2010 Annual Results Presentation. March 2011

Transcription

1 2010 Annual Results Presentation March 2011

2 Disclaimer Disclaimer This presentation is for reference purposes only. This presentation is prepared by Honghua Group Limited ( Honghua or the Group ) for business communications and general reference of the Group and shall not constitute in whole or in part any offer to purchase or subscription for shares in Honghua or any of its subsidiaries. The presentation shall not form any basis for any offer or commitment of any person(s) receiving it. Please consult a professional advisor prior to use or reliance on any relevant data. The presentation is an introduction only and shall not form a full description of the business, and current or past performance of the Group. The information and data presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed. No representation or warranty, expressed or implied, is made on this presentation. The Group accepts no liability arising from the use of or reliance on any information (whether financial or other data) presented or contained in this presentation. No one shall in any way modify, copy, publicly display, publish or distribute such materials or otherwise use the materials for any public or commercial purposes without the prior written consent of the Group. 2

3 Agenda Annual Results Review Business Review Financial Analysis Outlook and Prospects 3

4 2010 Annual Results Highlights 4

5 Financial Review For the year ended 31 Dec (RMB MM) 2009 (restated) 2010 Change (%) Turnover 1,962 1, % Gross Profit % Gross Margin 26.4% 20.3% -6.1 ppt EBITDA/(Loss) (44) (27) N/A Profit/(Loss) Attributable to Equity Shareholders Diluted Earnings/ (Loss) Per Share (128) (184) N/A (RMB0.0397) (RMB0.0571) N/A 5

6 Business Review 6

7 Rig Industry Review Global economy & oil demand gradually improved, but slow recovery of U.S. and European economies still affected demand of oil drilling equipment market. Worldwide Drilling Rig Count (Jan09 Dec10) According to Schlumberger, global drilling activities rose slightly in Jan 2009 Jul 2010 Jan 2010 Jul Source:Schlumberger Global drilling activities & utilization rate of drilling equipment gradually restored, but new demand in rigs was still suppressed as clients were still assimilating idle rigs purchased during 2007~ WTI Crude Oil Price (Jan09 Dec10) Global oil prices increased amid volatility due to adverse factors like U.S. monetary policy of quantitative easing & oil spill in the Gulf of Mexico Jan 2009 Jul 2010 Jan 2010 Jul Source: Energy Infromation Administration(EIA) 7

8 Core Business: Land Drilling Rig Market Rig Markets Sales Demand for land rigs was relatively stable in Russia Development of markets in Far East, South Asia and Middle-East Land drilling rig sales agreement worth approximately RMB700 million from OOO Burovoya Kompaniya Eurasia Providing rigs products and parts and components to renowned international oil and gas drilling enterprises Product Promotion Product launch in August 2010 to promote high performance-to-cost products attracted domestic and overseas clients Promoting product sales and enhancing brand recognition through the product launch Sales of Products Products are designed according to needs of different markets Products sold included truck-mounted rigs for cluster wells, train-skidding system, new desert trailer rigs, etc. Products were sold to markets including Europe & Central Asia, Middle-East and North America 8

9 Core Business:Capacity Allocation Parts Distribution Centre in Irkutsk The Irkutsk centre has commenced operations. A triangular storage layout among Irkutsk, Usinsk and Orenburg is planned. Services Development in Middle-East Assembly and maintenance centre in free trade zone of Jebel Ali, Dubai has begun construction. U.S. Assembly Base U.S. assembly base has obtained API and started assembly and refurbishment business for U.S. clients. 9

10 Core Business:R&D of Rig Products R&D Ability Over 390 R&D personnel in Chengdu, Guanghan and Shanghai 69 new patent applications, among which 25 are new inventions; 112 accumulated patents filed to the Chinese State Intellectual Property Office Unconventional gas drilling devices Quintuple Direct Motor-driven Pump Trial production and testing of new coiled tubing rigs Successful design and trial production of super single pipe rigs & new rack and pinion rigs Offshore drilling platforms Quintuple direct motor-driven pumps applied to offshore drilling rigs Designs of drilling rigs, barge sand modules System optimization via design of hoisting system, welded derricks and integrated electrical system, etc. Rack and Pinion Rig 10

11 New Business: Oil & Gas Engineering Services Oil & Gas Engineering Services Entry into the first oil and gas engineering services agreement worth about US$10 million in Kazakhstan Providing an expert engineering team and an in-house designed 7000-meter drilling rig Services planned to start in 2011 for a period of about 9 months Advantages from the New Business Motivating business diversification, expanding income sources and enhancing synergistic development Promoting rigs and related products through provision of oil and gas drilling related engineering services 11

12 Production Process and Efficiency Management Enhancement in Management Enhance production progress through ERP Implement strict cost control Strengthen supplies and materials management Improvement of Quality Control System Reinforce process optimization, maximize use of raw materials and reduce problems in shipment via working skill competitions and on-job trainings Constantly modify and optimize quality control system and enhance operational efficiency Increase production efficiency and customer satisfaction Strengthening of Staff Training Provide training in quality system Deliver specialized training Provide management enhancement training 12

13 Financial Analysis 13

14 Revenue Breakdown By Product By Geography (RMB MM) % 16.9% 15.4% 19.1% 17.6% 29.3% ,650 1, China Middle East South & Southeast Asia 0.7% 10.5% 1.9% Europe & Central Asia North America Others 12.8% 39.6% 34.5% Land Drilling Rigs Rig Parts & Components China Middle East South & Southeast Asia Europe & Central Asia North America Others 14

15 Breakdown by Rig Type Sales Units (RMB MM) (Unit) ,367 1, Digitally-controlled Rigs Conventional Rigs Digitally-controlled Rigs Conventional Rigs 15

16 Cost Structure % 7.4% 6.7% 11.2% 87.0% 82.1% Raw Material Labour Cost Other Manufacturing Expenses 16

17 Gross Profit & Gross Margin Gross Profit Segmental Gross Margin (RMB MM) % 27.8% 19.3% 23.6% Gross Profit for Drilling Rigs Gross Profit of Rig Parts & Components Gross Margin for Drilling Rigs Gross Margin of Rig Parts & Components 17

18 EBITDA and Profit/ (Loss) Attributable to Equity Shareholders EBITDA/(Loss) Profit/(Loss) Attributable to Shareholders (RMB MM) (RMB MM) (44) (27) (128) (184) 18

19 Summary of Balance Sheet (RMB MM) As at 31 December 2009 (restated) As at 31 December 2010 Non-current Assets 1,209 1,355 Current Assets 5,375 4,640 Cash and Cash Equivalents 1,603 1,003 Total Assets 6,584 5,995 Current Liabilities 2,062 1,729 Non-current Liabilities Total Liabilities 2,325 1,924 Share Capital Reserves 3,865 3,664 Minority Interests Total Equity 4,259 4,071 19

20 Cash Flow Statement (RMB MM) Net Cash Inflow (Outflow) for Operating Activities Net Cash Inflow (Outflow) for Investing Activities Net Cash Inflow (Outflow) for Financing Activities Gain/(Loss) on Foreign Exchange Cash and Cash Equivalents at 31 December (90) (519) (718) 0 (10) 1,603 1,003 20

21 Use of IPO Proceeds (HK$ MM) Offshore Project Oil & Gas Exploration & Related Business Production Capacity Expansion and R&D Working Capital & Day to Day Expenses Used Unused Net Proceeds Raised from IPO: HK$2.958 Billion 21

22 Outlook and Growth Strategies 22

23 Rig Market Outlook Number of Global Active Rigs in Recent 10 Years (Unit) Oil and natural gas still have an irreplaceable position in the global energy structure. Oil demand and prices will continue to rise steadily due to the gradual recovery of the global economy. The continued political unrest in Africa and the Middle-East may intensify fluctuations in oil prices and major currencies exchange rates, impacting on the economy and the oil equipment industry in short-term Feb 2011 Source:Baker Hughes- Number of Active Drilling Rigs Oil Price Estimation from 2010 to 2015 (US$/ barrel) Crude Oil Price Forecast Source: EIA- Annual Energy Outlook 2011 Expected Steady Growth of Oil Demand (Million barrels per day) Source :OPEC- World Oil Outlook

24 Market Development Strategy To penetrate the land drilling markets To proactively develop new markets in the Far East, South and Central Asia To design and produce high performance-to-cost products according to needs in new markets To develop oil and gas engineering services To gain more business in oil and gas engineering services by advanced skills and exploration technologies To demonstrate high performance-to-cost new products and expand income sources To facilitate sales in electric system & specialized motors Further market expansion for electric systems is planned. To promote sales by producing specialized motor products and various electric system to fit market needs, such as the drive control system and well-site electrical system. 24

25 Business Opportunities in Unconventional Natural Gas Global Natural Gas Development IEA estimated that global natural gas consumption will rise from 3 trillion cubic meters in 2007 to 4.3 trillion cubic meters in In 2010, shale gas accounted for 14% of the total production volume of natural gas in the U.S. Domestic Favorable Factors for Unconventional Gas Development In China, 12 th Five-Year Plan encourages exploration of clean energy, including shale gas and coalbed methane. The planned production of natural gas will reach 260 billion cubic meters with 25% annual growth rate during the Five-Year Plan period. In early 2011, the PRC Government announced the first-time tender of mining right for shale gas fields. The state-owned Sichuan Provincial Energy Investment Group was established in early 2011 and planned to participate in exploration of gas resources such as shale gas. 25

26 Business Opportunities in Unconventional Natural Gas Honghua Unconventional Gas Related Business Development Use of innovative ideas to drive the development of advanced shale gas exploration equipment and solutions. Honghua has intelligent rig designs, strong production capability and the advantage of one-stop shale gas related product development. Products include coiled tubing rigs, super single pipe rigs, 6000HP pressure pumps and flexible water tanks. To search for cooperation opportunities with enterprises in the field of energy exploration and enter into new energy development business by investing in small to medium size energy companies experienced in shale gas exploration. 26

27 Development of Offshore Production Base Construction and layout of the offshore production base Innovative layout of production base and utilization of mobile system for land construction of offshore equipment; Inventing heavy mobile combined crane to shorten production cycle and reduce production cost; Infrastructure construction has been completed. Subsequent to approval from the Development and Reform Commission of Jiangsu, the construction of production facilities will begin. Simulated Diagram of the Offshore Production Base Assembly & Launch of Rigs Land Construction of Hulls Progressive Production Line Digitalized Production Plant Production of Outfitting Production Flow of Offshore Equipment Production 27

28 Development in Offshore Equipment Segment Technical reserve of offshore drilling equipment Below: Simulated Diagram of Honghua No.1 Semisubmersible Rigs Platform Design of Honghua No.1 jack-up rig is completed and approved by ABS; Design of Honghua No.1 semisubmersible rigs platform is in progress; Expansion of professional design team, targeting on design of complementary parts and components to increase operating efficiency and reduce running cost of offshore rigs; Above: Simulated Diagram of Honghua No.1 Jack-up Rig Creating a high-quality sales team consisting of experts in cost control, project management and business negotiation. Simulated Diagram of Honghai No.1 Mobile Combined Crane 28

29 Thank You! Contact Information: Honghua Group Ltd. Tel: Fax: Website: Address: 99 East Road Information Park, Jinniu District, Chengdu, Sichuan PRC Elite IR Ms. Cindy Xin Tel: Fax: