Hindalco Industries Limited · NSE:HINDALCO
Hindalco Industries — FY2011 Earnings Presentation
67 slides from Hindalco Industries's earnings presentation, May 30, 2011
Slide 1: Hindalco Industries Ltd Press Meet FY11 Consolidated Results
Hindalco Industries Ltd Press Meet FY11 Consolidated Results May 30, 2011
Slide 2: Contents
Contents Highlights and Financials Economy and Industry Performance Review Looking Ahead … 2
Slide 3: FY11 - Highlights
FY11 - Highlights Strong Financial & Operating Performance Highest ever sales Best ever Underlying EBIDTA Strong Operational Cash flows Strong overall liquidity Highest ever capex spend Efficient Capital Structure 3 Best ever performance despite challenging conditions
Slide 4: FY11 – Highlights … Drilling Down
FY11 – Highlights … Drilling Down Aluminium Strong operational performance India Financial closure of Utkal & Mahan achieved under difficult market conditions Best ever performance, poised for Novelis transformational growth Value accretive to Hindalco shareholders Copper Record production at
Slide 5: Consolidated Financial Performance
Consolidated Financial Performance: FY11 ` Cr US$ Mn FY10 FY11 FY10 FY11 Change (%) Net Sales 60,722 72,078 12,827 15,848 24% EBITDA 10,069 8,433 2127 1,861 -13% Adjusted 6,983 8,724 1475 1,925 31% EBITDA* PBT 6,181 3,843 1306 845 -35% PAT 3,926 2,456 829 540 -35% EPS (`) 22.17 12.84 * Adjusted for
Slide 6: Adjusted EBITDA vs. Reported EBITDA
Adjusted EBITDA vs. Reported EBITDA US$ Mn Unrealised Improvement in 2500 Derivative underlying Gain FY10 Unrealised performance Derivative 2000 2,127 578 Loss, FY11 450 1,925 64 1,861 1500 74 1,475 Transitional AS- 31% 30 adjustments 1000 in FY10 500 0 Reported Underlying Underlying Reported EBITDA
Slide 7: Novelis: Underlying PBT
Novelis: Underlying PBT ($ Mn) FY10 FY11 Reported PBT 727 243 Unrealized gains 578 (64) (losses) on derivatives Loss on -- (84) extinguishment of debt Restructuring (14) (34) charges Others 5 1 Total adjustments 569 (181) Underlying PBT 158 424 168% jump in underlying PBT 7
Slide 8: Economy and Industry
AT ADITYA BIRLA ae Economy and Industry
Slide 9: Aluminium: Strong Demand
Aluminium: Strong Demand Asia driving > 50% demand Asia as dominant if not more than W. Europe or US Demand growth expected to remain strong Global demand to grow at ~ 8-10% Asia & China to witness strong growth despite moderation concerns 9 US & Europe demand too continue to be robust
Slide 10: Aluminium: Demand, Supply
Aluminium: Demand, Supply 9% 9% Reported stocks 50 (Mn tons) World (days of consumption) 44.6 45.9 45 41.0 42.0 2004 34 40 35 2005 33 25.9 26.9 30 24.2 25.0 2006 28 25 7% 7% Ex-China 2007 26 20 2008 52 15 10 2009 63 16.9 17.0 18.7 19.1 China 5 2010 57 11% 12% 0 Current 58 Demand Production Demand Pr
Slide 11: Incessant Cost Push
Incessant Cost Push Alumina & power together constitute ~ 65-70% of aluminium cost Alumina: De coupling looks imminent… Several new contracts on spot pricing basis ~ 30% Moved up from ~11.5% of aluminium to >15.5% Fundamentals do not justify aluminium linked pricing New bauxite finds in difficu
Slide 12: Aluminium Price Outlook
Aluminium Price Outlook Warehousing deals have created a physical shortage • Warehousing deals viable until - Contango > (storage cost + carrying cost) • Inventory may rise further in 2011 • Unwinding possible when global interest rates inch up Key drivers of LME Cost Push Vulnerable to … LME • Chan
Slide 13: Copper: Mixed Outlook
Copper: Mixed Outlook Copper market has tightened Concentrate terms improved for 1,085 Refined copper smelters in 2011 Japanese Benchmark surplus / deficit (kt) TCRC (c/lb) 19.6 14.4 245 11.9 -342 2009 2010 2011 (P) 10000 9,483 2009 2010 2011 LME Cu ($/t) 9000 8000 7000 Certain smelter disruptions
Slide 14: Global Demand Drivers: FRP
Global Demand Drivers: FRP CAN AUTOMOTIVE CONSTRUCTION ALUMINUM SHEET SECTOR SECTOR DEMAND ASIA N. AMERICA EUROPE S. AMERICA Source: Industry reports and company estimates 14
Slide 15: Performance Review: Indian Operations
Performance Review: Indian Operations 15
Slide 16: Key Business Drivers & Impact
Key Business Drivers & Impact Change ( %) Driver Impact FY11 over FY10 Aluminium LME 21 Average($/ton) Copper TC/RC (26) (cents/lb) Exchange (4) Rate (`/$) Energy Costs >20 16
Slide 17: Aluminium Operations: Production Trend
Aluminium Operations: Production Trend Alumina (kt) Metal (kt) 1,353 555 538 1,307 FY10 FY11 FY10 FY11 Alumina production increased as a result of brownfield expansion Despite Hirakud outage, metal production declined by only 17 Kt as Renukoot continued to deliver higher volumes through asset 17
Slide 18: Aluminium: Improved Mix
Aluminium: Improved Mix Jump in Hydrate / Alumina sales with Maximized domestic sale of metal … focus on specials 310 kt 28% 241 kt 149 Specials Export 128 82% 87% 50% 57% Domestic 160 113 Standard 44% 41% FY10 FY11 FY10 FY11 Specials market share Domestic ~85%, Global ~6% 18
Slide 19: Copper: Production
Copper: Production Cathode (kt) 333 336 Higher production despite outage due to cooling tower failure FY10 FY11 CCR*(kt) 10% 144 131 Increased production of value added continuous cast rods FY10 FY11 * Own production 19
Slide 20: Copper: Leveraging every opportunity in the book
Copper: Leveraging every opportunity in the book Operational Excellence • Copper output up by 3 kt despite cooling tower failure • Fertilizer & acid streams optimized ~ 21% jump in DAP production Focus on unlocking hidden value • Increased recovery of copper and selenium • New capability to use exte
Slide 21: Standalone Financial Performance: FY11
Standalone Financial Performance: FY11 ` Cr FY10 FY11 Change (%) Net Sales 19,522 23,859 22 EBITDA 3,210 3,502 9 Adj. 2,861 3,502 22 EBITDA* PBT 2,265 2,595 15 PAT 1,916 2,137 12 EPS (`) 10.82 11.17 3 21 * Adjusted for transitional AS-30 adjustments under Indian GAAP
Slide 22: Novelis
Novelis ADITYA BIRLA eee)
Slide 23: FY11 Highlights – An Outstanding Year
FY11 Highlights Strong Global Demand Driving Near 100% Capacity Closed FY11 with Record Financial Results: Shipments Up 10% vs. FY10 to 2,969 Kt Net Sales Up 22% vs. FY10 to $10.6 Billion Record Adjusted EBITDA Up 42% vs. FY10 to $1.1 Bn Net Income of $116 Million Strong Liquidity of $
Slide 24: Novelis: Value drivers
Novelis: Value drivers Shipments by Region – Volumes & Pricing All-round growth FY10 FY11 KT 1,200 Ch. FY10 FY11 (%) 1,000 Shipments 800 2,708 2,969 10 (kt) 600 400 Adj. EBITDA 279 361 29 200 per ton ($) 0 South Asia Europe North America America Footprint & Product portfolio optimization drove impro
Slide 25: Strong Momentum
Strong Momentum Adjusted EBITDA (Millions) • Shipments (Kt) Adjusted EBITDA Shipments Linear (Adjusted EBITDA) $300 $291 900 $280 $263 $250 $232 $238 $218 800 $199 $200 $200 $150 $128 $124 700 $100 $89 $50 600 $50 $0 500 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011 Company Actions Continuously
Slide 26: ABML Copper Mines in Australia
ABML Copper Mines in Australia 26
Slide 27: ABML: Strong Show
ABML: Strong Show • Highest Copper Production recorded at Nifty Ore • Highest Ore Mined and Processed to date Nifty Mine • Stabilizing recovery at around 93% • Full year production of copper at an all time high at 59,661 metric tonnes despite fall in copper grade. • Project received final approval •
Slide 28: Robust Performance of Nifty Mine
Robust Performance of Nifty Mine Nifty Sulfide Production (Cu tons) Nifty EBIDTA (A$ mn) 3% 10% 56,450 58,034 173.3 157.2 FY10 FY11 FY10 FY11 Highest ever Nifty production despite lower grade 28
Slide 29: Looking Ahead …
Looking Ahead … 29
Slide 30: Our Strategy
Our Strategy Sharp accent on Strong conversion Aggressive growth in value addition and businesses to lower Aluminium – one of cost leadership in vulnerability to our chosen metals each of the economic downturns businesses A High Alpha, Low Beta Portfolio Our Goals Being amongst world’s most valued
Slide 31: Strategic Pathway
Strategic Pathway Objective Short Medium term term/Immediate Maintain cost Re-inforce cost Consolidate Global leadership in the leadership with leadership face of inflationary world class green- leveraging Novelis’ environment field projects head start Enablers H’kud brown field expansion, Significa
Slide 32: FY11: Progressing well …
FY11: Progressing well … Indian Business: Robust performance by existing operations Novelis- The Projects: Strong growth progress on On a Strong Footing momentum ground continues ABML: Geared for further organic / inorganic 32 growth
Slide 33: Attractive Project Pipeline
Attractive Project Pipeline Planned capacity increase may coincide with Well timed capacity global economic recovery and ride the next increase commodity cycle Lower Production Hindalco’s greenfield plants expected to be in Cost global best quartile for manufacturing costs Lower Capex cost State
Slide 34: Greenfield Projects Update
Greenfield Projects Update Expected Project Progress completion • Strong progress on the ground & over 90% of project cost committed Mahan Aluminium, • Project finance completed (contracted debt Rs 7,875 Cr) First Metal MP • Forest clearance for coal block awaited & applied for End 2011 tapering lin
Slide 35: Update on Projects: Brownfield
Update on Projects: Brownfield Project Scope Expected completion Hirakud expansion Smelter: 155 to 213 ktpa 2012 Transfer from Novelis UK plant to produce a wide FRP, Hirakud End 2011 product range including can body stock Significant increase in Pinda (Brazil) End 2012 FRP capacity to 600 ktpa Incr
Slide 36: Planned Aluminium Portfolio
Planned Aluminium Portfolio 4.7 mt 4x 6 mt 3x 1.8 mt 1.6x India+ Jharkhand Utkal- 359 kt 3 mt Novelis + II 1.5 H'kud+ Aditya 190 kt Aditya 1.5 359 kt Utkal Mahan 1.5 mt 1.5 0.6 mt 359 kt Current Current Current Alumina Al Metal Downstream Lien over coal & bauxite to yield lowest decile cost structur
Slide 37: Novelis: The Transformation
Novelis: The Transformation FY08 Constrained under-performance FY09 Claiming the rightful share in the value chain FY10 The Turnaround FY11 Value accretive for HIL Shareholders FY12….. 37 ???
Slide 38: Novelis Footprint: Today & in Five Years
Novelis Footprint: Today & in Five Years Shipments (Kt) Total Novelis FY16 Total Novelis FY11 Capacity ~4,000 Capacity ~3,000 ~1100 ~900 ~600 ~136 ~990 0 ~1000 ~400 ~65 0 $1.5 Billion Three-Year Capital Investment
Slide 39: Key Medium-term Themes …
Key Medium-term Themes … Aluminium Dramatic growth with ‘Last Man Standing’ cost business in positions India Maintaining momentum – through footprint optimization & leveraging technology edge Novelis Participate in the most value-accretive growth opportunities worldwide Copper Growth through
Slide 40: Summing Up…
Summing Up… Strong all-round performance in a challenging year on the back of continuous efficiency improvements Projects have gained a significant visibility – to reinforce low- cost advantage Novelis’ technology edge and footprint optimization to drive the organization to new heights Robus
Slide 41: Thank you
Thank you 41
Slide 42: Hindalco Industries Ltd FY11
Hindalco Industries Ltd Investor Presentation FY11 May 9, 2011
Slide 43: Performance Highlights, Business Environment, Performance Review
Performance Highlights Business Environment Performance Review 2
Slide 44: FY11: Highlights…
FY11: Highlights… Strong Production Performance: Record Aluminium Production at Renukoot Highest ever Copper output at Dahej Financial closure for Utkal & Mahan achieved Long Tenor, Covenant light, Attractive pricing Novelis Refinancing to improve Overall capital structure USD 1.7 Bn remitt
Slide 45: Highlights – Q4 FY11
Highlights – Q4 FY11 Quarterly turnover crossed $1.5 bn for the first time ever Net profit up 54% sequentially as operations resumed normalcy 10-quarter high PBITDA despite severe cost pressures New precious metals refinery commissioned in Q4 Highest-ever alumina production at Muri Finan
Slide 46: Q4: Strong PBITDA trend
Q4: Strong PBITDA trend (PBITDA, ` Cr) Disruptions at Hirakud & Dahej 1200 1020 1000 913 901 833 797 801 780 800 666 600 400 200 0 FY10 Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY11 Q1 FY11 Q2 FY11 Q3 FY11 Q4 Improvement despite tremendous cost pressures 5
Slide 47: Financial Performance (Standalone)
Financial Performance (Standalone) ` Cr FY10 FY11 Change (%) Net Sales 19,522 23,859 22 PBITDA 3,210 3,502 9 PBT 2,265 2,595 15 PAT 1,916 2,137 12 EPS (`) 10.8 11.2 3.2 ` Cr Q4 FY10 Q4 FY11 Change (%) Net Sales 5,397 6,846 27 PBITDA 913 1020 12 PBT 674 787 17 PAT 664 708 7 EPS (`) 3.5 3.7 6.6 6 • Ne
Slide 48: Financing Highlights
Financing Highlights Particulars Mahan Utkal Project Cost (including 10,500 7,009 financing cost) Rs Cr Debt / Equity 0.75 0.70 Loan Size Rs Cr 7,875 4906 Arrangers SBI/SBI Caps, Citi, Kotak & RBS SBI/SBI Caps, IDBI & RBS Tenor (Door to Door) 12.75 Yrs 12 Yrs. Interest Rate SBI base rate plus Margin
Slide 49: Business Environment
Business Environment 8
Slide 50: Key Business Drivers and Impact
Key Business Drivers and Impact Change ( %) Driver Impact FY11 over FY10 Aluminium LME 21 Average($/ton) Copper Tc/Rc (26) (c/lb) Exchange (4) Rate (`/$) Input costs 9
Slide 51: FY11 – A Challenging Year
FY11 – A Challenging Year Global recovery Favourable continued … LME Weathering sovereign debt concerns and Depressed geopolitical threats … Intense cost TC/RC pressures Amidst unprecedented policy support • Hirakud outage Confluence of • Dahej: Cooling tower failure one-off disruptions • Kalwa rest
Slide 52: Incessant Cost Pressures
Incessant Cost Pressures Change in global benchmark prices (Q4 FY11 vs. year ago) #1 Relative energy inflation Crude Coal 37% 36% Alum. 16% (Mar 11 vs. Mar 10) 2.7% 1% #2 8.7% Appreciation of rupee 7.1% in inflation-adjusted terms INR inflation USD inflation INR Net appreciation disadvantage 11 A si
Slide 53: Performance Review
ADITYA BIRLA HINDALCO Performance Review
Slide 54: Al: Trend in production
Al: Trend in production Alumina (kt) Annual Metal (kt) Wire rod (ton) 1,353 555 538 91,903 94,307 1,307 FY10 FY11 FY10 FY11 FY10 FY11 Alumina (kt) Quarterly Metal (kt) Wire rod (ton) 138 139 23,176 23,152 344 344 Q4 FY10 Q4 FY11 Q4 FY10 Q4 FY11 Q4 FY10 Q4 FY11 13
Slide 55: Aluminium: Enhancement of Profitability by improving Product-Mix
Aluminium: Enhancement of Profitability by improving Product-Mix Jump in Hydrate / Alumina sales with Maximized domestic sale of metal … focus on specials 310 kt 28% 241 kt 149 Export Specials 128 82% 87% 50% 57% Domestic Standard 160 113 44% 41% FY10 FY11 FY10 FY11 Specials market share Domestic ~8
Slide 56: Al: Revenue break up (Rs Cr.)
Al: Revenue break up (Rs Cr.) Metal Chemicals FRP 14% 3,409 767 11% 2,924 31% 586 2,644 2,989 FY10 FY11 FY10 FY11 FY10 FY11 Extrusions Others All-round growth 313 551 219 552 FY10 FY11 FY10 FY11 Strong Growth despite Hirakud outage 15
Slide 57: FY11: The Aluminium story…
FY11: The Aluminium story… Challenges Mitigation Actions Increasing Improved 1. Higher production at Renukoot efficiencies, 2.Hirakud outage affected the Cost asset performance, now back to normal Pressure sweating 3.Hirakud Brownfield expansion on track 1.Higher sales in lucrative domestic market M
Slide 58: Aluminium Business: Financial Performance
Aluminium Business: Financial Performance (` cr) Q4 FY10 Q4 FY11 Change (%) Net Sales & 2,037 2,211 9 Operating Revenue EBIT 614 562 (8) (` cr) FY10 FY11 Change (%) Net Sales & 6,989 7,965 14 Operating Revenue 17 EBIT 1,767 2,004 13
Slide 59: Copper: External Drivers
Copper: External Drivers Driver Current Assessment Impact TCRC • Long term TCRC lower than last year LME/INR • LME being supported by liquidity INR •Appreciating rupee Acid prices • Improving trend Energy • Correlated with commodity cycle; likely to be prices firm Challenging times 18
Slide 60: Cu: Production Performance
Cu: Production Performance Cathode (kt) Annual Own CCR(kt) 333 336 144 131 FY10 FY11 FY10 FY11 Quarterly Cathode (kt) Own CCR(kt) 85 75 37 33 Q4 FY10 Q4 FY11 Q4 FY10 Q4 FY11 19
Slide 61: Cu: Revenue Drivers (Rs Cr.)
Cu: Revenue Drivers (Rs Cr.) Cathode CCR 7,756 36% 5,588 20% 5,569 4,669 FY10 FY11 FY10 FY11 Fertilizers & Acids Precious Metals & others 782 1,891 102 1,874 % 388 FY10 FY11 FY10 FY11 Strong Revenue Trend added by favourable macro factors 20
Slide 62: Cu: Leveraging every Opportunity
Cu: Leveraging every Opportunity Multiple Value-Drivers: Optimized fertilizer stream when TcRc was down Focus on unlocking value: Increased production of selenium New initiative to use external scrap to supplement primary production Maintained domestic market leadership to optimize sales-mix TcRc dr
Slide 63: Copper Business: Financial Performance
Copper Business: Financial Performance Q4 FY10 Q4 FY11 Change (` cr) (%) Net Sales & 3,361 4,637 38 Operating Revenue EBIT 127 206 61 FY10 FY11 Change (%) Net Sales & 12,540 15,902 27 Operating Revenue EBIT 660 602 (9) 22
Slide 64: Key External Drivers - Outlook
Key External Drivers - Outlook Driver Current Assessment Impact LME Strong momentum so far; but vulnerable to risk aversion / rate hikes INR USD Upward pressure on rupee, including from overall USD weakness Input prices Sharp rise in coal and carbon costs TCRC 2011 terms favourable to smelters vis-à
Slide 65: Projects: Progressing well…
Projects: Progressing well… Detailed Review to be published along with the Consolidated results FY 11 spend…. ~ Rs 6,500 Crores 24
Slide 66: Forward Looking & Cautionary Statement
Forward Looking & Cautionary Statement Certain statements in this report may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the
Slide 67: Thank you
Thank you 26