Lifting Jonathan Templeman – Chief Executive 53% of Lifting 22% of Melrose
Products overview Oil & Gas Mining Crane and industrial Specialist fibre and steel rope High quality steel wire ropes High performance wire ropes Mooring, drilling, pipe laying and crane ropes for Shaft mining, surface mining and cable-belt ropes Construction (cranes) and general engineering / exploration, infrastructure build and production industrial applications Structural applications Fishing industry International site services High performance cable assemblies High quality ropes International site services Bridges and Buildings Trawl ropes and marine applications Repair and maintenance, installation and replacement services, inspection and testing, non- destructive examination (NDE), splicing 2 Products overview
Locations overview Global reach - 11 manufacturing and 12 distribution / sales locations worldwide Big Hydra rope - Take Pre - form head on up stand closer machine Frigerio wire drawing machine Large closer Galvanising International Site Services machine 11 manufacturing locations Repair and maintenance 12 distribution/sales locations Installation and replacement services Inspection and testing Rope coming off 460 Non-destructive examination (NDE) machine in Germany Splicing 3 Locations overview
Financial performance Revenue Headline³ operating profit growth (%) Cash conversion £259m £246m £238m £237m +35% +35% +7% (15%) (15%) 104% +3% (4%) +9% +21% +21% Average headline³ operating profit conversion to cash (pre capex) in Melrose ownership 1,2 2008 2009 2010 2011 2007 2008 2009 2010 2011 2011 revenues ahead of 2010 Margin improvement made in More cash generated than profits Melrose ownership Expect continued progress in Working capital levels reduced 2012 – good order intake Further margin improvement through investment and leaner Benefiting from a recovery in processes expected offshore Oil & Gas Some lower margin sales in structures division now being exited Notes 1 Includes pre-Melrose ownership under different accounting policies 2008 includes £20m turnover, £2m operating profit regarding Bridon Tianjin – discontinued operation 2 3 Before exceptional costs, exceptional income and intangible asset amortisation Financial performance 4
Sales by end market and geography Sales breakdown by end market, 2011 Sales breakdown by geography, 2011 8% 6% 18% 8% 31% 4% 32% Oil & Gas and Mining (52%) 28% 32% 2% 21% 10% Oil and Gas Mining Asia North America Industrial Structures Oceania South & Central America Fishing & Marine Wire Europe & ME Africa Oil & Gas / Mining represent 52% of 2011 sales 5 Sales by end market and geography
Competitive position Wire rope sector – c.1,800k tonnes¹ Served by sector Sector suppliers c.550k tonnes 9% 15% 2% 44% Served c.5 50k 46% 12% tonnes 26% 12% 7% 2% 3% 5% 17% KisWire Bridon WireCo Usha Oil & Gas Mining Industrial Haggie Redaelli WWW Other Structures Fishing Key customers Note ¹ Sector estimates are internal estimates derived from operations management 6 Competitive position
Medium term growth prospects Strong, continued growth in the world’s oil & gas demand World energy demand by fuel World Demand Demand move from West to East 18000 16000 14000 Higher oil prices enable exploitation of more 12000 challenging reserves 10000 8000 IEA forecasts annual oil demand growth 1.2% pa 6000 4000 2010-2030 2000 0 Deepwater Demand 1980 1990 2000 2010 2020 2030 Coal Oil Gas Major offshore oil finds >2,000m Nuclear Hydro Biomass Other Renewables WEO 2008 total Offshore production to grow from 33% to 35% by 2020 (Douglas-Westwood Consultants) Source: IEA Oil discovered by water depth Deepwater discoveries 50% of total discoveries 2006 – 2009 (specialist vessel market update to 3000 2014) 2500 Water Depth (m) Deepwater share of offshore production forecast to 2000 increase to 12% in 2012 and rise rapidly in the 1500 following decade (Douglas-Westwood Consultants) 1000 Demand for specialist vessels growing 500 1990 1995 2000 2005 2010 Year Discovered Source: Specialist vessels market update to 2014 7 Medium term growth prospects
Medium term growth prospects Increased global mining demand Steel consumption per capita (kg/year) Emerging Countries Metals demand in India is predicted to double in five years and remain robust for a decade (Bloomberg Analyst) Increase of consumption of steel per capita driving demand for coking coal and iron ore Global steel demand will be driven by infrastructure projects in China, US, Middle East and India World Energy Demand¹ Source: Gurufocus.com Coal production expected to increase at a rate of 1.5% pa, with particularly strong growth in China World market energy consumption, 1990-2035¹ and India Electricity is the world's fastest-growing form of end- History Projections use energy consumption (growth in non-OECD countries projected at 4% pa) and coal will remain a key source of production. 2008 to 2035 total world coal production increase of 54% ¹ Source: US Energy Information Administration – World Energy Demand and economic outlook -Report #:DOE/EIA-0484(2011) - Release Date: Sept 19, 2011 8 Medium term growth prospects
Key developments under Melrose ownership Culture change Technology leadership Awaking the sleeping giant! Solutions Strategic direction and leadership Technical expertise New product development – process, 3D design and FEA Performance management system From “Blame” to “Game for” Engagement with customers and institutions Town Hall and comms for engagement New technology centre planned Changing and up skilling leadership team Upgrading quality systems Health & Safety number 1 Market orientation Operational excellence Customer engagement at different levels Investing in neglected factories Key account management Upgrading quality systems Technical visits, seminars, training Lean continuous improvements Senior customer visit programme Mission directed work teams for engagement Revised services offering Bridon operating system Increased media and industry profile Waste and scrap reduction programmes Supply chain management project 9 Key developments under Melrose ownership
Investment and growth phase Key investment overview Newcastle – new facility – New manufacturing facility – c. £20m investment in 2011 and 2012 – 9,000 tonnes of additional capacity – Will produce the next generation of ropes, the biggest and most capable in the world Doncaster – Investment in own wire mill in 2010 / 2011 – over £1m annual cost savings – Greater vertical integration – Block Wire drawing machine in 2010 – 9,000 tonnes p.a. capacity increase (c. 14% of product line) and strengthened quality Germany and Newcastle (Willington Quay) – Upgrades and extensions – more than 1,000 tonnes of additional capacity £40m investment programme in 2010 - 2012 New markets (e.g. Brazil) and opportunities 10 Investment and growth phase
Global technology leadership Significant investment for the future: Project Neptune Overview State-of-the-art manufacturing facility Heavy lift transportation Leading rope technology Logistical flexibility Supporting ultra deep challenges Installation expertise World leading capacities Deepwater portside location Material development and innovation Bedrock quality 600t rope weights Artist’s impression 11 Global technology leadership
Global technology leadership At the forefront of technology: technology centre Overview Towards being the global technological leader Leading edge testing equipment Support to our new product development, leading to innovative products Artist’s impression 12 Global technology leadership
Global technology leadership 7 new products launched in 2011, and strong pipeline New products BriStar Core for Large Diameter Winch and Crane Ropes VIV Strakes on Sheathing of Deep Water Mooring Cables 24LS Dyform Non-Rotating Hoist Rope Extruded and Sheathed Round Balance Rope 23 Global technology leadership
Global technology leadership 7 new products launched in 2011, and strong pipeline Future developments Multistrand Rope Development for Neptune High Strength Light Weight Hybrid Ropes 23 Global technology leadership
Concluding remarks Continued investment under Melrose’s ownership 1 Investing in innovative new products that will deliver real benefits for our customers Investing to create the world’s leading rope manufacturer A pipeline of projects - new facility in Newcastle coming on-line next year 2 Clear strategy: become the global technology leader for demanding rope applications 3 Exposure to sectors with strong growth potential 4 Focus on delivering solutions for our customers 15 Concluding remarks
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