Investor Presentation January 2016

Transcription

1 Investor Presentation

2 Forward-Looking Statements This presentation contains certain forward-looking statements and information relating to S.A. and its subsidiaries (collectively, ) that are based on the current beliefs of its management as well as assumptions made by and information currently available to. Such statements reflect the current views of with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic, political conditions in the countries in which does business or other countries which have an impact on s business activities and investments, changes in interest rates, changes in inflation rates, changes in exchange rates, the degree of growth and the number of consumers in the markets in which operates and sells its products, changes in steel demand and prices, changes in raw material and energy prices or difficulties in acquiring raw materials or energy supply cut-offs, changes in business strategy and various other factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or targeted. does not intend, and does not assume any obligation, to update these forward-looking statements. 2

3 Profile and Markets 3

4 s Profile A leading steel company in Latin America Net sales of USD 8.7 billion Finished products capacity of 11.0 million tons Industrial facilities in Mexico, Argentina, USA, Colombia and Central America Vertically integrated, from iron ore mines to service centers Focus on high value-added products Participation in Usiminas 1 control group Steel Shipments (9M 2015) Mexico 62% Other Markets 12% Southern Region 2 26% 1 Usiminas: a leading steel company in the Brazilian flat steel market 2 Southern Region encompasses the steel markets of Argentina, Bolivia, Chile, Paraguay and Uruguay 4

5 s Profile Strengths Superior results based on: Focus on high margin value-added products Flexible production configuration Diversified cost structure Upstream and downstream integration Best practices Broad distribution network Innovative culture, industrial expertise and long-term view 5

6 Steel Markets Latin America in the World Steel consumption growth expected in s main markets in Low steel use per capita in Latin America represents an opportunity for China and CIS are the main steel exporters in the world World Americas Apparent steel use (ASU) ASU/capita y-o-y growth rate (kg) China -3.3% -3.5% -2.0% 486 World ex-china 4.5% -0.2% 2.9% 142 USA 11.7% -2.9% 1.3% 324 Mexico 11.7% 5.0% 3.8% 193 Brazil -8.6% -12.9% 0.9% 110 Argentina -1.1% 3.0% -0.3% 121 Other 2.9% -7.3% 4.2% 109 Nafta 162 Steel nominal overcapacity (million tons) South America Europe CIS Ref: (million tons) Crude steel capacity Crude steel use Overcapacity RoW China Japan Source: worldsteel (October 2015), 6

7 Steel Markets Latin American main markets Latin America s largest markets are Mexico, Brazil, Argentina and Colombia: 67% of population 71% of GDP 77% of steel use Import substitution potential (direct and indirect) Mexico is one of the most dynamic manufacturing hubs in the world Steel consumption (million tons) 15.3 Mexico Brazil Argentina Colombia CAGR 4.4% 16.8 CAGR 2.9% CAGR 3.4% CAGR 4.8% Import share (%) 35% Source: worldsteel, Alacero 15% 16% 60% 7

8 Market Focus - Mexico Overview Healthy economic activity Steel shipments in Mexico (million tons) s steel shipments in Mexico up 8% in 9M 2015 versus 9M Vehicle production up 6% in 2015 versus 2014 Cement production up 10% in 9M 2015 versus 9M Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Vehicle production ( 000 units) Cement production (million tons) Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Source: AMIA, INEGI and 8

9 Market Focus - Mexico Solid steel consumption growth Highest apparent steel use per capita in the region (189 kg) Strong link to the US manufacturing industry Substantial opportunities for import substitution Largest automotive industry in Latin America National Infrastructure Plan ASU per capita (kg) Mexican Flat Steel Market (mt) 153 CAGR: 4.1% f Source: Canacero Industrial Commercial 9

10 Market Focus - Mexico s differentiation based on products and services Strengthened positioning in Mexican industrial market through: New products development Certification of new steel grades Consolidation of operations in Pesquería and Tenigal facilities Enhanced IT tools Increasing demand for high-end steel products Increasing shipments to industrial customers through import substitution TX s automotive certifications Ongoing Certified Note: number of product certification by process and customer (accumulated) Shipments to industrial customers (million tons) Regional commercial approach to leading industrial customers

11 Market Focus - Mexico is the largest supplier to the auto industry Among the fastest growing auto industries in the world Light vehicle production in Mexico (million units) Growth coming from competitive labor cost and free trade agreements Production of 5 million units per year expected by 2020 Investments encompass all the automotive value chain Growing local research and development capabilities Opportunities for import substitution in the automotive coated steel market Source: IHS 11

12 Market Focus - Mexico Enhancing our service offering in the commercial market s distribution network in Mexico s distribution network High-margin market resulting from customization and service Shipments (mt) +17% Active customers +26% Value coming from branding, local presence and logistics management High entry barrier against imports Full product range Nationwide coverage through regional distributors Positive momentum in the construction market Enhancing service through IT developments Source: Inegi Construction GDP in Mexico (y/y growth) 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10%

13 Market Focus - Argentina Overview Government change in Argentina Mauricio Macri, leader of the opposition coalition Cambiemos, took office on December 10 th, 2015 Steel shipments in Southern Region ( 000 tons) Argentina Other Return to a dirty float exchange rate system and significant devaluation of the Argentine peso Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Vehicle production ( 000 units) Cement production (million tons) Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Source: AFCP, ADEFA and 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 13

14 Performance 14

15 Performance: Sustainable Growth, Resilient Profitability and Solid Financial Position Shipments reached 9.4 millions tons in 2014 Average EBITDA per ton * of USD156 over the last six years Net debt of USD1.3 billion, equivalent to 1.2 times last 12 months EBITDA EBITDA (USD million) ,648 1,418 EBITDA per ton* (USD) ,487 1,471 1, Steel shipments (million tons) Net debt (cash) position (USD billion) * Consolidated EBITDA divided by steel shipments Sep-15 15

16 Performance Capex: focus on differentiation and cost reduction Market positioning in high-end and value-added products Automotive hot-dip galvanizing mill (Tenigal) Pesquería cold-rolling mill Slab caster and vacuum degassing station in Argentina Hot-dip galvanizing debottlenecking in Argentina Service centers expansion Cost reduction initiatives Participation in Techgen (new power plant) Coking facilities expansion Capital Expenditures (USD million) 1, M 2015 High-end investment plan 16

17 Performance Quarterly results Steel shipments Mexico Southern Region Other Markets EBITDA (USD million) Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 EBITDA Margin EBITDA per ton * 25% (% of net sales) 240 (USD) 20% 15% 10% 18% 19% 15% 19% 14% 15% 11% 13% % % 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 0 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 * Consolidated EBITDA divided by steel shipments 17

18 Performance US steel market Steel price benchmarks (hot rolled coils) Scrap price benchmark (shredded USA Midwest) 800 Europe domestic (USD/ton) US domestic (USD/ton) 450 USD/long ton Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 US steel imports US service center inventory Million tons Months of supply 4.2 Million tons Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Source: Metal Bulletin / Steel Business Briefing / MSCI / US Census Bureau / estimates

19 Performance Input costs Iron ore IODEX CFR North China (USD/ton) Slab price FOB Black Sea (USD/ton) Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Hard Coking Coal Contract (USD/ton) FOB Natural gas - Henry Hub (USD/mmbtu) Spot Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Source: Metal Bulletin / Steel Business Briefing / Bloomberg 19

20 Performance Flexible production configuration and diversified cost structure s mix of technologies provides flexibility to adapt to changing market environments Diversified cost structure supports margin stability Purchased Slabs Slab processing Iron ore Natural gas DRI EAF CC DRI/EAF 38% 34% Electricity BF BOF CC 28% Iron ore Coking coal BF/BOF Notes: DRI: Direct reduced iron EAF: Electric arc furnace BF: Blast furnace BOF: Basic oxygen furnace CC: Continuous caster 20

21 Performance New power plant to strengthen s Mexican steel mills among the largest private energy consumers in Mexico Techgen: new 900 MW combined cycle power plant in Pesquería, Monterrey Owned 48% by, 30% by Tecpetrol and 22% by Tenaris and Tenaris will contract 78% and 22%, respectively, of Techgen s power capacity Project to be completed by the end of 2016 at a cost of USD1.1 billion 21

22 Conclusion 22

23 Conclusion s Strategic Agenda Our Focus Our Objectives Leader in attractive markets, high market share Expansion in North America, mainly Mexico Focus on value-added products Increase high-end product offering Differentiation Profit sustainability Growth Slabs supply strategy Operational excellence Shareholder value 23

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25 Appendix Corporate Structure Production Capacity Production Configuration Shipments and Net Sales Income Statement Cash Flow Statement Balance Sheet 25

26 Corporate Structure Techint Group: 62% Tenaris: 11% (treasury shares): 2% Public: 24% Subsidiaries Joint operations Non-consolidated company 71% 61% México 29% Siderar 39% Other 100% Las Encinas 50% Peña Colorada 50% 6% 1 27% 1 Usiminas CEU: 7% 1 ArcelorMittal Nippon Steel & Sumitomo Metal: 29% 1 TenarisConfab: 5% 1 Other (ordinary shares): 26% 1 51% 49% Nippon Steel & Economic participation Tenigal Sumitomo Metal Direct Indirect Total 100% Ferrasa Mexico 71% 17% 89% Siderar 61% 61% 100% Usiminas 2 13% 2% 15% USA Tenigal 51% 51% 100% Ferrasa 100% 100% Guatemala TX Guatemala 100% 100% 48% 30% TX USA 100% 100% Techgen Tecpetrol Las Encinas 71% 17% 89% 22% Peña Colorada 36% 9% 45% 50% 50% 1 Participation based on ordinary shares distributed Exiros Tenaris 2 Participation based on total shares distributed 26

27 Production Capacity s main steel production facilities are located in Mexico and Argentina México Argentina Other (1) Total Production Capacity (*) (million metric tons per year) slabs billets Crude steel coils rebars & wire rods Hot rolled Cold rolled coils Tinplated products Galvanized products Pre-painted products Service center (1) Southern US, Colombia and Central America (*) As of year-end

28 Production Configuration s facilities provide flexibility Mexico Argentina Natural Gas Proprietary Iron Ore Mines Pellet Iron Ore (Corumba, Atlantic) Coking Coal Pet Coke Scrap Direct Reduction (2.7 mtpy) Market Concentrate Sales Continuous Casting 1 (3.9 mtpy) Round Bar / Billet Sales Blast Furnaces (3.2 mtpy) Slab Purchases Continuous Casting (5.6 mtpy) Flat/Long Hot Rolling (3.4 mtpy) Hot Strip Mills (3.7 mtpy) Slab Sales Hot Strip Mill (2.9 mtpy) Value Adding Processes Value Adding Processes Domestic & Regional Market Domestic & Regional Market 1 Includes a scrap-only long steel manufacturing facility with capacity of 0.7 mtpy 28

29 Shipments and Net Sales Third quarter and first nine months of 2015 (1) The item "Other products" primarily includes pig iron. 3Q Q 2014 Dif. 3Q Q 2014 Dif. 3Q Q 2014 Dif. Mexico 1, , % 1, , % % Southern Region % % 1,010 1,074-6% Other Markets % % % Total steel products 1, , % 2, , % % Other products (1) % Total steel segment 1, , % Total mining segment % , % % Total intersegment eliminations (50.7) (74.9) Total steel and mining segments 1, , % Net Sales (million USD) Shipments (thousand tons) Revenue / ton (USD/ton) 9M M 2014 Dif. 9M M 2014 Dif. 9M M 2014 Dif. Mexico 3, , % 4, , % % Southern Region 1, , % 1, , % 1,004 1,056-5% Other Markets % % % Total steel products 6, , % 7, , % % Other products (1) % Total steel segment 6, , % Total mining segment % 2, , % % Total intersegment eliminations (156.0) (221.1) Total steel and mining segments 6, , % Net Sales (million USD) Shipments (thousand tons) Revenue / ton (USD/ton) 29

30 Shipments and Net Sales Full year 2014 and 2013 Net Sales (million USD) Shipments (thousand tons) Revenue / ton (USD/ton) Dif Dif Dif. Mexico 4, , % 5, , % % Southern Region 2, , % 2, , % 1,052 1,118-6% Other Markets 1, , % 1, , % % Total steel products 8, , % 9, , % % Other products (1) % Total steel segment 8, , % Total mining segment % 3, , % % Total intersegment eliminations (287.6) (316.4) Total steel and mining segments 8, , % (1) The item "Other products" primarily includes pig iron and pre-engineered metal building systems. 30

31 Income Statement USD million 3Q Q 2014* 9M M 2014* 2014* 2013 (Unaudited) (Unaudited) Net sales 1, , , , , ,530.0 Cost of sales (1,620.8) (1,759.7) (5,038.9) (5,160.1) (6,925.2) (6,600.3) Gross profit , , , ,929.7 Selling, general and administrative expenses (188.0) (206.2) (590.2) (614.8) (816.5) (843.3) Other operating income, net Operating income , ,109.4 Finance expense (23.4) (35.0) (71.9) (89.8) (117.9) (132.1) Finance income (2.4) Other financial income (expenses), net (1.0) Equity in (losses) earnings of non-consolidated companies (48.8) (748.8) (59.4) (746.5) (751.8) (31.6) Profit before income tax expense 71.8 (456.8) Income tax expense (31.8) (87.3) (156.1) (215.8) (339.1) (349.4) Profit (Loss) for the period 40.0 (544.1) (175.6) (104.2) Attributable to: Owners of the parent 24.8 (530.9) (251.8) (198.8) Non-controlling interest 15.2 (13.2) Profit (Loss) for the period 40.0 (544.1) (175.6) (104.2) * Restated in May

32 Cash Flow Statement USD million 3Q Q 2014* 9M M 2014* 2014* 2013 (Unaudited) (Unaudited) Profit (Loss) for the period 40.0 (544.1) (175.6) (104.2) Adjustments for: Depreciation and amortization Equity in losses (earnings) of non-consolidated companies Changes in provisions Net foreign exchange results and others Interest accruals less payments (3.2) 2.2 (0.7) (16.9) Income tax accruals less payments (20.9) 13.1 (44.4) (64.9) (39.5) (24.2) Results on the sale of participation in subsidiary company Changes in working capital 73.6 (48.7) (553.2) (551.0) Net cash provided by (used in) operating activities , ,092.2 Capital expenditures (115.3) (94.8) (342.8) (334.8) (443.5) (883.3) Proceeds from the sale of property, plant & equipment Sale of participation in subsidiary company, net of cash disposed - - (0.7) Acquisition of business/stake - Purchase consideration Usiminas (249.0) - Investment in non-consolidated companies - Techgen (3.0) (3.0) - Dividends received from non-consolidated companies Loans to non-consolidated companies (Increase) Decrease in Other Investments (1.8) Net cash (used in) by investing activities (97.7) (28.2) (342.1) (272.1) (675.8) (882.8) Dividends paid in cash to company's shareholders - - (176.7) (147.2) (147.2) (127.6) Dividends paid in cash by subsidiary companies - - (32.7) (33.6) (33.6) (66.7) Acquisition of non-controlling interest - - (74.0) - - (0.9) Contributions from non-controlling shareholders in consolidated subsidiaries Proceeds from borrowings , ,863.9 Repayments of borrowings (496.5) (332.9) (1,108.8) (581.5) (773.4) (2,134.7) Net cash (used in) provided by financing activities (216.8) (145.5) (679.7) (466.1) (Decrease) Increase in cash and cash equivalents (63.1) (11.8) 44.7 (85.4) (256.7) * Restated in May

33 Balance Sheet USD million September 30, 2015 December 31, 2014* USD million September 30, 2015 December 31, 2014* Property, plant and equipment, net 4, ,481.0 Capital and reserves attributable to the owners of the parent 4, ,697.2 Intangible assets, net Non- controlling interest Investments in non-consolidated companies Total Equity 5, ,634.7 Derivative financial instruments - - Provisions Deferred tax assets Deferred tax liabilities Rec eivables, net Other liabilities Trade rec eivables, net Trade payables Total non- current assets 5, ,257.3 Borrowings Total non-current liabilities 1, ,880.1 Rec eivables Derivative financial instruments Current income tax liabilities Inventories, net 1, ,134.0 Other liabilities Trade rec eivables, net Trade payables Other investments Derivative financ ial instruments Cash and cash equivalents Borrowings ,264.2 Total current assets 2, ,334.1 Total current liabilities 1, ,091.4 Non-current assets c lassified as held for sale Total liabilities 3, ,971.5 Total assets 8, ,606.2 Total equity and liabilities 8, ,606.2 * Restated in May

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