Heg Limited · NSE:HEG
Heg — Investor Presentation (November 2018)
25 slides from Heg's investor presentation, Nov 23, 2018
Slide 1: Intimation of Schedule of Analyst / Institutional Investor Meeting
PROUD TO BE INDIAN PRIVILEGED TO BE GLOBAL HEG/SECTT/2018 23 rd November, 2018 1 ESE Limited 2 National Stock Exchange of India Limited 25 th Floor, P J Towers Exchange Plaza, 5th Floor Dalal Street Plot No.C/l, G Block, Bandra - Kurla Complex MUMBAI - 400 001. Bandra (E), Scrip Code: 509631 MUMBAI
Slide 2: Investor Presentation November 2018
Investor Presentation November 2018 April 2 2018 0
Slide 3: HEG is part of LNJ Bhilwara group
HEG is part of LNJ Bhilwara group a diversified, reputed and large Indian business house having more than five decades of industrial experience and presence in Power Generation & Textiles Graphite Electrodes Power Consultancy IT Enabled Services 3 1
Slide 4: Nationwide Presence
Nationwide Presence Plants & Office Locations • Group has 5 of its companies listed on Indian Stock Exchanges, with over one million stakeholders. • Corporate office & Production units at 37 locations with over 25,000 workforce. LNJ Group - Key Financials 2017-18 Turnover USD 1242 mn Net Fixed Asset
Slide 5: World's Largest Single Site Graphite Electrode Plant – 80,000 MT per annum
World’s Largest Single Site Graphite Electrode Plant – 80,000 MT per annum 5 3
Slide 6: Highlights
• 1977 - Established in Financial (appx 25% equity) / Technical participation of Pechiney, France • 1992 - Pechiney sold their Graphite business to SGL, Germany & Indian Promoters bought these shares in HEG • 1995 / 2011 – Kept expanding from 10,000 mt in small tranches & in 2011 took a quantum leap
Slide 7: Graphite Electrode (GE) Industry – Our Unique Strengths
Graphite Electrode (GE) Industry – Our Unique Strengths • GE- An indispensable material for Electric Arc Furnaces (EAF) for Steel production • EAF accounts for appx 45% of total World Steel Production (Without China) • High Entry Barrier – HEG the last new entrant in the world -1977 • Uses 100 % Cap
Slide 8: R&D Center
R&D Center • R&D set up to corroborate the Quality & Improvement Drives with small scale production facilities • The focus is also on development of new product lines • Development is focused towards Carbon 8 6
Slide 9: Capacity Build Up
Capacity Build Up Graphite Electrode Captive Power (MW) (In '000 tonne) (In '000 tonne) 120 120 100 100 100 80 77 77 77 80 80 66 60 52 60 44 40 30 40 20 14 20 14 0 0 1 990 2002 2006 2009 2011 2 020 2002 2006 2009 2011 2 020 Probable 9 7
Slide 10: EAF Steel
EAF Steel 10 8
Slide 11: Global EAF steel production
Global EAF steel production 8-10% 500 -2% 400 3.5% 300 200 100 0 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 • EAF steel production
Slide 12: EAF World Production – Without China & China
EAF World Production –Without China & China China EAF EAF World w/o China % of EAF China 13.4% +1.1% 449 432 415 398 373 383 383 372 380 366 301 360 366 353 356 175 160 100 66 71 65 75 F igures in mmt 57 54 52 47 20% 21% Source: WSA 9% 12% 6% 6% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201
Slide 13: Blue Sky Policy
Chinese Government is taking air pollution control measures seriously. This year the application of the restriction will be more rigid & strict. & have been Blue Sky Policy advanced from 1 Oct to 31 Mar compared to 15 Oct to 15 Mar last year Export of Steel is likely to keep falling in near futu
Slide 14: China Pollution Crack Down
China is in the fifth year of a “war on pollution” . 2017 environment control was not very serious – being first year , allowed 60- 65% capacity utilization against 50% orders but this year it will be much more China Pollution stringent & the impact may be higher. Crack Down Last year Environmen
Slide 15: China's Steel Capacity outlook 2018
China’s Steel Capacity outlook 2018 IF's capacity closure in Major Regions • Capacity reduction ahead of expectations: net capacity reduction achieved 115 mmt vs. 150 mmt target. The balance is expected to close down in this year. • Additional ~155 mmt illegal induction furnace capacity closed • Man
Slide 16: Chinese Steel Exports Further Down 11% Y-o-Y Jan-Sep'18
Chinese Steel Exports Further Down 11 % Y-o-Y Jan-Sep’18 7.4 Jan 4.7 5.8 CY17 Feb 4.9 CY 18 112 Mar 7.6 5.7 108 6.5 Apr 6.5 7.0 May 93 6.9 6.8 Jun 6.9 China Steel Exports (MT) 7.0 Jul 5.8 76 Aug 6.5 5.9 70 Sep 5.1 6.0 5.0 Annualized based on 8 months actuals Oct Monthly Chinese Exports in MnT CY-14
Slide 17: Chinese Steel Exports
Chinese Steel Exports Exhibit 1: Chinese steel exports have fallen sharply in CY17 MT Fall of >50% in most geographies 5.0 112.0 108.0 120 from CY15 levels 93.0 4.0 100 8 0 3.0 75.6 6 0 2.0 40 1.0 20 0.0 0 CY14 CY15 C Y16 C Y17 EU (28) USA Africa Middle-East I ndia Worl
Slide 18: Conclusion on EAF Steel
EAF Steel production is expected to grow at a faster pace compared to BOF because of following reasons: • Replacement of Induction furnaces & polluting blast furnaces in China by EAFs • EAF Share in China to grow from 6% in 2016 to 20% in Conclusion 2020 on EAF Steel • Chinese scrap availability to
Slide 19: Graphite Electrode (GE) Industry
Graphite Electrode (GE) Industry 19 17
Slide 20: Industry Overview – India's Rising Share
Industry Overview – India’s Rising Share (w/o China & Russia) 60 5 4 40 33 32 32 32 30 26 2 3 23 20 14 3 0 0 Graftech SGL Japan India 1 990 2010 2017 20 18
Slide 21: GE Capacity Evolution (w/o China & Russia)
GE Capacity Evolution (w/o China & Russia) S. No. Company Name 2010 2014 2017 No. of plants 1 SDK 105 105 225 5 2 Tokai 100 100 95 4 3 NCK / SEC 60 60 60 2 Sub-Total Japan (A) 265 265 380 11 4 Graftech 245 185 167 3 5 SGL 230 180 0 0 Sub-Total US/Europe (B) 475 365 167 3 Sub-Total ( A + B ) 740 630
Slide 22: GE Industry Development
GE Industry Development 7 GE plants got closed urrently 19 plants in 15 C lmost 300,000 tons of A between 2010 and 2016 , 20% countries comprising 725,000 inefficient/polluting GE of world capacity due to tons capacity are working at capacity in China has been demand supply imbalance. 85-90% ca
Slide 23: Needle Coke Scenario
• Needle coke is the main raw material for GE production & is very critical for the growth of GE industry. • Due to excess capacity of needle coke in the recent past, some of the needle coke producers have been trying to find a new application for coke in the Lithium Ion batteries. • In the last cou
Slide 24: Financial Snapshot
Financial Snapshot in Rs. Crore (except EPS) Jul-Sep 2018 Apr-Jun 2018 Jul-Sep 2017 Apr’17-Mar’18 (Quarterly) (Quarterly) (Quarterly) (Annually) REVENUE 1794 1587 410 2758 EBITDA* 1389 1197 192 1734 EBITDA Margin 76.57% 75% 46.66% 63% EBIT 1371 1180 174 1661 EBIT Margin 76% 74% 43% 60% PAT 889 770 1
Slide 25: Thank You
_ Thank You ss es Ye