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Management PresentationManagement Presentation
November 2007November 2007
CONFIDENTIALCONFIDENTIAL
2
Safe Harbor StatementSafe Harbor Statement
This presentation may contain forward-looking statements that are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements of future goals and similar statements other than historical facts constitute forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, which are described in Claymont Steel’s filings with the Securities and Exchange Commission. The actual results may differ materially from any forward-looking statements due to such risks and uncertainties. Claymont Steel undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this presentation.
3
PresentersPresenters
Jeff BradleyJeff BradleyChairman and Chief Executive OfficerChairman and Chief Executive Officer
Allen EgnerAllen EgnerChief Financial OfficerChief Financial Officer
4
Claymont Steel at a GlanceClaymont Steel at a Glance
Leading producer of custom steel plate
500,000 tons of finished plate capacity per year
Assets configured for custom plate production
Strong, diverse and loyal customer base
High level of customer service
Non-union
Significant organic growth opportunities
Highly stable market
Current LTM 9/30/07 revenue and EBITDA of $333 million and $64 million respectively
End-Market Applications
5
Significant Headway Since IPOSignificant Headway Since IPO
What We Have Done
Operations Sales
Management Financial
Continue Growing
Shareholder Value
Capital improvements in plant
Added personnel to support increased capacity:– Shipping staff augmented
Overhauled plant maintenance organization
Implemented new melt shop practices which have achieved record first half
Stronger safety program
Restructured sales force
Created and implemented a new commission plan
Continued new customer incentive program that has resulted in over 75 new customers
Continued growth in custom plate burning
Continued cost savings initiatives, primarily in scrap and energy procurement
De-levered through successful IPO
Post-IPO refinancing substantially lowered the cost of capital by $13 million.
Initiated implementation of Sarbanes-Oxley
New VPs of Custom Burning, Human Resources and Operations
New Directors / Managers of Quality Control & Tech Services, Engineering, Production Control, Purchasing, Environmental and Safety
New Corporate Controller
6
Plate Market is Highly StablePlate Market is Highly Stable
(1) Source: Steel Facts (AISI).(2) Capacity of Carbon Plate only.(3) Major U.S. Producers defined as steel producers with U.S. production capacity of greater than 400,000 tons.(4) Source: Purchasing Magazine.
Strong End-Markets and Limited Capacity Among Few Producers Creates StabilityStrong End-Markets and Limited Capacity Among Few Producers Creates Stability
Claymont Market
Hot Rolled Sheet Price (4)
(Price per Ton)
Plate Price (4)
(Price per Ton)
$400
$600
$800
$1,000
Nov -04 May -05 Nov -05 May -06 Nov -06 May -07 Nov -07
$400
$600
$800
$1,000
Nov -04 May -05 Nov -05 May -06 Nov -06 May -07 Nov -07
IPO IPO
7
$-
$100
$200
$300
$400
$500
$600
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Plate Spread
Improved Market FundamentalsImproved Market Fundamentals
Source: Purchasing Magazine. Spread of Cut-to-Length Hot Rolled Plate over No.1 Heavy Melt Scrap Steel (Chicago).(1) Spread indicates selling price less scrap costs.
Elimination of Capacity Has Driven Plate Spreads to Historical HighsElimination of Capacity Has Driven Plate Spreads to Historical Highs
Stable MarketBlast Furnaces
Market TurmoilNew Entrants
Stable MarketMini-Mills
Gulf States 0.4 MM tons
Geneva Steel 1.0 MM tons
Nucor0.9 MM tons
IPSCO1.2 MM tons
Oregon Steel 1.1 MM tons
Pla
te S
prea
d ($
/ to
n)
Bethlehem Steel 1.0 MM tons
New Mill Openings: 4.3 MM tons
Permanent Mill Closures: 2.4 MM tons
IPSCO 1.1 MM tons
(1)
8
10.0
10.8 10.810.2
10.5 10.6
11.0
11.3
10.0 10.0
8
9
10
11
12
2005 2006 2007 2008 2009
Net Imports Domestic Consumption Domestic Capacity Domestic Capacity at IPO
Continuing Plate Deficit Continuing Plate Deficit
Source: “August 2005 Steel Plate Quarterly” by CRU International Limited and management estimates.(1) Arcelor-Mittal announced plans to restart its plate mill located in Gary, Indiana in 2008.
Rising Consumption Will Keep Plate Prices StableRising Consumption Will Keep Plate Prices Stable
U.S. Projected Supply and Demand(Millions of Tons)
Indexed Capacity Utilization
100% 102% 103% 100% 102%
(1)
9
Focus on Custom PlateFocus on Custom Plate
Focused on Lower Volume, Higher Profit Segment of the MarketFocused on Lower Volume, Higher Profit Segment of the Market
Claymont: Improving Mix and Volume(Thousands of Tons)
(1) 2007E figure calculated using YTD Q3 ended 9/30/07 tons annualized.
51%28%36%
151
118
145
266
0
50
100
150
200
250
300
2001 Run-rate Q3 2007
Commodity Custom
51% 49% 31% 69%
(1)
10
0%
20%
40%
60%
80%
100%
Focus on Custom Discrete PlateFocus on Custom Discrete Plate
Source: Based on management estimates and AISI data.(1) Carbon Plate Only.
One of the Few Custom Discrete Steel Plate Manufacturers in U.S.One of the Few Custom Discrete Steel Plate Manufacturers in U.S.
2006 U.S. Steel Capacity (1)
102mm tons 10.2mm tons 500,000 tons
Sheet
Bar
Plate
Other
Coiled
Discrete
6.6mm tons
Arcelor-Mittal
Evraz / OregonLe Tourneau
Nucor
Claymont
SSAB / IPSCO
Jindal
Standard
Custom
1.6mm tons
Evraz /Oregon
Claymont
Arcelor-Mittal
Steel Plate ClaymontDiscrete Plate Custom Discrete
11
Custom Strategy Yields Significant Price Premium Custom Strategy Yields Significant Price Premium
(1) Spread indicates selling price less scrap costs.(2) Source: Purchasing Magazine. Plate selling price less scrap cost.
$227
$464
$604$558 $549
$267
$519
$658 $637 $624
$0
$100
$200
$300
$400
$500
$600
$700
$800
2003 2004 2005 2006 YTD 9/30/07
Market
Claymont
Plate Market Spread vs. Claymont Spread (1)
Premium ($)
$40 $55 $54
Claymont Commands a Greater Spread Than Standard Plate ProducersClaymont Commands a Greater Spread Than Standard Plate Producers
($ / Ton)
(2)
$79 $75
12
19%18%
16% 16%
11% 11% 11%
9% 8% 8% 8%
5% 5% 5%4%
20%22%
26%
0%
5%
10%
15%
20%
25%
30%
Seve
rsta
l
Stee
l Dyn
amics
Cla
ymon
t
Nuc
or
Arce
lor-
Mitt
al
Ger
dau
Dof
asco
US
Stee
l
AK S
teel
Rel
ianc
e
Met
als
USA
AM C
astle
Com
mer
cial M
etal
s
Rus
sel M
etal
s
Wor
thin
gton
Cal
if. S
teel
Olym
pic
Rye
rson
Whe
elin
g-Pi
ttsbu
rgh
Superior Margin PerformanceSuperior Margin Performance
Niche Market Focus Translates to Among the Highest Margins in the IndustryNiche Market Focus Translates to Among the Highest Margins in the Industry
North American Steel Companies’ LTM 9/30/07 EBITDA Margin (1)
Source: Capital IQ.(1) As of 9/30/07 except for Commercial Metals and Worthington which are as of 8/31/07 and Severstal, Metals USA, Ryerson and Wheeling-Pittsburgh which are as of 6/30/07.
(NM)
13
Assets Ideally Suited for Custom ProductionAssets Ideally Suited for Custom Production
Raw Materials
ProductionProcess
Products Commodity Plate
ReheatFurnace
ReheatFurnace
ReheatFurnace
SlabYard
SlabYard
SlabYard
EAFEAF
ScrapScrap
Rolling Mill
Imported Slabs
Evraz / Oregon Steel
Nucor and SSAB / IPSCO
Arcelor-MittalClaymont
Commodity &Custom Plate
Commodity &Custom Plate
Custom Plate
Coke &
Iron Ore
Rolling Mill Rolling MillRolling Mill
Blast Furnace
Facility Optimized to Deliver Custom Orders in Short Lead Times and in Small QuantitiesFacility Optimized to Deliver Custom Orders in Short Lead Times and in Small Quantities
14
Rank 2001 2002 2003 2004 2005 2006
1 Claymont Claymont Claymont Claymont Claymont Claymont
2 Nucor Hertford Nucor Tuscaloosa Nucor Hertford Nucor Tuscaloosa Mittal BHP IPSCO
3 Nucor Tuscaloosa Nucor Hertford Nucor Tuscaloosa Mittal BHP IPSCO Nucor Hertford
4 Geneva Steel Mittal Plate Mittal Plate Nucor Hertford Nucor Tuscaloosa Nucor Tuscaloosa
5 Mittal BHP Mittal BHP Mittal BHP IPSCO Oregon Steel Oregon Steel
Superior Customer ServiceSuperior Customer Service
Source: Jacobson & Associates. Rankings based on customer satisfaction and quality.
Overall Customer Satisfaction According to Jacobson & Associates
Customers Consistently Rank Claymont #1 Among Plate ProducersCustomers Consistently Rank Claymont #1 Among Plate Producers
15
297 286 291344
389
500500
400350350
320320 337
407
0
150
300
450
600
2001 2002 2003 2004 2005 2006 LTM 9/30/07$0
$2
$4
$6
$8
$10
$12
$14
$16
Plate Capacity Tons Shipped Capital Expenditures
Growth Opportunities: Increase Mill OutputGrowth Opportunities: Increase Mill Output
Capacity, Shipments and Capital Expenditures(Thousands of Tons) ($Millions)
Ability to Significantly Grow Mill Capacity with Modest Capital ExpendituresAbility to Significantly Grow Mill Capacity with Modest Capital Expenditures
(1) Includes additional capacity beyond melt shop obtained through purchase of third party slabs.
(1)
16
Growth Opportunities: Attractive and Growing End MarketsGrowth Opportunities: Attractive and Growing End Markets
Claymont Focuses on High-Growth End MarketsClaymont Focuses on High-Growth End Markets
Source: Datamonitor from Thomson Research.(1) U.S. construction and farm machinery sector growth from 2005 to 2010.(2) U.S. bridge and tunnel sector growth from 2005 to 2010.(3) U.S. railroad sector growth from 2005 to 2010.(4) Communication equipment sector growth from 2004 to 2009.(5) Crude tanker fleet growth from 2005 to 2007.
17
Growth Opportunities: Geographic Expansion of SalesGrowth Opportunities: Geographic Expansion of Sales
Increased sales force to 21 sales personnel from 11 in 2006
Currently sell in 41 states and Canada
Increased focus on Western market
– “Buy American”
Further penetrate existing markets
Sales initiatives undertaken since IPO include:
– Restructured sales force
– New commission plan
– Continued new customer program that has resulted in 75 new customers
– Continued growth in custom plate burning
– 2 District Sales Personnel to be added in the Midwest and Chicago
Continue to Focus on Underserved “Buy American” Markets in the WestContinue to Focus on Underserved “Buy American” Markets in the West
Geographic Distribution
States where Claymont product is sold
Field Sales Personnel
Independent Sales Agent
Regional Managers
Company Headquarters
District Sales Personnel to be added
18
Growth Opportunities: Higher-Margin ProductsGrowth Opportunities: Higher-Margin Products
Growth in Higher Priced, Greater Value-Added ProductsGrowth in Higher Priced, Greater Value-Added Products
(1) Source: management estimates.
6% 63% 31%% of Run-Rate YTD Q3 07 Volume:
Plate Pricing per Ton by Product (1)
> $1,000
> $875
> $800
$0
$300
$600
$900
$1,200
Custom Burned Custom Standard
Average Selling Price
$857 $822
$0
$300
$600
$900
$1,200
YTD Q3 2006 YTD Q3 2007
19
Experienced Management TeamExperienced Management Team
Strong Management Team with Significant Industry ExperienceStrong Management Team with Significant Industry Experience
20
Financial OverviewFinancial Overview
21
Financial StrategyFinancial Strategy
“Measure everything, every day”
– Every decision financially driven
Maintain fixed cost structure while increasing production levels
Minimize working capital
Prudent, analytical approach to capital investment
– Target $5 to $8 million of capital expenditures per year after reinvestment period
Strong balance sheet
– Near-term debt reduction
– Emphasis on liquidity and flexibility
22
Resolution Reached for Challenges Faced in the First Three Quarters of the YearResolution Reached for Challenges Faced in the First Three Quarters of the Year
Challenges Faced
1st Quarter - Gas curtailment in the first quarter
2nd Quarter - Increasing scrap costs
3rd Quarter - Meeting strong market demand and issues with the Reheat Furnace
Outlook and Resolution
Obtained agreements with gas providers to ensure uninterrupted service
Experiencing stable scrap costs since April
Plate mill operations resolved in late September through a planned outage
Tough Decisions
Postpone plate mill outage that had been planned for April to take advantage of strong market demand
Less than optimum mill conditions due to postponement meant production and shipping delays and increased repair and maintenance costs
23
YTD through 3YTD through 3rdrd Quarter and FY 2006 Financial Highlights Quarter and FY 2006 Financial Highlights
YTD 9/30/07 Financial Highlights:
– 6% decrease in shipments and a 3% increase in average selling price when comparing 9 months 2007 verses 9 months 2006
– Increase in custom mix to 69% custom and 31% standard plate
– Custom burned tons increased to 16,363 tons in YTD, 3rd quarter 2007 from 9,140 tons YTD, 3rd quarter in 2006
2006 Financial Highlights:
– 20% increase in shipments and 12% increase in average selling price between 2005 and 2006
– Increase in custom mix to 64% custom and 36% standard plate
– Custom burned tons increased to 15,081 tons in 2006 from 3,200 tons in 2005
– Capital expenditures of almost $12 million enhanced output of plate mill in 2006
24
Historical Revenue and EBITDAHistorical Revenue and EBITDA
344 337
407 401
1212
50
100
150
200
250
300
350
400
450
2004 2005 2006 LTM 9/30/07
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
Tons Shipped Toll Processing Price Per Ton
Historical Tons Shipped and Sales per Ton(Thousands of Tons) (Dollars per Ton)
Historical Adjusted EBITDA
$69.1
$93.7$84.1
$57.7
$6.9
$6.2
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2004 2005 2006 LTM 9/30/07
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
EBITDA One Time Costs Adjusted EBITDA Margin
($Millions) (% Margin)
(1)
(1) One time costs include sponsor fees, CITIC settlement and non-cash compensation.
$63.9
$91.0$93.7
$69.1
25
Prudent Approach to Capital ExpendituresPrudent Approach to Capital Expenditures
Capital Expenditures
$3.1 $2.9
$1.6 $1.6
$11.9
$12.0 - $15.0
$6.3
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
2001 2002 2003 2004 2005 2006 2007E
No major projects
No major projects
No major projects
Investments in growth initiatives
Specific projects including a 4H1 Mill Motor
Siemens upgrade Reheat furnace
project Additional rail
lines
No major projects
($Millions)
$2.2 - Scarfing operation
$2.0 - New custom burning table equipment
$1.2 - New testing facility
$1.5 - EAF Transformers
$1.0 Reheat furnace rebuild
$1.0 – Mobile equipment
26
Conservative CapitalizationConservative Capitalization
($Millions)
(1) Includes unamortized original issue discount value.
Reduce debt to $100 million in 24 – 36 months
Redeemed PIK Notes with IPO proceeds
Refinanced Floating Rate Notes with lower-cost Senior Notes
Successfully reduces annualized interest expense by over $10 million
Continue de-leveraging with cash flow from operations
As of As of12/31/2006 9/30/2007
Cash and Cash Equivalents 20.1$ 1.3$ Investment Securities 94.8 4.9
Debt:Revolving Credit Facility -$ 48.4$ Term Loan - 10.5 Senior Secured Floating Rate Notes (1) 168.8 - Senior Secured PIK Notes 75.0 - Senior Notes - 105.0
Total Debt 243.8$ 163.8$
Common Equity (40.3) (39.6) Total Capitalization 203.5$ 124.3$
Total Debt / LTM Adjusted EBITDA 2.6xNet Debt / LTM Adjusted EBITDA 2.5x
27
Fiscal Year 2006 and LTM 9/30/07 EarningsFiscal Year 2006 and LTM 9/30/07 Earnings
Adjusted EBITDA ReconciliationAdjusted EBITDA Reconciliation($Millions)
(1) Includes vesting of equity compensation and certain other non-cash accruals.
Fiscal Year End LTM2006 9/30/2007
Sales 333.4$ 332.7$ Cost of Sales 233.2 258.9
Gross Profit 100.2 73.8 Gross Margin 30.1% 22.2%
Selling, General and Administrative Expenses 20.6 20.9
Total Operating Income 79.7 52.9
Interest Income 2.2 0.8 Interest Expense (29.3) (47.2) Other Non-operating Income 0.1 (0.0)
Total Other Income (Expense) (26.9) (46.3)
Income Before Income Taxes 52.8 6.6
Income tax expense 20.8 3.3 Net Income 32.0$ 3.2$
Depreciation and Amortization 4.3 4.8 Net Interest 27.1 46.3 Income Taxes 20.8 3.3
EBITDA 84.1$ 57.7$
Sponsor Fees 4.7 4.7 CITIC Settlement 2.0 - Non-cash Compensation (1)
0.3 1.5
Adjusted EBITDA 91.0$ 63.9$
28
Investment HighlightsInvestment Highlights
Excellent plate market fundamentals
Focus on niche markets
Facility optimized for low-cost production in market niche
Superior customer service
Significant organic growth opportunities
Experienced management team
Strong financial performance and prospects
Highly successful performance since IPO in December 2006 (current market capitalization(1) = $344.5 million)
Successful deleveraging strategy reduces annualized interest expense by over $10 million and positions balance sheet for continued growth
(1) As of November 9, 2007.
29