Ashok Leyland Limited · NSE:ASHOKLEY
Ashok Leyland — Investor Presentation (July 2009)
63 slides from Ashok Leyland's investor presentation, Jul 8, 2009
Slide 1: Investors' Meet July 8, 2009
Investors’ Meet Julyy 8,, 2009
Slide 2: Presentation outline
Presentation outline 2008-09 CV market performance Ashok Leyland performance Combating the downturn Product launches 2009-10 CV market outlook Ashok Leyland – Focus areas Joint ventures MD / AL / Investor Meet / 08/07/2009
Slide 3: Hinduja Group Overview
Hinduja Group Overview Hinduja group was established in 1914 in Mumbai Employs more than 35,000 personnel worldwide Global presence across 30 countries Automotive Energy & Chemicals Ashok Leyland is India's second largest Gulf Oil is arguably one of the most commercial vehicles and diesel engine evo
Slide 4: 2008-09 Battling the odds
2008-09 Battling the odds CV Industry most severely affected by economic slowdown in FY ‘09 Global financial crisis led to turmoil in Indian financial and stock markets triggering economic slowdown N Non-availability il bilit off fifinance and d llack k off b business i confidence precipitated crisi
Slide 5: Cyclical Downturn – M&HCV last 20 yrs
Cyclical Downturn – M&HCV last 20 yrs Truck 275000 250000 225000 200000 175000 150000 125000 100000 75000 50000 25000 0 M&HCV Truck demand – cyclical in nature MD / AL / Investor Meet / 08/07/2009
Slide 6: CV Market performance in FY '09
CV Market performance in FY ’09 Slowdown in industrial production (IIP registered negative 0.1% growth in HY 2 of FY ‘09 compared to 7.6% growth in previous year, manufacturing index dropping from 8.2% growth in HY 2 of FY ‘08 to a negative 0.4% in FY ‘09), resulted in overall shrinkage of available
Slide 7: CV Market performance in FY '09 contd..
CV Market performance in FY ’09 contd.. Fall, expected; suddenness and severity, not 160000 140000 120000 100000 2007‐08 2007 08 80000 60000 2008‐09 40000 20000 0 First Half Second Half Lack of cash, capital and confidence MD / AL / Investor Meet / 08/07/2009
Slide 8: CV Market performance in FY '09 contd.
CV Market performance in FY ’09 contd. Drop in demand for residential houses and slow down in road building in HY 2 led to slackness in demand for Tippers and 6 X 2 models, registering a drop of 64% and 68% respectively Drop in ocean traffic, reflected in steep fall in Baltic index, index led to poo
Slide 9: Tractor, Tipper & MAV: high growth sectors shrink 41.2%
Tractor, Tipper & MAV : high growth sectors shrink 41.2% 2007‐08 ICV Bus Tipper Tractor 2008‐09 Bus Pvt Haulage ICV Goods Bus STU Temporary reversal of modernisation of Indian commercial vehicle composition ? MD / AL / Investor Meet / 08/07/2009
Slide 10: Reasons for the segmental shift
Reasons for the segmental shift Cyclical uncertainties With growing NPAs, banks and NBFCs lacked confidence to lend; margin requirements from customers increased Interest rates remained high Hence customers preferred low risk models:Opted Hence, for general purpose vehicles (4 X 2) instead of specia
Slide 11: Ashok Leyland performance
2008-09 Ashok Leyland performance MD / AL / Annual Press Conference / 15/05/2009
Slide 12: Sales dropped by 34.7%
Sales dropped by 34.7% 83094 83307 61655 54740 54431 48654 36444 29673 '01-02 '02-03 '03-04 '04-05 '05-06 '06-07 '07-08 '08-09 MD / AL / Investor Meet / 08/07/2009
Slide 13: Drop in market share
Drop in market share Steep drop in South – traditionally AL stronghold Lack of significant presence in East where the market held its own Lost 180 bps in market share due to regional imbalance in TIV MD / AL / Investor Meet / 08/07/2009
Slide 14: Drop in market share contd..
Drop in market share contd.. TIV drop in AL’s strong tonnage segments TIV YOY inc / ALL Market Share YOY inc/(dec) TRUCKS FY '09 FY '08 (drop) % FY '09 FY '08 bps 7.5 to 12 Tonnes 27716 40849 (32.2) 4.6 4.3 30 12.01 to 16.2 Tonnes 42657 60445 (29.4) 21.2 20.6 60 Rigid Vehicles 16.21 to >25 Tonnes 68
Slide 15: AL's Export sales in FY '09
AL’s Export sales in FY ’09 Export Sales Countries FY '09 FY '08 % Inc / (dec) Srilanka 1076 2353 (54) Middle East 2523 3015 (16) Latin America and Africa 1533 608 152 Bgdesh, Maldives & Nepal 1491 1043 43 Others 189 266 ((29)) TOTAL 6812 7285 (6) Drop in off take in Srilanka and Middle East made go
Slide 16: Composition of Sales
Composition of Sales 2007-08 2008-09 % Inc (Dec) Domestic Civilian Buses 18 244 16 548 (9.3) Trucks 57 364 30 651 (46.6) Total 75 608 47 199 (37.6) Defence 414 420 1.4% Exports 7 285 6 812 (6.5) Total vehicles 83 307 54 431 (34.7) Engines 11 757 21 447 82.4 Spares incl Defence Kits 79 124 79 969 1.1
Slide 17: Financial Performance
Financial Performance Rs Lakhs 2007-08 2008-09 % growth Net Sales / income from operations 774258 598107 (22.8) Gross operating margin 82038 46944 (42.8) Financial expenses 4974 11871 138.7 Other income 5760 4962 (13.9) Gross Profit (PBDT) 82824 40035 (51.7) Depreciation 17736 17841 0.6 Profit from
Slide 18: Performance Highlights – 5 Years
Performance Highlights – 5 Years 04-05 05-06 06-07 07-08 08-09 R O C E (%) 18.6 21.2 24.7 23.2 8.7 Current Asset 1.9 2.4 2.7 2.7 1.9 Turns (Times) Debt : Equity 0.3 0.2 0.3 0.4 0.9 EPS (In Rs.) 2.28 2.74 3.38 3.53 1.43 Not highly geared; Headroom exists for reducing working capital and improve cash
Slide 19: Combating the downturn
Combating the downturn MD / AL / Investor Meet / 08/07/2009
Slide 20: 1. Focused on non-cyclical businesses
1. Focused on non-cyclical businesses % Def & Bus, 18 Bus, 14 Spares, 9 Cyclical, 50 Def & Spares, 11 Exports, 9 Cyclical, 66 Exports 14 Exports, Engines, 2 Engines, 7 FY09 FY08 Non-cyclical business contribution up from 34% to 50% MD / AL / Investor Meet / 08/07/2009
Slide 21: 2. Cash conserved
2. Cash conserved Reduced capacity buildup at Uttarakhand from 70000 vehicles p.a. to 50000 vehicles p.a. Froze capacity build up at Ennore on Engine / Gear box All discretionary capital expenditure put on hold But product development related capex being pursued without restrictions MD / AL / Invest
Slide 22: 2. Cash conserved
2. Cash conserved Significant increase in working capital FY '09 FY '08 Remarks Finished Vehicle (Nos.) 6358 6748 Sudden drop in TIV/Vehicle sales Production inventory (in Rs. Crs) 683 578 Sudden drop in TIV/Vehicle sales Extended credits to dealers to cope Trade Debtors (in Rs. Crs) 958 376 up with
Slide 23: 2. Cash conserved contd..
2. Cash conserved contd.. New Working Capital Management Initiative put in place Working capital reduced from Rs. 2263 crs in Dec ‘08 to Rs. 1029 crs in Mar ’09 Borrowings from banks reduced to “NIL” as of M ‘09. Mar ‘09 Total borrowings as of Mar ’09: Rs. 1958 crs (incl. Rs. 102 cr non-interest bea
Slide 24: 3. Reverse material cost increases
3. Reverse material cost increases During I half / FY ‘09 commodity prices (steel, rubber, aluminium etc.) increased significantly Suppliers had to be granted price increases around Rs. 50,000/- per vehicle Most of commodity prices have retreated to pre-April A il ‘08 llevels l AL secured Rs. 25000/
Slide 25: 4. Focus on operating cost cutting
4. Focus on operating cost cutting Reduced number of working days (4 days / week) leading to reduction in manpower cost Voluntary salary cuts (20%) for executives Cut in travel, advertisement, other discretionary expenditure Cost reduction measures resulted in a saving of Rs. 90 Crs in operating cos
Slide 26: 5. Improved competitiveness
5. Improved competitiveness A slew of projects were undertaken at the Units Productivity enhancements Value engineering Value Stream Mapping Conversion of non-movingg models into saleable ones with changes in aggregates MD / AL / Investor Meet/ 08/07/2009
Slide 27: Product Introductions of 2008-09
Product Introductions of 2008-09 MD / AL / Investor Meet / 08/07/2009
Slide 28: Product introductions - Buses
Product introductions - Buses Rear Engine SLF (CNG) – BS III Tarmac Coach ULE (CNG) – BS III MD / AL / Investor Meet / 08/07/2009
Slide 29: Product introductions: Trucks
Product introductions: Trucks 2516 Super 2516 HT 2516 HT 3516 ETK MD / AL / Investor Meet/ 08/07/2009
Slide 30: India's first H-CNG engine
India’s first H-CNG engine 6-cylinder, 6-litre 123 hp BS-4 engine with blend of natural gas and hydrogen (20% by volume) Further reduces emissions Stimulates combustion Improves efficiency of the engine MD / AL / Investor Meet / 08/07/2009
Slide 31: Prospects for 2009-10
Prospects for 2009-10 MD / AL / Investor Meet/ 08/07/2009
Slide 32: Stimulus Package for CV Industry
Stimulus Package for CV Industry Relief measures announced by Government in Dec.08/Jan.09 covered: • One time measure for states under the JnNURM for purchase of buses for urban transport • Accelerated A l t dd depreciation i ti off 50% ffor commercial vehicle purchases after 1st Jan ‘09 • Reduction
Slide 33: CV Industry outlook (M & HCV Market)
CV Industry outlook (M & HCV Market) Reasonably good monsoon augurs well for good agricultural production, thereby assuring freight availability IIP is expected to grow by 5.1% (Source: CMIE) Reduction in Excise Duty significantly reduced the capital cost of acquisition of CVs. CVs Reduced EMIs (by
Slide 34: Prospects for 2009-10 contd..
Prospects for 2009-10 contd.. CV Industry Outlook (M & HCV Market) Rapid implementation of JnNURM funded projects (15,000 Buses) likely to lift up demand for buses and improve passenger traffic by road Impact of recent fuel hike needs to be studied. Economy likely to get mild dose of inflation which
Slide 35: Budget Impact
Budget Impact For M & HCV Industry Generally no major impact Increased allocation for JnNURM (87%) and NHAI (23%) will potentially benefit major industry players Higher Government borrowing leading to likely hardening of interest rates may impact vehicle sales FBT abolition (+ve) and MAT rate hike (
Slide 36: Focus areas for Ashok Leyland in 2009-10
Focus areas for Ashok Leyland in 2009-10
Slide 37: 1. Product development
1. Product development The NEPTUNE engine range A new family of 4 and 6 cylinder inline engines ranging from: • 160 – 230 hp in 4 cylinder engines • 270 – 380 hp in 6 cylinder engines Of modular capacity from 4 4.7 7 litre to 8 litre – BS3 and BS4 / Euro IV compliant and protected for Euro-V, with c
Slide 38: 2. Product development
2. Product development The UNITRUCK platform The all-new modular, universal platform to meet diverse requirements of both domestic and global markets This on and off-highway platform range can create variants Will span truck models from 16 ton GVW to 49 ton GCW To feature new family of engines and c
Slide 39: 3. GENMOD process
3. GENMOD process Transformational new matrix management process Customer Inspired Solutions – to design break- through products To offer products at a new price-performance point i t Building up healthy business process for cost effective, high quality transport solutions meeting highest customer e
Slide 40: 4. New products – Bus segment
4. New products – Bus segment ULE – BS III Following the 875-bus order received from DTC, orders for 120 ULE Buses received from other STUs, as part of 4800 vehicle orders d under d JNNURM (out of 9500 vehicle order released) State of art bus body facility created in Alwar Unit to cater to Fully Bui
Slide 41: 5. New products – Truck segment
5. New products – Truck segment 3116 To be launched • H series 160 HP Engine Product with inline FIP Highlights • Heavy Duty Suspension • Optimised Power Train • Cement • Optimum power version for fuel Application • Market Load efficiency Segments • Parcel • User friendly inline FIP • Tanker • Low M
Slide 42: 5. New products – Truck segment 3518TT
5. New products – Truck segment 3518TT Product Ready Product • H series 132Kw Engine Highlights • OD Gear Box • Container • Steel Application • POL Tanker Segments • Market Load • Faster Turn Around Time • Bulker • Tipping Trailer • Improved Fuel Efficiency
Slide 43: 5. New products – Truck segment
5. New products – Truck segment 4019 Available from Q2 09-10 • Higher Low end Torque • First gear ratio of 9.2 Product • Heavy Duty Aggregates (Prop Highlights shaft, Rear Axle, Suspension) • Offered with G90 cab • Cement Application • Steel Coil Segments • Container, • Faster Turn Around Time • Mar
Slide 44: 5. New products – Truck segment 2521 Tipper
5. New products – Truck segment 2521 Tipper Available from Q2 09-10 • H series Engine • Higher Torque Product • Fuel Efficiency Highlights • 8 Speed Gear Box • Heavy Duty Rear Axle • Bogie Suspension • Quarry • Mining Application • Irrigation Projects • Dedicated Mining Tipper Segments • Stone,Bould
Slide 45: 6. Exports
6. Exports Expect market revival post cessation of hostilities in Sri Lanka Consolidation in newly entered markets (Angola, Honduras) Introduction of exclusively designed truck range for f exportt markets k t To capitalise on demand for price competitive products following revival in global markets
Slide 46: 7. Cash conserved
7. Cash conserved Scaled down investment over FY 2010-12(3 yrs) from Rs. 3000 Cr. to Rs. 2000 Cr. Capacity available for : FY 2010: 100k vehicles p.a. FY 2011: 150k vehicles p.a. (after commissioning Uttarakhand plant by Mar‘10) Capacity to be utilised towards manufacturing for LCV Project MD / AL /
Slide 47: 8. Capacity creation at Uttarakhand
8. Capacity creation at Uttarakhand Uttarakhand plant would be highly integrated plant of AL. Supply sources identified within tax exempted areas in Uttarakhand / Himachal Pradesh All facilities likely to be commissioned well in time before March 2010 to secure tax incentives AL is likely to benefit
Slide 48: 9. Other Measures to be focused
9. Other Measures to be focused Cost reduction measures – both commodity based material cost reduction and operating cost reduction – will continue Limit Capex for FY ‘10 within Rs. 700 Cr. including Rs. 450 Cr. for UTK. Reduce finished vehicle stock to < 4000 Nos. by y Sep ‘09. Reduce production in
Slide 49: Fund raising Plans
Fund raising Plans Sufficient headroom available for debt infusion. Plans to raise about Rs. 1200 Cr. through debt over 3 year period Total debt equity leverage not likely to cross 1 3:1 1.3:1 Enough fund limits available for meeting working capital requirements Seeking shareholders’ approval for eq
Slide 50: Composition of Sales Q1 FY '10
Composition of Sales Q 1 FY ‘10 2008-09 2009-10 % Inc Q1 Q1 (Dec) M & HCV Buses 3987 2213 (43.8) Trucks 12985 4454 (66.3) Total 16972 6667 (60.8) MS % 28.3% 17.6% LCV 173 128 (22.9) Exports 1280 903 (29.5) Total vehicles 18425 7698 (58.2) Engines 4850 4446 (8.3) Spares incl Defence Kits 20013 18026
Slide 51: Analysts' F'cast for FY 2010
Analysts F’cast for FY 2010 Sale Sales EPS in Rs. EBITDA PAT Volume Turnover for a FV of (Rs.Crs.) (Rs.Crs.) (Nos.) (Rs.Crs.) Re.1/share ICICI Securities 61654 7109 697 363 2.7 Credit Suisse 58264 7102 669 289 22 2.2 Kotak institutional 57761 6476 674 237 1.8 Centrum 62040 7526 661 292 2.2 Anand Rat
Slide 52: Joint Ventures & New initiatives
Joint Ventures & New initiatives MD / AL / Investor Meet / 08/07/2009
Slide 53: Light truck JV with Nissan
Light truck JV with Nissan Product development in progress Product portfolio expansion under consideration, by including Nissan products initially slated for production outside India Roll out postponed to 2011; due to market conditions diti and d lland d acquisition i iti d delays l MD / AL / Invest
Slide 54: Construction equipment JV with John Deere
Construction equipment JV with John Deere New company formed in June ’09 with 50:50 partnership with John Deere Land already identified; negotiations on Product plans in place; testing on Roll out by Oct 2010 MD / AL / Investor Meet/ 08/07/2009
Slide 55: Joint venture with ALTEAMS
Joint venture with ALTEAMS Fully established to meet both Telecom and automobile sector requirements Supplies commenced. MD / AL / Investor Meet/ 08/07/2009
Slide 56: Joint Ventures with Continental AG
Joint Ventures with Continental AG Vehicle electronics expected to plan an increasingly imported role in CVs in future JV is well positioned to develop innovative solutions in vehicle electronic systems viz., instrument cluster applications, cockpit electronics and body control units for CVs and spe
Slide 57: AVIA Ashok Motors, Czech Republic
AVIA Ashok Motors , Czech Republic Sold 518 LCVs in 2008 in Europe despite tough market conditions Successfully completed major cost reduction program in 2008/2009, (15% reduction in material cost) C Currently tl ffocused d on restructuring t t i off operations, strengthening of dealerships etc., an
Slide 58: Hinduja Leyland Finance
Hinduja Leyland Finance New Finance Company to support vehicle sales formed Focus areas would be those pockets not currently serviced by existing finance network and also address need for promoting specific models / product segments AL will cap its equity infusion over next three years to not more t
Slide 59: In conclusion
In conclusion New initiatives will reduce dependence on cyclical markets Growth in M&HCV demand – particularly in South and West visible. JnNURM and Emission standard (effective April ’10) will provide demand pull in CY New products and improved aggregates will boost AL’s competitive p edge g & rega
Slide 60: AL stock performance during last rally
AL stock performance during last rally 1-month 3-month 6-month Ashok Leyland -11.9% 61.8% 92.6% Tata Motors -13.5% 61.9% 70.9% Sensex -2.3% 46.5% 46.5% BSE Auto -2.9% 48.0% 81.0% 150.0 AL TML BSE Indx Auto Indx 120.0 90.0 60.0 30.0 0.0 MD / AL / Investor Meet / 08/07/2009
Slide 61: Wider presence in Automobile Sector
Automotive Sector LCVs M&HCV Defence Construction equipment Foundry y Engines g & Components p Business Auto Electronics Exhaust System Engineering and Testing Services Technology 61 Wider presence in Automobile SectorHinduja overview
Slide 62: The shareholding pattern
The shareholding pattern as of 30th June 2009 Hinduja Automotive Ltd 52% Body corporate 2% FIIs 12% Banks & MFs 4% Resident Individuals / Trust / Clearing members 14% Fis, Insurance Co, State Govt, Govt Companies 16% MD / AL / Investor Meet / 08/07/2009
Slide 63: Thank You
2 Thank You