TUBACEXTUBACEXTUBACEXTUBACEXCorporateCorporateCorporate Corporate

presentationpresentation

First: Health & Safety y•Our MISSION statement pledges that the people working in our group are one of thecompany’s main values:

to develop

professionally and

individually

working

in a safe pleasant

atmosphere

•In order to achieve this, the Company's directors set themselves the STRATEGIC OBJECTIVE

individually atmosphere

, p y Jof establishing and introducing an OCCUPATIONAL RISKS PREVENTION PROGRAMME toensure a standardised working method. This PREVENTION PROGRAMME is implementedthrough the ANNUAL PLANS with specific targets and responsibilities.

Environmentally Environmentally friendly policy & friendly policy &

Prevention and safety as Prevention and safety as driver in all internal driver in all internal

OSHAS 18001OSHAS 18001

processesprocesses

ISO 14001ISO 14001

processesprocesses

2

OSHAS 18001 OSHAS 18001 certificationcertification

ISO 14001 ISO 14001 certificationcertification

First: Health & Safetyy

OCCUPATIONAL RISK PREVENTION PROGRAMMEOCCUPATIONAL RISK PREVENTION PROGRAMME

•The target is to ensure the continuous improvement of Preventionmanagement in the Company, minimising the risks involved in our work.

•This is achieved through a series of ongoing prevention activities,organised by the management in conjunction with the workers, aimedat preventing and avoiding any type of accidents at work andat preventing and avoiding any type of accidents at work andoccupational diseases that can affect both the health of the workforceand production, installations and the environment.

•The Occupational Risks Prevention Department is responsible for•The Occupational Risks Prevention Department is responsible forproviding guidelines and monitoring these activities.

•Prevention is a commitment and area that involves everybody and,therefore, we are all obliged to ensure we practice RISK PREVENTION inour day - to - day work, integrating it in our progression to ensure a SAFEwork environment.

3

Table of contentsTable of contents

4

IntroductionIntroduction

Seamless stainlesssteel tube sector

1,490 million tons per yearCrude steel

A l Mitt l Ni St l

steel tube sector

85 million tons per year

Arcelor Mittal Nippon SteelJFE Baosteel …

Welded tube (carbon and stainless)

36 million tons per year

(carbon and stainless)

TMK BaosteelArcelor Mittal Condesa

32 million tons per year

Seamless carbon tube

Tenaris VallourecTMK Sumitomo …

Seamless stainless steel

Stainless steel

ThyssenKrupp OutokumpuA i POSCOtube

0.29million tons per year

Acerinox POSCO

HIGHEST VALUE -ADDED NICHEADDED NICHE

Note: Estimated 2011 figures. 6

Sector: maincharacteristics (I)

Strong growth

characteristics (I)

•Average growth of demand: 6% in 1993 – 2010 period.

•Stainless steel has a longer life than other materials and

g g

•Stainless steel has a longer life than other materials andit does not require maintenance.

•Significant substitution effect when stainless steel pricesSignificant substitution effect when stainless steel pricesgo down.

•Global growth requires safer and cleaner products, suchas stainless steel.

•Stainless steel is 100% recyclable.

• Low transport costs when compared with othermaterials.

7

Sector: maincharacteristics (II)

Linked to oil, gas and energy sectors…

characteristics (II)

Carbon Stainless High alloys

Several industrial processes

Welded tube

Construction

Food Che -

Oil conduction

Oil d l i

mistryAerospace

WaterLNG

Automotive

Seamless tube

Oil and gas exploration

Oil and gas extraction

Energy generation

T b G

tubePetrochemical

Tubacex Group

8

Sector: maincharacteristics (III)

…where Tubacex sells 90% of its products…characteristics (III)

IL •Onshore

ND

A

L •PlantsO •Offshore

•Refining

MIC

AL

AN

OC

HEM

ICA

•Organic•Plastics•Rubber•Fiber

CH

EMPE

TR

O

GEN

•Thermal•Combined cycles G

AS •Onshore

•Offshore

POW

ER G

Combined cycles•Cogeneration•Nuclear•Renewables

G Offshore

…with a 20% market share in its product range. 9

Sector: maincharacteristics (IV)

“C dit ” d tifi d d t

New competitors

characteristics (IV)

• “Commodity” and non- certified products.• Market share not relevant.• Learning curve.

• Specialization in higher value- added products.

Traditional competitors

• Allowing synergies among the different geographic areas.

Global market

10

Breakdown of revenues

Revenues breakdown 2012 by end-t (1) Revenues 2012 by geographical area

user sector(1) y g g p

Low exposure to the Spanish

Spain 9%

Asia 17%

Row 6%Gas8%

Chemical & Petrochemical

1% Refining24%

the Spanish market

Europe 54%

Asia 17%

USA + Canada 14%Power

l Generation16%

E&P Oil&Gas51%

Revenues breakdown 2012 by final destination of the tube (2)

Europe 14%Row 5% USA +

Canada 1%

(1) Considering the project business.(2) Considering the project business. 11

Asia 59%Latam 21%

Tubacex Group:Fully integrated structure

Raw materials:NickelStainless scrap

FINAL�MARKET

Fully integrated structure

MolybdenumFerrochromeOthers

Round bars and square billets

Commercial�offices

Hot extrusion FittiHot extrusion

Tube

Fittings

Tube

Master distributor

Cold rolling and stretching

Group stocksTube 12

Key milestones

1963C f d i

1975• An international

1992TUBACEX S A =

1999Acquisitions:

Key milestones

2009A t ithCompany foundation

in Llodio (Spain)

• An international commercial network is created

• The steel mill (ACERÁLAVA) begins operations

TUBACEX, S.A. holding

T.T.I., S.A.= manufacturing subsidiary

Acquisitions: Schoeller Bleckmann Edelstahlrohr GmbH

Agreement with Vallourec & Mannesmann

operations

1970Listing on the Stock

1988Fi i l

1995A i i i f

2010 - 112008New 2008 2012Listing on the Stock

Exchange• First stainless grades are manufactured

• Reduction of carbon steel production

Acquisition of a 100% stake in SALEM TUBE (United States of America). A 60% stake was held since 1989

First OCTG and umbilical tubes are manufactured

New 2008- 2012 Strategic Plan

13

St tStrategy

Tubacex Strategy Strategic Reflection (2008 – 2012)Strategic Reflection (2008 2012)

Focus on new high value added products

Speeding up movement to high value dd d dadded products

• Accelerate new production capacity in OCTG• Accelerate umbilicals goals• Speed up supercritical boilers development• Developing tube for urea plants

E l i i i i i i• Explore inorganic options in titanium

Increasing competitiveness

Speeding up growth in traditional profitable products

• Increase commercial presence in Asia• Increase productive capacity with competitive competitiveness• Increase productive capacity with competitive

cost in India• Explore M&A opportunities

People

Innovation

Focus on increasing competitiveness

• Excellence in manufacturing

Increasing profitability in traditional products

Service Quality

Excellence in manufacturing• Quality & Service• Operating cost monitorization

15

Tubacex 2012 vs. 2006: Deep change towards added valueDeep change towards added value

Orders of new products (% total orders)

38,0%41,9% 42,3%

35%

40%

45%

18 8%

27,6%

20%

25%

30%

4,4%8,8%

18,8%

5%

10%

15%

20%

1,4% 1,8% 0,1%4,4%

0%

5%

2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

• Commitment with innovation and development of new products• Strategic focus on new high value added products for sectors with positive

growth perspectivesg p p• New products are expected to account for the 18.8% of the total order intake

in 2012

16

Tubacex 2012 vs. 2006: Change in the portfolio of productsChange in the portfolio of products

Order intake 2006 by sector Order intake 2012 by sector(1)

E&P Others

Order intake 2006 by sector Order intake 2012 by sector

P

E&P5%

Mechanical8%

Others9%

2008 – 2012 Strategic

Gas8%

Chemical & Petrochemical

1% Refining24%

Power Generation

23%

Chemical & Petrochemical

gPlan

Power GenerationE&P Oil&GasPetrochemical

55%Generation

16%E&P Oil&Gas

51%

• Successful fulfilment of the Strategic Plan…..

• ….while significantly diversifying our customer basee s g ca t y d e s y g ou custo e base

(1) 2011 order intake considering the project business.17

Where does Tubacex want to be?Where does Tubacex want to be?

HIGHER VALUE ADDED PRODUCTSHIGHER VALUE - ADDED PRODUCTS

•OIL&GAS

•POWER GENERATION

18

Oil & Gas: exploration and extractionare increasingly complexare increasingly complex

Worldwide offshore rig count

358317 336 338

375436

400

500

100

200

300

02008 2009 2010 2011E 2012E 2013E

Offshore rig count

• In the last 5 years, more than 50% of new oil discoveries were made in deepwaters

Source: Morgan Stanley

• High levels of corrosion and extreme temperatures

• The technology required for the extaction is increasingly complex. This fact ismaking (and will continue making) that the relative use of seamlessmaking (and will continue making) that the relative use of seamlessstainless steel tubes increases when compared to less value- added products

19

Umbilicals: assistance in critical conditions of extractionconditions of extraction

• Process of acreditation already finished• Process of acreditation already finished• Goal of starting invoicing orders during 2013.

20

Where does Tubacex want to be?Where does Tubacex want to be?

HIGHER VALUE ADDED PRODUCTSHIGHER VALUE - ADDED PRODUCTS

•OIL&GAS

•POWER GENERATION

21

Coal plants as a primary source of energy still growing stronglyof energy still growing strongly

Coal plants: global annual new capacity (GW)

14

16

18

8

10

12

2

4

6

d f l l ll l f 2 1%

0

2

1951

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

2019

Source: IEA, Tubacex.

• Energy generated from coal plants will grow at an annual average rate of 2.1%up to 2030, outperforming the average of the other energy sources.

• Coal has lower geopolitical risk than oil

• China and India will account for an 85% of this growth.

• Only in the past five years, China has doubled its coal capacity.22

…with materials that meet higher pressures and temperaturesp p

Boilers in coal plants: composition and resistance

Nickel baseAusteniticAustenitic9%

Sub- critical Supercritical Ultrasupercritical

Austenitic24%

16%

Ferritic60%

20%9%

Ferritic80%

Ferritic91%

250 bars 280 bars 360 bars

550 ºC 610 ºC 710 ºC

CO2 emissions reduction vs. traditional power plant base -33% -40%

• Boilers must be more efficient and meet the new environmental requirements, leading to a need of pressure and temperature resistant materials.

traditional power plant base

leading to a need of pressure and temperature resistant materials.• Average annual growth rate 2007- 2012E: 10%

Source: Tubacex on different sources,. 23

Strategic alliance withVallourec & Mannesmann

Commercial

Vallourec & Mannesmann

Commercial

Oil & GasTechnical

R + DPowergen

Technical

Enhancement of ComplementaryEnhancement of goals sought in Strategic Plan

Complementary products

Wider range

24

Enhancing exposure tothe fastest growing marketsthe fastest growing markets

Deepwater Productive Capacity

8

10

12

s pe

r day

2

4

6

8

Milli

on b

arre

ls

02004 2009 2015 2020

Gulf of Mexico Brazil Nigeria Angola Others

M

• Brazil is going to have the highest expected growth rate in oil extraction capacity in the coming years

• Extremely aggressive environments: offshore, deepwater and pre - salt.

• Tubacex has achieved a revenue growth rate in Brazil of 700% in the last five years

25

Tubacex Innovation

USA.AUSTRIASPAIN

INDUSTRIAL STRUCTURE

Tubacex Innovation

COMMERCIAL STRUCTURE

QualityColdQualityUmbilic.ColdHotQualityColdHotSteel mill

STRUCTURE

Project leaders

Customer Service

R+ D TRANSVERSALITY

I d d t ExternalIndependent company

External technological

centers

Strategic alliances with third- parties

Institutional side (INNOBASQUE)

26

Operating environment

Commercial situation• Order intake grew by 12% in 2012 vs. 2011.

• Distribution:

Commercial situation

• Volumes increasing since 2010. Better behaviour in Europe but USA improving since 2011.

• Increase in demand in 2012 in spite of decreasing trend in nickel• Increase in demand in 2012 in spite of decreasing trend in nickel prices

• Projects:

• Progressive recovery since 2010.

• Positive performance of the t ith V&M b klagreement with V&M: backlog

in OCTG until H2 2013.

• Strong demand from Offshore projectsprojects.

• Refining and PowerGen improving in recent months.

28

Industrial situationIndustrial situation

• 25� Mill. of CAPEX in 2013:• Payment commitments due to investments made in the last

N f t i d l i TTI ( di t j t)

Payment commitments due to investments made in the last years (i.e. new OCTG capacity).

• New manufacturing model in TTI (medium - term project):• First player in the sector that will implement it.• Improvements in productivity.

L d i d i di k d i• Lead times and intermediate stocks reduction.• Quality improvement.

• Minimising operating costs:

• Personnel• Sub- contracting• Suppliers• Production / Planning

29

AnnexAnnex

Financial performance

Sales (€ Mill.) EBITDA (€ Mill)

p

430,5

539,1

697,2671,8

486,6532,4

500

600

700

800

106,2

72 480

100

120

347,5430,5

371,5 361,8

0

100

200

300

400

42,952,7

64,072,4

12,827,2

45,8

0

20

40

60

80

02004 2005 2006 2007 2008 2009 2010 2011 2012

-18,4-40

-20

02004 2005 2006 2007 2008 2009 2010 2011 2012

EBIT (€ Mill.) Net income (€ Mill.)

89,5

80100

56,7

506070

24,937,0

47,3 55,7

6,526,5

-200

20406080

2004 2005 2006 2007 2008 2009 2010 2011 2012

13,525,4

30,937,6

3,711,9

01020304050

31

-35,4 -5,9-60-4020

-25,8

-6,5-30-20-10

02004 2005 2006 2007 2008 2009 2010 2011 2012

Q1 2013 ResultsQ

Significant improvement in profitability vs. Q1 2012.

Sales (€ Mill ) EBITDA (€ Mill )Sales (€ Mill.) EBITDA (€ Mill.)

151133 135

148138

146140160

15,714,4

10,1%

7 7%

10,6% 11,5% 9,9%

10 0%

15,0%

15

20

88

6468 73

10191 97

120133

112122

135

112

138

80100120140 11,3

5,0 5,7 6,5

12,1

5,7

5,9

3,5

10,4

12,8

6,9

14,4

7,5%

4,9%

6,2% 6,7%4,3% 5,3%

2,9%

7,7%

5,0%

-5,0%

0,0%

5,0%

10,0%

0

5

10

15

1T09 2T09 3T09 4T09 1T10 2T10 3T10 4T10 1T11 2T11 3T11 4T11 1T12 2T12 3T12 4T12 1T13

0204060

-8,1

-2,9-4,4

-9,1%

-4,5%

-27,5%

-6,1%

-25,0%

-20,0%

-15,0%

-10,0%

-15

-10

-5

1T09 2T09 3T09 4T09 1T10 2T10 3T10 4T10 1T11 2T11 3T11 4T11 1T12 2T12 3T12 4T12 1T13

1T09

2T09

3T09

4T09

1T10

2T10

3T10

4T10

1T11

2T11

3T11

4T11

1T12

2T12

3T12

4T12

1T13 -18,7

-35,0%

-30,0%

-25

-20

EBITDA EBITDA Margin

32

Financial Situation

Equity / Total Assets (%)Working Capital vs. Net Financial Debt

€ Mill€ Mill.

250

300

42% 44% 41%46%

40% 38%50%

100

150

20041% 40% 38% 36% 36% 37% 37% 37%

10%

20%30%

40%

0

50

100

0 0 1 1 2 2 3

0%10%

2006

2007

2008

2009

2010

2011

1Q12

2Q12

3Q12

4Q12

1Q13

1Q10

3Q10

1Q11

3Q11

1Q 12

3Q 12

1Q 13

Working Capital Deuda Financiera Neta

Equity / Total Activo

• Due to our business model, Net Financial Debt is strongly correlated with our working capital evolution

• In spite of the sharp decrease in demand during 2009 and 2010, TUBACEX has been able to maintain a sound financial position

33