7 $482.7 Gross Profit Margin $ 18.8 $ 20.1 $ 18.6 $ 16.2 $ 73.6 Gross Profit Margin % 16.4% 15.5% 15.1% 14.0% 15.3% Net Income $ 5.8 $ 6.4 $ 5.3 $ 4.0 $ 21.6 Trend of Quarterly Profitability for Fiscal 2014 (dollars in millions) Dec 31, 2013 Mar 31, 2014 Jun 30, 2014 Sep 30, 2014 FY 2014 Net Revenues $93.7 $115.4 $126.3 $120.1 $455.4 Gross Profit Margin $ 5.3 $ 9.1 $ 14.1 $ 18.9 $ 47.3 Gross Profit Margin % 5.6% 7.9% 11.1% 15.8% 10.4% Net Income (loss) $ (3.5) $ (1.2) $ 2.1 $ 6.4 $ 3.8 Source: FY2010, FY2011, FY2012, FY2013 and FY2014 Form 10-K mill and improved absorption resulting in a margin expansion. Business conditions are improving. Announced price increases are expanding margins in the 2 nd half of year. 21

23 Financial performance Net Revenues Operating Income $600.0 $500.0 $542.9 $579.6 $482.7 $455.4 $80.0 $76.9 $ $60.0 $400.0 $381.5 $ $49.3 $300.0 $200.0 $40.0 $30.0 $20.0 $15.5 $32.0 $100.0 $10.0 $5.0 $ $ ASP $21.41 $22.97 $24.78 $22.94 $21.02 HPA # s Note: Dollars and pounds in millions. ASP is dollars per Acquired pound. by Cabot Corporation Operating income recovery is expected to continue over the course of fiscal 2015 as pricing continues to strengthen and volumes 2004 continue to improve. Reorganized as Haynes International, Inc. 22

24 Liquidity Sources of Cash Cash on hand at September 30, 2014 of $45.9 million and revolver debt of zero ($MM) $80.0 Cash provided by operations for FY2014 was $26.9 million $70.0 Credit facility availability of greater than $100 million $ $50.0 Haynes International Inc. Liquidity Cash From Operations Cash Revolver Debt $73.4 $68.3 $60.1 $46.7 $45.9 Future Uses of Cash Strategic capital expenditure plan $39.7 million FY14 and forecasted at $22.0 million for FY15 (excluding purchase of Leveltek, Laporte assets) Regular quarterly dividend of $0.22 per share $10.9 million on annualized basis Funding of pension plan and medical retiree obligations $ $30.0 $ $10.0 $0.0 0 $19.6 $20.8 $26.9 $0.0 $0.0 $0.0 $ CapEx $14.4 $25.9 $41.6 $ 39.7 Historically Since September 30, 2006 to September 30, 2014, we invested $181 million in capital expenditures, retired $117 million of debt, paid $52 million in dividends, paid $127 million into the Company s Pension and Retiree Healthcare plans and grew our cash position by $40 million. 23

25 Strong balance sheet Remained debt free with continued investment in capital expenditures (in millions) Summary Balance Sheet FY2010 FY2011 FY2012 FY2013 FY2014 Cash $ 64.0 $ 60.1 $ 46.7 $ 68.3 $ 45.9 Accounts Receivable Inventory PP&E, Net Other Intangibles Other Assets Total Assets $ $ $ $ $ Accounts Payable & Accruals $ 50.1 $ 68.8 $ 52.6 $ 41.3 $ 55.2 Revolving CreditFacilities Pension and postretirement Other Liabilities Equity Total Liabilities and Equity $ $ $ $ $ Source: FY2010, FY2011, FY2012, FY2013 and FY2014 Form 10-K; 24

26 We are positioned for long term growth We are a market leader in the specialty high performance alloy market Serving diverse geographic and end markets with long term relationships with our broad blue chip customer base Our unique business model facilitates strong customer service and retention Mill manufactured products Service and sales centers Value added processing services New application development Strong research and development program Our continual development of patent protected alloys puts us in the position of market leader We continue to make strategic investments to expand product capability, services, manufacturing capabilities and margins Financially positioned to meet our challenges successfully and achieve our goal of enhanced shareholder value 25