2019 annual results presentation -...
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2019 Annual Results Presentation
The presentation material contains forward-looking statements. Such forward-looking statements are subject to various risks, uncertainties and assumptions, certain of which are not under our control, causing actual results and growth which may differ materially from these direct or indirect forward-looking statements. Forward-looking events and relevant development discussed herein may differ from the expectation of Hilong Holding Limited (the "Company"), and even never occur due to such risks, uncertainties and assumptions. You should not rely excessively on any forward-looking information.
Information or content contained herein is subject to variation from time to time without prior notice, the Company is not obligated to update the presentation material. Since it is not verified independently, its accuracy is not assured, there is no direct or indirect statement or guarantee for the accuracy, fairness and completeness of the information or content contained herein, and reliance should not be placed on the accuracy, fairness and completeness of the information or content contained herein.
The Company, any of its associates, consultants or representatives shall not assume any responsibilities for losses arising from the information or content contained herein.
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Disclaimer
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Content
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Results Highlights
Business Review
Financial Performance
Business Outlook
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Results Highlights
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Results HighlightsDuring the year, Hilong achieved steady business growth, record revenue of RMB 3.649 billion, representing an increase of 13.3%. Net profit amounted to RMB188 million, representing an increase of 24.9%
Oilfield services
Maintained healthy operation and stable revenue
❖ Continued improvement in rig utilization, to historical high. Further improvement in management and increase in level of operation, break many operational records and receive awards from clients
❖ Good progress in new projects. The PDO and BP projects commenced operation
Adjusted business layout. Deploying resources and drilling teams to strengthen relationship with core customers such as Shell, BP and PDO etc.
Line pipe technology & servicesOverall revenue remained stable. Grew by 10.5% as compare to last year
Breakthrough in CWC business, with significant growth in business volume during 2019. Strong recovery in line pipe coating service market in two consecutive years
Pipeline integration business layout was basically completed, and continued to improve business capabilities to undertake more pipeline inspection projects
As the National Pipe Network Company was established at the end of 2019, it is believed to be an tremendous development opportunities for Hilong
Oilfield equipment manufacturing & services
Drill pipe and related products market performed well and achieved record high revenue
❖ Robust growth in domestic market, increased in upstream capital expenditures resulted in a significant increase in both volume and ASP. Generated more [non-API] products demand
❖ In the oversea market, the Company focused on high end and high value add orders. As a result, export volume was down but ASP was up by 12.4%
OCTG coating services laid by strong overseas growth, record a remarkable increase of 45.7%
Offshore engineering services
During the period, HL106, completed a number of key projects. Revenue up 6.2% to RMB 354 million
Bengal project received revenue of RMB279.0 million
The BOKOR project received revenue of RMB65.9 million
On 25 July 2019, the Group announced the establishment of a joint venture with SwiberOffshore Construction (SOC), to explore future opportunities
RMB MM Revenue RMB MMGross Profit RMB MM Net Profit
2019 revenue amounted to RMB3.65 billion, representing a yoy increase of 13.3
Net profit reached RMB188 million, a yoy increase of 24.9%
Total Revenue Gross Profit Net Profit(1)
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RMB mm RMB mm RMB mm
Financial Overview
3,222
3,650
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2018 2019
1,021
1,161
0
100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
2018 2019
151
188
0
50
100
150
200
2018 2019
7
Business Review
8
Segment Revenue: +13%
GP margin
GP margin %RMB mm
Strong Growth in Drilling Services,
Focusing on First-tier International Customers
Drilling & related services
Integrated & OCTG trading services
794 945
340
338
37% 36%
0%
10%
20%
30%
0
200
400
600
800
1000
1200
1400
1600
2018 2019
1,283
1,134
Oilfield Services
Achieved strong growth in traditional drilling services, with revenue increased by 19% yoy
Steady improvement of existing rigs utilization and reached historical high. Further improved management ability with significantly improvement in various KPIs (such as HSSE etc.)
Outstanding performance in various drilling teams, and break several records, and receive awards from clients
❖ High-end automated drilling rig HL58 contracted to PDO was often ranked first in respect of its composite KPI scores among the ten drilling teams operating in the same area, received cash award from the client
❖ HL59 completed a 3,500-meter drilling operation in the Mabrouk block. Recorded 10.32 days earlier than originally planned, which set the fastest record for similar drilling operations
During the period, Hilong oilfield service segment adjusted its client structure, putting more focus on first-tier international customers like Shell, BP and PDO etc.
Segment Revenue: +15.7%
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Rapid Growth in the Domestic Market
Strong Rebound of Demands for High-end Products
Drill pipe, components and others
OCTG coating services
GP margin
RMB mm GP margin %
1,2031,324
226
328
33%
35%
0%
10%
20%
30%
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2018 2019
1,429
1,652
Oilfield Equipment Manufacturing and Services
Drill pipe and related products
Sales of drill pipe recorded growth for 3
consecutive years. Production level has been
above maximum capacity
Domestic sales of drill pipes increased
significantly from 12,362 tonnes last year to
19,284 tonnes. ASP increased by 4.0% to
RMB16,653
The Group had also achieved gratifying results in
overseas high-end market, international ASP
increase by 12.4%
OCTG coating services
Strong overseas growth helped to achieve 45.7%
growth in this business. This helped to improve
gross margin in this segment
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Stable Growth in Revenue
Tremendous Development Opportunities
High-end series products achieved technological and markets breakthrough
❖ CWC Subsea weighted pipeline product achieved a number of key contracts, revenue increased from RMB 90 million last year to RMB 131.5 million, recorded an increase of 44.7%
❖ Line pipe Coating services saw a strong rebound with revenue increased by 110% to RMB 151 million
❖ Pipeline inspection services record revenue of RMB 25 million. Continued to improve ability to undertake more projects
As the National Pipe Network Company was established at the end of 2019, which indicated that the country's large investment and construction in the field of energy transmission pipelines to be coming. It is believed to be an tremendous development opportunities for this segment
Line pipe
coating services
CRA
OCTG coating materials
Line pipe coating materials
CWC GP marginLine pipe inspection
RMB mm GP margin %
64 33
8
1
72 151
73 19
91 132
25
34%
29%
0%
10%
20%
30%
0
50
100
150
200
250
300
350
400
450
500
2018 2019
32719
361
Line Pipe Technology & Services
Segment Revenue: +11%
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Segment Revenue: +6.2% Introduction of strong Cooperation in the Future
Offshore Engineering service
Offshore Engineering Services
RMB mm
333 353
0
50
100
150
200
250
300
350
400
2018 2019
Successfully completed a number of key projects and achieved steady growth during the year
❖ Bengal project realized revenue of RMB 279 million
❖ BOKOR project realized revenue of RMB 65.9 million
On 25 July 2019, the Group announced the establishment of a joint venture with Swiber Offshore Construction (SOC) for the purpose of joint participation in the bidding for offshore engineering services. Both parties are committed to integrating their respective favorable advantages and resources through such cooperation to achieve resource complementation, jointly capturing market opportunities on the basis of involving neither assets nor material investments
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Financial Performance
Offshore engineering services10.3%
20182019
Oilfield equipment manufacturing
& services45.3%
Oilfield Services
35.2%
Line pipe technology & services
Middle East
Oilfield equipment manufacturing
& services
44.4%
Oilfield Services
35.2%
Line pipe technology & services
10.1%
Offshore engineering services
South & Southeast Asia
2019
9.7%
China
24.8%
North & South America
13.2% Russia, Central Asia& Eastern Europe
25.1%Africa7.1%
10.5%
19.3%
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Revenue Breakdown
Revenue Breakdown by Segment
Revenue Breakdown by Region
9.8%
2018
China
27.1%
North & South America
12.4%
Russia, Central Asia& Eastern Europe
28.5%Africa8.7%
Middle East4.1%
South & Southeast Asia
19.1%
Stable Gross Profit Margin Total Cost in 2018: RMB 2.2 billion
Total Cost in 2019: RMB 2.49 billion
Raw materials
56%
Depreciation13%
Labor cost
17%
Transportation3%
Power & utilities4%
Others7%
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Raw materials59%
Depreciation
12%
Labor cost
16%
Transportation3%
Power & utilities
4%
Others6%
RMB mm GP margin %
Gross profit GP margin
Account Receivable
‘000 RMB 2019 2018
- Within 90 days 907,375 1,000,596
- over 90 days and within 180 days
388,624 212,306
- over 180 days and within 360 days
341,155 371,425
- over 360 days and within 720 days
352,456 135,565
- over 720 days 96,766 88,027
1,021 1,161 31.7% 31.8%
0%
10%
20%
30%
0
500
1000
1500
2018 2019
Analysis on Cost, Gross Profit and Changes in Account Receivable
Gearing Ratio: Net Debt/Total Capital (3)
Return on Assets & Return on Equity (1)
Turnover Days for Current Assets (2)
Capital Structure
%
Days
%
2019 2018
RMB mm
Cash & cash equivalents 783 662
Current assets 4,674 4,035
Total assets 8,541 7,900
Short-term debt 1,712 576
Long-term debt 1,531 2,495
Total liabilities 4,835 4,378
Shareholders' equity 3,663 3,309
Minority interest 44 213
Total equity 3,706 3,522
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Note: 1. Return on assets = net profit / ending balance of total assets;
Return on equity = net profit / ending balance of total equity2. Average inventory days = days in the period * average inventory of this period / cost of sales of this period
Average trade receivables days = days in the period * average net trade receivables of this period / revenue of this periodAverage trade payables days = days in the period * average trade payables of this period / cost of sales of this period
3. Net Debt = Long term debt + short term debt – cash and cash equivalents and restricted cash, total capital = total equity + net debt
Average inventory turnover days
Average trade receivable days
Average trade Payable days
Return on assets Return on equity
2.2% 1.9%
5.1% 4.3%
2019 2018
125 144195 208
98 112
2019 2018
Capital Structure and Return Rate
39% 39%
2019 2018
Major Capital Expenditure ProjectsCapital Expenditure Breakdown
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Capital Expenditure
Oilfield equipment manufacturing & services
Line pipe technology & services
Oilfield services Offshore engineering services
RMB mm
125 137
22 18
442
93
-
-
-
100
200
300
400
500
600
700
2018 2019
589
Oilfield services
❖ Capital expenditure on normal maintenance of existing rigs
Line pipe technology & services
❖ Investment in line pipe inspection equipment
Oilfield equipment manufacturing & services
❖ Fixed asset investment in drill pipes leasing service amounted to approximately RMB 80 million
248
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Business Outlook
Proactive Response to Market Changes
We have achieved a bigger international drill pipe market share compared with 2015/16. We have a better balance between domestic and different international markets
Oilfield Equipment
Manufacturing & Services
Line Pipe Technology & Services
Oilfield Services
Offshore Engineering
Services
The explosive growth in the domestic market saw last year was due to the emphasis on domestic energy security, which is less affected by international oil price
Most of the OFS contracts are date rate contact which normally has a term of 3 years. The longest contract term such as that in the case of our current PDO and BP contracts are 10+5 and 5+1 years. Stronger resistance to periodicitysince last year, the group has been focusing its assets to serve its core client. Among the 22 drilling and workout rigs, 8 are working with Shell, BP and PDO which are considered international first-tier customers. Has more guarantee in future business volume and accounts receivables
OCTG coating service has higher entry barrier and higher risk resistance
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Leverage Business Competitive Strength; Proactively Embracing
Uncertainty in the Market
Actively develop the civilian offshore engineering market. Through the cooperation with Swiber, the group can further expand its operation ability and lower marketing cost
The key target customers of line pipe
technology and service segment are
national oil and gas network’s
infrastructure, which has low correlation
with international oil price
As the National Pipe Network Company
was established at the end of 2019, it is
expected that there would be a huge
investment in oil and gas transmission
infrastructure development
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Q & A