Tata Steel Limited · NSE:TATASTEEL
Tata Steel — FY2007 Earnings Presentation
55 slides from Tata Steel's earnings presentation, May 18, 2007
Slide 1: Tata Steel- Towards Growth & Globalization
Tata Steel- Towards Growth & Globalization Presentation on Performance of Tata Steel for FY 2006-07 Analyst Meet Mumbai May 18, 2007 1
Slide 2: Disclaimer
Disclaimer Statements in this presentation describing the Company’s objectives, projections, estimates, expectations 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
Slide 3: Presentation Outline
Presentation Outline Tata Steel’s Performance for FY 2006-07 Corus’s Performance for Jan- March 2007 Financial Performance and Corus Financing Tata Steel – Corus integration update Outlook for FY 2007-08 and Long Term Plans 3
Slide 4: Key highlights (FY 2006 - 07)
Key highlights (FY 2006 - 07) Completion of Corus Acquisition Conclusion of the commercial negotiations for the Acquisition Re- Financing Consolidation of NatSteel Asia equity holding in Xiamen, China and Vietnam Tata Steel (Thailand) integration process completes 1 year Consolidated Turnover (excl
Slide 5: Operational highlights in FY 2006-07
Operational highlights in FY 2006-07 Steel Production up by 8% at 4.93 million tonnes ‘G’ blast furnace crossed 2 million tonnes production Highest ever annual production at HSM (3.24 million tonnes) and CRM (1.5 million tonnes) West Bokaro produced 1.9 million tonnes of clean coal for the first tim
Slide 6: Operational highlights in FY 2006-07
Operational highlights in FY 2006-07 Production In million tonnes 7% 7% 8% 5.55 5.18 5.05 4.73 4.93 4.55 Hot Metal Crude Steel Saleable Steel FY 2005-06 FY 2006-07 Represent increase in production in FY 2006-07 vs FY’2005-06 6
Slide 7: Enhancing Operational Efficiency
Enhancing Operational Efficiency Raw Material Consumption Coke and Fuel Rate Consumption Fuel Rate (Coke rate + Injection) Ton/ ton of Saleable steel Impact : Rs. 26 Crs 4 Impact : Rs. 192 Crs (USD 6 million) (USD 44 million) Kg/thm 3.31 600 587 578 3.11 3 76 91 500 2 511 400 487 1 300 0 FY 2005-06
Slide 8: Enhancing Operational Efficiency
Enhancing Operational Efficiency Power Consumption Specific Energy Consumption Impact : Rs. 16 Crs Impact : Rs. 74 Crs Kwhrl/tss (USD 4 million) (USD 17 million) Gcal/tss 450 402 8 6.96 400 388 6.72 7 6 350 5 300 4 250 3 2 200 1 150 0 FY 2005-06 FY 2006-07 FY 2005-06 FY 2006-07 8
Slide 9: Enhancing Operational Efficiency
Enhancing Operational Efficiency Specific Refractories Consumption Labour Productivity Impact : Rs. 26 Crs Impact : Rs. 27 Crs Kg/tcs (USD 6 million) (USD 6 million) 10 Tcs/man/year 9 363 350 326 8 7 6.33 5.59 300 6 5 250 4 200 3 2 150 1 0 100 FY 2005-06 FY 2006-07 FY 2005-06 FY 2006-07 9
Slide 10: Marketing highlights in FY 2006-07
Marketing highlights in FY 2006-07 Gross Steel sales up by 8% at 4.79 million tonnes Sales to Automotive sector up by 29% at 0.86 million tonnes Global Supplier Approval received from Honda Engg. Services (Honda Car, Japan) for CRCA TOC (VMI) initiated for 3 models at Tata Motors with zero stock out
Slide 11: Increasing Steel Sales in FY 2006-07
Increasing Steel Sales in FY 2006-07 Figure in ‘000 tonnes Sales up 8% Semis, 32, 1% Semis, 89, HR, 1361, 28% Longs, 1,668, 2% HR, 1260, 35% Longs, 1356 29% , 30% Galv, 487, CR, 1246, 26% 10% Galv, 515, 12% CR, 1198, 27% 4.42 million tonnes 4.79 million tonnes FY 2005-06 11 FY 2006-07
Slide 12: Enhancing Market Share in Automotive
Enhancing Market Share in Automotive Galv Auto CR Auto 38% 500 75% 38% 50 30% 40% 37% 400 60% 37% 40 300 28% 45% 30 16% 24% 12% 20% 200 30% 20 6% 100 15% 10 0 0% 0 0% FY03 FY04 FY05 FY06 FY07 FY03 FY04 FY05 FY06 FY07 '000 Tonnes Market Share (%) '000 Tonnes Market Share (%) Total Auto HR Auto 900 44
Slide 13: Enhancing Market Share in Focus Segments
Enhancing Market Share in Focus Segments TISCON Speciality Wire Rods (HC+LC) 9% 1000 350 51% 49% 49% 50% 7% 300 800 6% 6% 6% 250 45% 600 200 400 150 100 200 50 0 0 FY03 FY04 FY05 FY06 FY07 FY03 FY04 FY05 FY06 FY07 '000 Tonnes Market Share (%) '000 Tonnes Market Share (%) Galvanized (Construction) 27
Slide 14: Enhancing Focus on Branded Products
Enhancing Focus on Branded Products Revenue : All Branded Products USD million 299 544 773 885 1059 Rs. Crores 5000 4604 3848 4000 3362 3000 2365 2000 1300 1000 0 '03 '04 '05 '06 '07 14
Slide 15: Non-Steel Profit Center Operations
Non-Steel Profit Center Operations FAMD Tubes ‘000 tonnes Rs 577 crs Rs 589 crs Rs. 41 crs USD 133 mn Rs 38 crs USD 136 mn USD 9.4 mn 1,928 USD 8.7 million 1,648 1,627 1,611 ‘000 tonnes 310 303 264 258 Prodn. Sales Prodn. Sales FY 06 FY 07 FY 06 FY 07 Wires Bearings Rs 25 Crs Rs 30 crs Million Nos.
Slide 16: Performance of South-East Asian Operation
Performance of South- East Asian Operation Tata Steel Thailand Finished steel production up by 18% at 1.14 million tonnes Sales up by 16% at 1.12 million tonnes Revenue up by 22% at USD 595 million EBITDA at USD 67 million, Margin @ 11.2% (6.7% in FY’06) Net Profit at USD 29 million, Margin @ 4.9% (
Slide 17: Corus's Performance for Jan-March 2007
Corus’s Performance for Jan- March 2007 17
Slide 18: Corus' Q1 2007 results (Jan-March 2007)
Corus’ Q1 2007 results (Jan-March 2007) Preliminary un-audited results for the 3 months to 31 March 2007 Prepared under International Financial Reporting Standards as applied by Corus at December 2006 No fair value adjustments or related items arising from the acquisition 18
Slide 19: Key highlights (Jan-March 2007)
Key highlights (Jan-March 2007) Underlying Operating Profit* £m EBITDA* £m 430 699 Q4 61 Q4 127 Q3 168 Q3 235 Q2 126 Q2 193 184 254 Q1 75 Q1 144 2006 2007 2006 2007 2006 2007 Net debt £m Steel Deliveries (kt) ** 746 20.9 564 Q4 5.2 Q3 5.2 Q2 5.4 Q1 5.1 5.6 Dec 2006 Mar 2007 2006 2007 2006 2007 * Con
Slide 20: Group income statement (Jan-March 2007)
Group income statement (Jan-March 2007) IFRS £ million Q1 2006 Q1 2007 Continuing operations Turnover 2,289 2,711 EBITDA* including: 240 196 Non-recurring pension credit (96) - Transaction costs - 58 Underlying EBITDA * 144 254 EBITDA margin (%) 6.2 9.4 Operating profit before restructuring, 171 126
Slide 21: Group income statement (Jan-March 2007)
Group income statement (Jan-March 2007) IFRS £ million Q1 2006 Q1 2007 Group operating profit 176 125 Net finance costs including: (116) (33) Premium to redeem 2016 debenture (87) - Fair value of equity options on convertible bonds (11) (8) Joint ventures & associates 1 4 Profit before taxation 61 1
Slide 22: Divisional performance (Jan-March 2007)
Divisional performance (Jan-March 2007) £ million Growth Gross Revenues Q1 2007 Revenues Volume Price Strip Products 1,426 6% (3)% 10% Long Products 726 12% 2% 10% D&BS 840 24% 14% 8% Operating RONA (%) EBITDA* Margin (%) Profit * ** Strip Products 196 13.7 150 14 Long Products 46 6.3 27 8 D&BS 22 2
Slide 23: All operations: Working capital
All operations : Working capital Inventories £m Carbon steel inventories kt Slab stock build for IJmuiden re-line 2,250 4.00 3.8 2,012 2,000 1,890 1,858 3.50 0.5 1,750 3.6 3.7 3.3 1,500 3.00 March 2006 Dec 2006 March 2007 March 2006 Dec 2006 March 2007 Trade Receivables / Payables £m Total working c
Slide 24: Financial Performance and Corus Financing
Financial Performance and Corus Financing 24
Slide 25: Financial Performance – Tata Steel Limited (FY 2006-07 vs FY 2005-06)
Financial Performance –Tata Steel Limited (FY 2006-07 vs FY 2005-06) FY 2005-06 FY 2006-07 Rs.crores USD Million Rs.crores USD Million 17,144 3,944 Turnover 19,763 4,546 6,192 1,424 EBITDA 7,407 1,704 40% 40% EBITDA Margin 41% 41% 5,240 1,205 Profit before Tax 6,262 1,440 3,506 807 Net Profit After
Slide 26: Financial Performance – Tata Steel Limited (Jan-March 2007)
Financial Performance –Tata Steel Limited (Jan-March 2007 vs Jan-March 2006) Jan-March 2006 Jan-March 2007 Rs. crores USD Million Rs. crores USD Million 4,602 1,059 Turnover 5,610 1,290 1,367 315 EBITDA 1,983 456 33% 33% EBITDA Margin 39% 39% 1,189 274 Profit before Tax 1,669 384 783 180 Net Profit
Slide 27: Financial Performance – Consolidated (excl Corus)
Financial Performance –Consolidated (excl Corus) (FY 2006-07 vs FY 2005-06) FY 2005-06 FY 2006-07 Rs.crores USD Million Rs.crores USD Million 22,272 5,123 Turnover 27,437 6,311 6,591 1,516 EBITDA 7,888 1,815 32% 32% EBITDA Margin 31% 31% 5,515 1,269 Profit before Tax 6,313 1,452 3,735 859 Net Profit
Slide 28: Financial Performance – Pro-forma Consolidated with Corus
Financial Performance – Pro-forma Consolidated with Corus (Jan-March 2007 vs Jan-March 2006) Jan-March 2006 Jan-March 2007 Rs.crores USD Million Rs.crores USD Million 25,411 5,845 Turnover 31,296 7,199 2,672 615 EBITDA * 4,231 973 11% 11% EBITDA Margin 14% 14% 1,750 403 Profit before Tax 2,464 567 1
Slide 29: Key Financial Ratios: Tata Steel Limited
Key Financial Ratios : Tata Steel Limited Net Debts / Equity (*) Debtors + Inventory (in no. of days sales) 2.0 80 79 53 1.5 1.07 60 1.0 40 0.5 -0.12 20 0.0 0 '03 '04 '05 '06 '07 (0.5) '03 '04 '05 '06 '07 Earnings Per Share (Rs per share) EVA Spread (Rs. Crores) 75 74 63 63 3,000 2,707 47 2,500 50 2
Slide 30: Tata Steel Financing strategy
Tata Steel Financing strategy Raising cost efficient funds for the growth plans of the Company To remain in the Investment grade in the Long Term To provide financial flexibility in the Balance Sheet Funding strategy to focus on EPS accretion 30
Slide 31: Financing of Corus Acquisition
Financing of Corus Acquisition US$ Million 15,000 4,100 2,662 6,143 846 13,751 12,000 3,409 19 508 827 9,000 5,635 6,000 10,342 838 3,000 2,044 1,824 2,056 0 Tata Steel Asia Tata Steel Corus Non- Enterprise of Corus taken Existing debts Financing Quasi Equity Recourse Equity Value over Fund required
Slide 32: Financing Plan of Tata Steel Equity
Financing Plan of Tata Steel Equity US$ Million 4,500 1,267 500 1,888 445 4,100 4,000 445 3,500 3,000 2,044 2,500 1888 0 2,000 0 1,253 1,500 (753) 1,000 464 2,056 500 803 0 Right Isue Total Equity Foreign Equity Borrowings Own cash Equity Offering Tata Steel’s Equity financing pattern for an offer o
Slide 33: Initial vs final financing structure
Initial vs final financing structure Initial financing structure Final financing structure USD 3.12bn term loans USD 6.18bn term loans A: USD 0.49bn 7 years A: USD 3.26bn 5 year amortisation B: USD 1.32bn 8 years (incl. guarantees for interest on loan C: USD 1.32bn 9 years notes of 0.04bn) B: USD 2.
Slide 34: Margin Comparison between Initial and Final financing structure
Margin Comparison between Initial and Final financing structure Spread Initial Financing structure 4.0% 3.72% 3.72% 3.72% 3.72% 3.0% 1.97% 1.84% 2.0% 1.47% 1.34% 1.0% Final Financing structure 0.0% Total Debt/EBITDA Total Debt/EBITDA Total Debt/EBITDA Total Debt/EBITDA >3.0x <3.0x and >2.5x <2.5x an
Slide 35: Key Financing Milestones
Key Financing Milestones Equity issuance in Tata Steel Ongoing under implementation Financing at Tata Steel Asia Structure under finalisation Non- Recourse Financing in Commercial negotiations finalised Corus Consultation process to seek advice from CN Works Council being initiated Commenced discuss
Slide 36: Tata Steel – Corus integration update
Tata Steel – Corus integration update 36
Slide 37: Combined Long-term Strategy Map
Combined Long-term Strategy Map Strong Base in India • Multi Location • Single • Strong Location regional • World class Primary steel making in countries rich in Iron Ore presence. • Small in and / or Coal / Gas • Auto & size Packaging & Construction Overseas acquisitions in growing & mature led. ma
Slide 38: Group Ambition
Group Ambition Tata Steel & Corus: a compelling vision in steel Global player with a balanced presence in developed European and fast growing Asian markets Strong positions in construction, automotive and packaging market sectors Significant raw material security & greenfield / brownfield developmen
Slide 39: Economies of Scale, Pricing Power
Economies of Scale, Pricing Power Expand scale from 7mtpa to 25mtpa and reap significant economies of scale Arcelor - Mittal 118.0 Nippon Steel 33.7 JFE Steel 32.0 Posco 31.2 Baosteel + Bayi Steel Group (*) 26.1 Tata Steel + Corus consolidated (*) 25.6 6th largest steel maker globally US Steel 21.3
Slide 40: Enhanced Product Portfolio
Enhanced Product Portfolio Strong High Value Added Product Portfolio straddling Automotive and Construction Spaces Flat Products Long Products Value Added Products Hot Rolled Coils Rebars Galvanized Sheets / Sheets Wire Rods Cold Rolled Coils / Sheets Wires Leading Position Hot Rolled Coils Rail Adv
Slide 41: Access to New Markets
Access to New Markets Combined entity has significant presence in both emerging and developed economies Tata Steel Corus Combined Entity North ROW Asia ROW ROW Asia ex America 8% 10% 9% 3% Asia 9% India 24% 23% UK UK 22% 29% North America 8% India Europe Europe 69% 49% 37% Source: Tata Steel FY2005-
Slide 42: Enhanced Customer Reach
Enhanced Customer Reach Access to new markets and presence across steel value chain, significantly enhances customer reach EU (excl UK & Netherlands) Distribution centres UK & Ireland 3 production facilities Distribution Centres USA Netherlands Distribution Centres 1 Production Facility Distribution
Slide 43: Enhancing Competitiveness
Enhancing Competitiveness Transfer of technology from Europe to India to develop new products and capture growth in India and Asia a Benefit from high growth in emerging markets and pricing stability in developed markets Sharing of best practices 43
Slide 44: Virtual Organisation
Virtual Organisation Two legal entities but one virtual a Organisation Common Vision & goals Joint Business Plan Raw Material Strategy 44
Slide 45: Strong Cultural Fit…
Strong Cultural Fit… Long-standing relationship between Tata Steel and Corus Tata Steel engaged Ijmuiden operations of Corus in 1992 to help it in coke making and blast furnace facilities improvement Strategic commercial relationship Management at both Tata Steel and Corus highly focused on improvin
Slide 46: Strategic and Integration Committee
Strategic and Integration Committee R N Tata Chairman To To determine determine the the future future Drive Drive integration integration where where strategic strategic priorities priorities of of the the there there is is aa clear clear business business enlarged enlarged group group benefit benef
Slide 47: Significant identified Synergies
Significant identified Synergies Manufacturing Best Practices sharing Procurement Synergies of USD 450 million are Shared services expected to be achieved over 3 years Research, Development & Technology Tax synergies Financing synergies Synergies have been identified and audit process initiated – Ma
Slide 48: Raw Material Self-sufficiency
Raw Material Self-sufficiency With Jsr Tata Steel Brownfield & Long Term With Corus Standalone Orissa Project Vision (3 – 5 years) Steel size 5 23 34 34 Security* 80% 17% 40% 60%- 80% Iron Ore 100% 20% 50% 60% - 80% Coal 60% 15% 25% 60% - 80% Tata Steel standalone raw material security is 80% which
Slide 49: Outlook for FY 2007-08 and Long Term Plans
Outlook for FY 2007-08 and Long Term Plans 49
Slide 50: Global Steel Industry
Global Steel Industry Global apparent steel demand expected to grow by 5.9 % at 1179 million tonnes in 2007 (65 million tonnes) Chinese steel demand expected to grow by 13 % in 2007 Indian steel demand expected to grow by 10.2% in 2007 European crude steel production up 5% in Quarter 1 2007 at 53.8m
Slide 51: Outlook for FY 2007-08 (Apr-March)
Outlook for FY 2007-08 (Apr- March) India Crude steel production increase of 0.30 million tonnes Steel sales increase of 0.24 million tonnes Ongoing cost reduction programme South-East Asia Tata Steel Thailand – Crude steel production increase of 0.27 million tonnes – Steel sales increase of 0.23 mi
Slide 52: Summary of Progress on Major Projects
Summary of Progress on Major Projects Ongoing 1.8 mtpa expansion at Jamshedpur as per schedule (June 2008) 2.9 mtpa steel capacity expansion at Jamshedpur (Flat Products) Haldia Coke Project (1.6 mtpa coke plant) as per schedule (March 2008) Kalinganagar Steel Project, Orissa Land lease deed execute
Slide 53: Summary of Progress on Major Projects
Summary of Progress on Major Projects Dhamra Port Project, Orissa Financial closure for Rupee Term Loan achieved Tata Bluescope JV Building Solutions – Pune, Bhiwadi and Chennai plants in operation Coated Steel – Site development work nearing completion at Jamshedpur – Expected to place orders for c
Slide 54: Summary of Progress on Major Projects
Summary of Progress on Major Projects Projects in Europe Major capex & restructuring programme underway & on track in Quarter 1 to deliver planned improvements: – Port Talbot to 5 million tonne slab output by end 2007 – £130m strategic investment at Scunthorpe: 120m rail, increase premium wire rod s
Slide 55: Thank You
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