Hindalco Industries Limited · NSE:HINDALCO
Hindalco Industries — Q2 FY2008 Earnings Presentation
63 slides from Hindalco Industries's earnings presentation, Oct 31, 2007
Slide 1: Performance Review H1 2007-08
Hindalco Industries Limited Performance Review H1 2007-08 Presentation to Investors 31st October 2007
Slide 2: Backdrop & Highlights, Business Performance & Outlook, Project Highlights
Backdrop & Highlights Business Performance & Outlook Project Highlights Detailed Q2 FY08 Financials
Slide 3: Backdrop: H1 FY08
Backdrop : H1 FY08 Adverse Macro economic factors, • Domestic Aluminium realisation down by 8% YoY from Rs.118625/T to Rs 109203/T . o INR appreciating by 11% (US$ from Rs.45.93/$ during H1 FY07 to Rs.41.01 /$ during H1 FY08). o Aluminium Customs duty down from 8.08% to 5.72% • Alumina spot price do
Slide 4: Trend of Domestic Ingot Realisations
Trend of Domestic Ingot Realisations Hindalco Dom. Ingot Realisation Rs/T FY 08 Fall in LME + LME Recovers LME improves Re. strong + PRICE CHANGE but Re. strong Duty Cut Date Change Rs/T 140000 but Re. strong 03-Apr-07 3,000 120000 03-May-07 -7,000 Big Fall in LME 100000 20-May-07 3,000 but Re. weak
Slide 5: Domestic Macro Trends - FY08
Domestic Macro Trends Trends-- FY08 Aluminium import duty Copper Duty Differential 33.0% 31.0% 33.0% 30.0% 28.0% 19.0% 20.0% 18.8% 15.0% 10.6% 11.3% 8.1% 5.7% 5.7% 5.1% 3.1% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Indian Rupee continuously appreciating 47 46 4
Slide 6: Global Macro Trends - FY08
Global Macro Trends ––FY08 FY08 Even with higher LME, Aluminium price has fallen in INR terms Alumina prices continues to be soft 120000 2680 700 117948 600 2655 116000 2640 500 400 112000 2600 300 315 2568 108882 200 108000 2560 LME INR (Left margin) 100 LME USD (Right Margin) 104000 2520 0 April'0
Slide 7: Global Macro Trends - FY08
Global Macro Trends ––FY08 FY08 Aluminium LME falling with increase in stock Weakening Spot TC/RC (Mt) US$/Mt LME –CSP $/Mt 1200000 3,800 140 1100000 3,300 1000000 Indexed. Base=100 2,800 900000 120 2,300 800000 700000 1,800 Aluminium Inventory 1,300 600000 500000 800 100 6 6 7 6 06 7 07 06 7 /0 /0
Slide 8: However, Hindalco continues to deliver through…
However, Hindalco continues to deliver through… • Increased metal production o Timely progress of Hirakud Phase-II expansion (grew by 41% compared to H1 FY07) o De-bottlenecking smelter assets at Renukoot- production enhanced by more than 4000Mt. • Copper anode production increased by 14 Kt on impro
Slide 9: H1 FY 2008 at a Glance
H1 FY 2008 at a Glance • Highest ever Aluminium production at 234426 T 8% • Highest ever revenue at Rs.9,638 Crores 8% Vs H1 FY 2007 • Net Profit at Rs.1,246 Crores 4% • Copper cathode Production at 158415 T 16% Growth in Net Profit despite adverse business environment. 9
Slide 10: Financial Highlights - Q2 & H1 FY08
Financial Highlights ––Q2 Q2 & H1 FY08 (Rs. Cr) (Mn US$) Q2 Change H1 Change Q2 Change H1 Change FY08 (%) FY08 (%) FY08 (%) FY08 (%) Net Sales & 4960 7% 9638 8% 1248 24% 2424 25% Op. Revenue EBIDTA 1031 -6% 2040 -3% 261 14% 515 14% Pre-tax profits 824 -2% 1634 -1% 209 15% 413 15% Net Profit 643 8% 1
Slide 11: Aluminium Business Performance
Aluminium Business Performance
Slide 12: Aluminium performance affected due to 8% drop in metal realisation
Aluminium performance affected due to 8% drop in metal realisation Aluminium Q2 FY08 H1 FY08 Change Change (Rs. (%) (Rs. (%) Crores) Crores) Net Sales & Operating 1785 -4% 3539 1% Revenue EBIT 662 -1% 1304 -6% Note: As per SEBI Format 12
Slide 13: Production trend
Production trend Aluminium (Mt) 234426 H1 FY07 H1 FY08 216532 114366 104162 21293 18507 13321 13143 35464 34289 Primary Metal Wire Rods FRP Extrusions Foils _______________________ Source: Company Data Allround improvement in production 13
Slide 14: Sales
Sales Significant improvement in Aluminium sales Aluminium With higher value added proportion volume (Mt) Total Turnover- 230000 H1 FY07 10% Rs3011Cr 226441 9% 41% 225000 59% 220000 40% +7% 215000 H1 FY08 211158 Total Turnover 9% -Rs3084Cr 210000 10% 40% 205000 60% 41% 200000 H1 FY07 H1 FY08 Primary
Slide 15: Sales Realisation
Sales Realisation Maximised metal realisation by bridging the landed price gap between Hindalco metal and Improved Markup of value added products Imported metal Rs/Mt 135848 • Rolled product markup for domestic 131990 business up by 4% • Extrusion business markup improved by 20% as compared to H1 FY
Slide 16: Allround Improvement in Cost
Allround Improvement in Cost • Aluminium - Conversion cost down by 3% compared to H1 FY07. o Energy cost in conversion cost down by 2% at 51% • Achieved through better coal quality as well as improved power efficiency. o Carbon cost lower by 1% at 26% • Due to softening of Pitch cost as compared to
Slide 17: The Profitability being maintained at high levels
The Profitability being maintained at high levels Aluminium Hindalco (Al) Vs Peers- EBIDTA for H1 FY08 EBIDTA Margin maintained Indexed. Base=100 120 H1 FY07 H1 FY08 100 100 100 100 96 50% 90 49% 80 65 44% 60 42% 40 20 0 A leading A leading Indian Hindalco International Company player 2004-05 2005-0
Slide 18: Copper Business Performance
Copper Business Performance
Slide 19: H1 FY08 key levers of performance
H1 FY 08 key levers of performance……….. • Cathode production rose by 16% compared to H1 FY07 to 158 KT. • Continuous Cast Rod production rose by 29% compared to H1 FY07 to 69 KT. • Copper sales rose by 18% compared to H1 FY07 to 157KT. • Operating efficiency and Conversion cost improved. • Though Ba
Slide 20: EBIT improved despite fall in TCRC
EBIT improved despite fall in TCRC Copper Rs Crs 240 105 238 TCRC Indexed. Base=100 235 100 100 230 95 225 90 221 220 85 85 215 80 EBIT TCRC 210 75 H1 FY07 H1 FY08 Achieved through better by-product realization and improvement in operational efficiency 20
Slide 21: Improvement in Market Mix
Improvement in Market Mix ……………. H1 FY 07 H1 FY 08 43% 51% 49% 57% Export Domestic Benefits of increase in duty paid sales by 8 % eaten away by reduction in duty differential. 21
Slide 22: Improvement in Operational Efficiency
Improvement in Operational Efficiency Copper Energy Consumption of complex GEB Drawl 63158 GJ/t 23.6 (Mwh) 16.2 6057 H1 FY 07 H1 FY 08 H1 FY 07 H1 FY 08 Significant improvement in energy consumption Grid power usage has come down due to compared to H1 FY 07 improved own power availability 22
Slide 23: Improvement in By-product sales realization
Improvement in By -product sales realization By-product 9398 Rs/t 7402 H1 FY 07 H1 FY 08 DAP Subsidy improves to meet cost 23
Slide 24: Copper Business Performance at a glance
Copper Business Performance at a glance…. Copper H1 Q2 FY08 Change FY08 Change (Rs. (%) (%) (Rs. Crores) Crores) Net Sales & Operating 3178 14% 6105 6% Revenue EBIT 126 2% 238 8% Note: As per SEBI format 24
Slide 25: ABML – Highlights for the Quarter
ABML – Highlights for the Quarter • Development of the Main Decline has been completed upto 23 level (bottom most level in the underground mine). • More than 70% of total ore production is by Underground Crusher and Conveyor and is on increasing trend. • Oxide ore stacking completed, leaching and ca
Slide 26: ABML – Further Exploration and Development
ABML – Further Exploration and Development • Esperanza south – Geotechnical drilling and metallurgical test works have been completed and a Pre- Feasibility study report has been prepared. • Maroochydore -- Exploration drilling has commenced to evaluate the feasibility. Resource evaluation using old
Slide 27: ABML H1 FY08 Performance
ABML H1 FY 08 Performance Financials (Million A$) H1FY07 H1FY08 Chg (%) Net Sales 168.4 317.2 88% EBIDTA 46.0 107.9 135% EBIT 21.2 83.4 293% Production ABML Nifty Sulphide Cu/MT Cu/MT 48000 28000 39355 24740 40000 41% 21000 197% 32000 27818 24000 14000 16000 8316 7000 8000 0 0 H1 FY 07 H1 FY 08 H1 F
Slide 28: Aluminium Outlook
Aluminium Outlook
Slide 29: Aluminium long term growth story intact
Aluminium long term growth story intact intact…… World Aluminium demand to be strong in coming Which reflects in strong forward curve years Aluminium US$/Mt 2500 12 Annual Consumption growth (Kt) Growth % 2210 2900 10 15th Oct'07 28th June'06 2000 9.6 2800 2700 1575 8 1500 2600 6 2500 1000 5.5 2400
Slide 30: Aluminium demand robust across the world
Aluminium demand robust across the world… China to become net importer of Aluminium by Aluminium demand in western countries also to 2009 be strong 900 Kg/Car Intensity of use of Aluminium in Chinese net trade (‘000 Mt) 180 European cars 162 160 140 700 120 CAGR-27% 100 80 60 39 500 40 20 0 1980 199
Slide 31: By 2030, Aluminium consumption growth will be driven by China & India
By 2030, Aluminium consumption growth will be driven by China & India. 2005 2030 World demand-31.9 Mn tonnes World demand-73.7 Mn tonnes 6% 5% 14% China 23% 22% China 13% 35% India 3% 4% 8% 22% 5% 5% 4% India 5% 8% 8% 10% North America EU/EEA Japan CIS & Other Europe Latin America SE Asia India Chin
Slide 32: Aluminium price forecasts
Aluminium price forecasts 2700 Average LME Year (USD/t) 2500 2008 2413 2300 2009 2351 2010 2301 2100 2011 2249 1900 Merill Lynch & Co Societe Generale 1700 CRU JP Morgan Chase & Co Forward curve (as on 29th Oct) 1500 2008 2009 2010 2011 Source Bloomberg/CRU Aluminium price expected to remain strong
Slide 33: Copper Outlook
Copper Outlook
Slide 34: Copper Price Forecast and driving factor
Copper Price Forecast and driving factor US$/Mt Copper 9000 8000 Average LME Year 7000 (USD/t) 2008 6826 6000 2009 5824 5000 2010 5442 4000 2011 5068 3000 2000 2008 2009 2010 2011 Reuters CRU Merril Lynch Goldman Sachs Fortis Metal Source Bloomberg/CRU Copper Price Driving Factor : • The copper pric
Slide 35: Refined Copper Consumption growth
Refined Copper Consumption growth Copper 4.4% 7.5% 7.4% 3.7% 3.4% 6.4% Growth in 4.7% 2008-18 Driven by 2.7% 0.6% 0.7% 0.7% Russia China Germany India USA W. Europe E.Bloc Brazil World Consumption Growth 2001-06 2007 2008-18 Source Q2 FY08- Brook hunt China and Russia followed by India are the main
Slide 36: World Concentrate Market Balance
World Concentrate Market Balance 700 Kt 618 Copper 600 Concentrate Market Balance 500 400 300 250 200 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -100 -200 -300 -271 -400 C/lb C/lb 14 12.8 30 Long Term TCRC Spot TCRC 24.4 12 21.8 24 10 18 15.4 8 10
Slide 37: Highlights & Backdrop, Business Performance & Outlook, Project Highlights
Highlights & Backdrop Business Performance & Outlook Project Highlights Detailed Q2 FY08 Financials
Slide 38: Project Highlights: Hirakud Power
Project Highlights: Hirakud Power • Unit # 4 ( 100MW,Three boilers and single turbine) - o Hydro-test of Boiler # 11 and # 10 completed. o Boiler # 11 light-up in 1st week November. o Turbine assembly in progress. Power House structure Unit#4 o Generator placed on foundation. o Coal Handling Plant e
Slide 39: Hirakud Power
Hirakud Power Generator on Foundation CHP Gallery & Structure C W Pump House & Cooling Tower Ash Pipe rack to Silo 39
Slide 40: Project Highlights: Hirakud Smelter Expansion
Project Highlights: Hirakud Smelter Expansion • Phase-I (35 kTPA expn.)- o Pot line-4 completed in Dec’06 as per schedule & operation stabilized. o Efficiencies well within guaranteed levels. • Phase-II (43 kTPA expn.)– Conversion of pot room #5 o Conversion of Pot Line-3 completed in Jun’07, and al
Slide 41: Project Highlights: Muri Expansion
Project Highlights: Muri Expansion • Basic & Detailed Engineering - Completed • Environmental Clearance & Other Statutory Clearances - Obtained • Land for future mud disposal site - Notification & acquisition by Govt. awaited • Construction Status - o Muri expansion Overall - 98.8 % complete • Power
Slide 42: Muri Expansion
Muri Expansion Fine seed disc filter being assembled High Temp. Digesters Plant view – seed filters, growth precipitators etc Pressure decanter recd. at site 42
Slide 43: Muri Expansion
Muri Expansion Mud filter section extension Raw water treatment & Effluent plant New Cogeneration Power plant view 43 New Alumina plant DCS facility recently commissioned
Slide 44: Greenfield Projects – Utkal Alumina
Greenfield Projects – Utkal Alumina • Bauxite Mining Capacity of 4,500 KTPA & Refining capacity of 1,500 KTPA. • Basic Engineering documents – all 21 packages received from Alcan and review is in final stages of completion by UHDE. • Detailed Engineering in progress for Non-Alcan areas as well as fo
Slide 45: Utkal Alumina
Utkal Alumina Bridge No 1 and 2 - Open for vehicular movement Non-plant buildings - Piling work commenced Hard rock cutting - drilling WIP 45
Slide 46: Mahan Aluminium Project
Mahan Aluminium Project • Smelter Capacity- 358 kTPA & CPP capacity – 750 MW • Land: Deposited Rs 53 Crores for acquisition of 2999 acres of private land. Section 4 notification published on 15th August 07 & Public Hearing conducted on 5th October 07. • Coal: Coal block allotted on Apr’06 in JV with
Slide 47: Latehar Aluminium Project
Latehar Aluminium Project • Smelter Capacity- 358 kTPA & CPP capacity – 750 MW • Tubed Coal Mine Allotted- o Formation of joint venture between Tata power and Hindalco in progress. • Land Acquisition: Land acquisition of 5400 acres in progress • Power: Sanction for 5MVA obtained. • Environmental cle
Slide 48: Aditya Aluminium
Aditya Aluminium • Bauxite Mining Capacity – 4,500 KTPA & Refining Capacity – 1,500 KTPA. • Smelter Capacity – 358 KTPA & CPP Capacity – 900 MW. • Technology Agreement signed with Aluminium Pechney for Aluminium Smelter • Land: 1360 Acres of Land registered for Smelter, 440 Acres(Koraput) & 34 Acres
Slide 49: To Sum Up
To Sum Up • It has been a very difficult quarter and the trend is expected to continue. • Management anticipated the adverse trend reasonably accurately and the remedial steps taken to face the emerging challenges seem to have paid off. • Copper TCRC will continue to be a major negative influence on
Slide 50: Highlights & Backdrop, Business Performance & Outlook, Project Highlights
Highlights & Backdrop Business Performance & Outlook Project Highlights Detailed Q2 FY08 Financials
Slide 51: Financials
Financials Rs.Crs. Q2 FY 08 Q2 FY 07 % Chng H1 FY 08 H1 FY 07 % Chng Net Sales 4959.7 4634.2 7% 9637.6 8907.9 8% Total Expenditure 4038.0 3647.8 11% 7831.6 6988.2 12% Other Income 109.8 110.8 -1% 234.4 188.4 24% PBDIT 1031.4 1097.2 -6% 2040.4 2108.1 -3% Depreciation 144.5 207.9 -30% 287.3 342.0 -16%
Slide 52: Segmental Results Q2 FY08
Segmental Results Q2 FY08 C.E 57% 43% Net Sales 36% 64% EBIT 84% 16% Aluminium Copper Aluminium Copper Rs Crs. Q2 FY08 Q2 FY07 % Chg Q2 FY08 Q2 FY07 % Chg Net Sales 1785 1852 -4% 3178 2783 14% EBIT 662 671 -1% 126 123 2% EBIT Margin 37.1% 36.2% 4.0% 4.4% Capital Employed 7674 6789 13% 5865 7324 -20%
Slide 53: Aluminium: Production
Aluminium : Production Unit Q2 FY08A Q2 FY07A % Chg H1 FY08A H1 FY07A % Chg Alumina MT 282,292 290,462 -3% 584,722 589,911 -1% Metal MT 118,257 109,376 8% 234,426 216,532 8% Wire Rods MT 18,031 17,255 5% 35,464 34,289 3% Rolled Products MT 57,273 52,052 10% 114,366 104,162 10% Extrusions MT 11,107 9
Slide 54: Copper: Production
Copper : Production Production Unit Q2 FY08 Q2 FY07 % Chg H1 FY08 H1 FY07 % Chg Copper Cathodes MT 79,181 71,391 11% 158,415 136,061 16% CC Rods MT 35,335 26,711 32% 69,430 54,016 29% DAP/NPK MT 34,117 53,280 -36% 70,337 125,782 -44% Sulphuric Acid MT 245,371 249,586 -2% 488,492 461,243 6% Gold Kgs
Slide 55: Summary
Summary Rs.Crs. Segment Information Company Information Other Al EBIT Cu EBIT Interest PBT Tax PAT Income Q2 of FY07 671.0 123.3 -51.5 110.8 837.7 -240.1 597.6 Q2 of FY08 662.1 126.1 -63.2 109.8 823.7 -180.9 642.8 Change -8.9 2.8 -11.7 -1.0 -14.0 59.2 45.2 Unallocable other income Q2 FY07 Rs.94.9Crs
Slide 56: Treasury income – Q2FY08
Treasury income – Q2FY08 • Other Income is almost same compared to previous year • Lower interest income on income tax refund at 20 Rs.9.5 Crs against Rs.48.4 Crs. in corresponding 76 quarter of previous year. • Treasury income higher compared to 89 corresponding quarter of last year o Higher pre-ta
Slide 57: Interest Q2FY08
Interest Q2FY’08 Q2 FY07 Q2 FY08 154 133 • Gross and Net interest is higher compared to last year due to o Higher average borrowing 63 51 o Syndicated loan was drawndown July 06. o Higher average interest rate at 7.35% vs 7.10% in corresponding quarter. Net Interest Gross Interest 57
Slide 58: Taxes Q2FY08
Taxes Q2FY’08 Current Tax Deferred Tax • Provision for Taxes lower mainly due to :- o Decrease in effective tax rate from 28.7% 255.7 to 22% due to proportionately higher 35.7 exempt income in the current Quarter 145.2 o Higher capitalization led to lower current tax and higher deferred tax (15.6) Q
Slide 59: THANK YOU
THANK YOU
Slide 60: Aluminium: Sales Revenue
Aluminium : Sales Revenue Sales Revenue Unit Q2 FY08 Q2 FY07 % Chg H1 FY08 H1 FY07 % Chg Alumina Rs.Crs. 146.5 210.6 -30% 309.8 393.2 -21% Primary Metal Rs.Crs. 400.8 421.8 -5% 793.6 793.6 0% Wire Rod Rs.Crs. 209.4 226.6 -8% 428.0 448.3 -5% Rolled Products Rs.Crs. 657.6 631.3 4% 1267.5 1201.9 5% Ext
Slide 61: Copper: Sales Revenue
Copper : Sales Revenue Rs.Crs Q2FY08 Q2 Y07 % Chg H1FY08 H1FY07 % Chg Copper Cathodes 1,375.0 1,532.0 -10% 2,784.2 2,836.2 -2% CC Rods 1,257.4 947.6 33% 2,381.4 1,832.8 30% DAP/NPK 63.1 89.6 -30% 119.1 207.1 -42% Sulphuric Acid 24.2 12.6 92% 41.6 22.8 82% Gold 309.5 150.7 105% 461.8 394.3 17% Silver
Slide 62: Aluminium: Sales Volume
Aluminium : Sales Volume Sales Tonnage Unit Q2 FY08 Q2 FY07 % Chg H1 FY08 H1 FY07 % Chg Alumina MT 63,516 87,820 -28% 140,088 156,337 -10% Primary Metal MT 36,697 35,372 4% 69,088 65,420 6% Wire Rod MT 18,005 17,556 3% 35,322 34,192 3% Rolled Products MT 46,945 42,354 11% 89,096 81,016 10% Extrusion
Slide 63: Copper: Sales Volume
Copper : Sales Volume Sales Volumes Unit Q2FY08 Q2FY07 % Chg H1 FY08 H1 FY07 % Chg Copper Cathodes & Others MT 43,327 42,266 3% 88,015 80,279 10% CC Rods MT 35,318 25,690 37% 69,048 53,261 30% DAP/NPK MT 30,440 55,664 -45% 68,095 129,364 -47% Sulphuric Acid MT 205,939 144,841 42% 378,593 251,514 51%
Hindalco Industries — Q2 FY2008 Earnings Presentation on 6ix