Hindalco Industries Limited · NSE:HINDALCO
Hindalco Industries — Q2 FY09 Earnings Presentation
54 slides from Hindalco Industries's earnings presentation, Oct 31, 2008
Slide 1: Hindalco Industries Limited Performance Review Q2 FY09
Hindalco Industries Limited Performance Review Q2 FY09 Presentation to the Investors 31st October 2008 1
Slide 2: Agenda
Financial Highlights & Overview Industry & Business Review Business Outlook Project Highlights Detailed Financials
Slide 3: Financial Highlights: Best Ever Q2 & H1
Financial Highlights: Best Ever Q2 & H1 Q2 FY09 H1 FY09 Rs Cr Rs Cr Sales 5,683 14% 10,331 7% PBT 926 12% 1,856 14% PAT 720 12% 1,417 14% 3
Slide 4: Commodities Affected by Global Economy Turmoil
Commodities Affected BY Global Economy US construction sector in doldrums Turmoil Base Metal demands showing declining trend US Residential US Economy showing recessionary trends Waning demand from Europe due to spreading financial crisis US Non Residential Slowdown in Chinese demand post Olympics
Slide 5: Market Dynamics
Prudent & well thought of actions in troubled times Hindalco Actions •Brownfield expansions • Hirakud, Muri •De-bottlenecking assets Cost Pressures • Renukoot • Green field • Utkal Market Dynamics •Negotiation with vendors/Import Alternatives Explored Demand Slow down •Long term Customer retention i
Slide 6: Results at a glance
Results at a glance: Q2 Q2 H1 H1 FY08 FY09 Change FY08 FY09 Change Rs Crores (%) (%) Net Sales 4,967 5,683 14% 9,652 10,331 7% PBDIT 1,032 1,170 13% 2,038 2,334 15% PBT 823 926 12% 1,629 1,856 14% PAT 643 720 12% 1,241 1,417 14% EPS 5.78 5.87 1.6% 11.21 11.55 3.0% 6 6
Slide 7: Aluminium
Aluminium 7
Slide 8: Key Industry Drivers: Deceptively positive in a challenging environment
Key Industry Drivers: Deceptively positive in a challenging environment Relative Driver Impact movement* LME Average($/ton) Exchange Rate(Rs/$) Crude derivatives/ Hydrocarbons * QOQ basis 8
Slide 9: Deteriorating Markets
Deteriorating Markets Slowdown in Aluminium demand US Economy showing recessionary trends Significant slow down in building & construction and automobile sectors Waning demand from Europe due to spreading financial crisis Europe consumption to decline Slowdown in Chinese demand post Olympics
Slide 10: Global Peers Suffered But Profits of Hindalco Improved
Global Peers suffered But Profits of Hindalco Improved Indexed EBIT 120 108 100 100 100 100 Anemic Demand 100 84 80 Continued Cost Push 60 55 40 21 Short lived improvement in LME 20 0 Hindalco Global Peer 1 Global Peer 2 Global Peer 3 Favourable Currency movement Q2 FY08 Q2 FY09 Strong Performance d
Slide 11: Improved Profitability through Operational Excellence
Improved Profitability through Operational excellence Higher alumina and Financials aluminium Production (up 13% QoQ) on account of (Best Ever Q2) Brown field expansions & Asset Sweating Sales Highest ever for Q2 - Rs Efficient cost management 2120 Cr - Up 18% EBIT Highest ever for Q2 – Rs.715 Key C
Slide 12: Higher Alumina sales including specials
Higher Alumina sales including specials Significant growth in Alumina sales Supported by higher special sales volume 45,000 90,000 40,000 80,000 35,000 70,000 +9% +27% 30,000 60,000 25,000 50,000 Mt Mt 40,000 80,823 20,000 39,049 35,779 30,000 63,516 15,000 20,000 10,000 10,000 5,000 0 0 Q2 FY08 Q2
Slide 13: Aluminium Business Performance
Aluminium Business Performance: Q2 FY08 Q2 FY09 Change Rs Crores (%) Net Sales & Operating 1,792 2,120 18% Revenue EBIT 662 715 8% 13
Slide 14: Best Ever Q2 EBIT
Best Ever Q2 EBIT 800 GR- 18% 715 700 671 CA 662 600 500 435 Rs Cr 400 300 200 100 0 Q2 FY06 Q2 FY07 Q2 FY08 Q2 FY09 14
Slide 15: Copper
HINDALCO ADITYA BIRLA GROUP Copper
Slide 16: Key Industry Drivers & Impact
Key Industry Drivers & Impact Relative Driver Impact movement* LME Average($/ton) TC/RC By-product prices Fertilizer Subsidy * QOQ basis 16
Slide 17: Refined Copper: Fast Losing Steam; Mine output remained Constrained
Refined Copper: Fast Losing Steam; Mine output remained Constrained Slowing Demand & unprecedented credit crunch led to sharp fall in the copper prices in the recent past In 2008 Demand expected to decline in the US, remain stagnant in Europe & Increase at a significantly lower pace in China Short
Slide 18: Challenging Times
Challenging Times TC/RC lower by 44% vis-a- vis Q2FY08 Input price push continued as crude touched record levels before cooling off Inflationary pressures leading to rising operating costs 18
Slide 19: Impressive Performance in challenging times
Impressive Performance in challenging times Higher Smelter Output (Up 2%) but marginal decline in cathode production (down 2%) Improved efficiency & lower conversion cost Higher contribution from Fertilisers stream Increased sulphuric acid production Production increased to take advantage of
Slide 20: Improvement in EBIT despite drop in TCRC
Copper Improvement in EBIT despite drop in TCRC 220 200 In spite of sharp fall in TCRC EBIT 180 increased 160 140 Indexed Q2 120 FY09 110 10 100 Base TCRC, EBIT (Q2FY08)=100 80 44 Q2 56 FY09 60 Q2 FY09 40 TCRC EBIT 20
Slide 21: Copper Business Performance
Copper Business Performance Q2 FY08 Q2 FY09 Change Rs Crores (%) Net Sales & Operating 3,178 3,565 12% Revenue EBIT 126 138 10% 21
Slide 22: Aluminium Outlook
Aluminium Outlook 22
Slide 23: Demand-Supply: Surplus over short term
Demand-Supply : Surplus over short term Sharp Slow down in Global demand will result in higher inventory in 2009-2010 Developing US recession & its extension to Europe will have a major impact China showing signs of moderation after a sharp run up in demand Weakness in supply a comforting factor
Slide 24: Costs: Unsustainable with sharp fall in prices
Costs :Unsustainable with sharp fall in prices Cost push to continue despite expected relief in crude & related inputs Any cost benefits will come with a lag and will be offset by price correction Resulting into capacity closures New Capacities/Expansion plans affected due to unprecedented credi
Slide 25: LME falling with increase in stocks
LME falling with increase in stocks 3,800 1,700,000 3,341 3,300 1,500,000 LME CSP-$/Mt 2,800 1,300,000 1,100,000 2,300 1,963 900,000 1,800 700,000 Stock= Comex+LME+Shanghai 1,300 500,000 800 29/Sep/08 26/Jun/06 13/Jun/07 20/Jun/08 2/Jul/07 5/May/06 11/Jan/07 21/Jan/08 3/Oct/06 9/Oct/07 10/Mar/08 23/
Slide 26: Prices
Prices Aluminium Prices declined sharply on account of rising economic uncertainty in the aftermath of financial crisis According to CRU with a sharp drop in LME, most of the Global smelters are making cash losses High cost Chinese capacities closing down Smelters in the western world are cont
Slide 27: The Crux
The Crux……. Prices are expected to remain subdued However, downside from existing levels is limited More Smelters closures expected in coming days Cost pressures expected to ease marginally with falling energy prices Demand weakness will stay for a while Hindalco being among the least cost
Slide 28: Copper Outlook
Copper Outlook 28
Slide 29: Demand Slow down
Demand Slow down…… China Copper Consumption Demand slump due to slowdown in the end user segments Slow down in the US housing & construction industry Chinese demand growth expected to slow down Survey of 24 major copper smelters in China conducted by Ieforex shows that 90 percent copper smelting
Slide 30: Still TC/RC to remain subdued over next year
Still TC/RC to remain subdued over next year….. Constrained Concentrate Supply Declining Refined copper Rising Capital & Operating costs demand due to Declining demand and increased input, interest costs falling prices may restore and Labour issues the balance in favour of declining copper grade
Slide 31: TCRC expected to improve over medium term
TCRC expected to improve over medium term….. Prolonged demand slow down and falling by product prices may result in smelter shutdowns Expected New smelters will defer their plans Larger Miners will continue to produce as they are relatively better off (in comparison to smelters) due Source: Brook Hu
Slide 32: By Products Outlook Bleak
By Products Outlook Bleak Precipitous fall in Sulphur prices Government’s directive to compulsorily supply sulphuric acid to Indian fertiliser industry at sulphur benchmarked prices led to disproportionate fall in domestic realisations Going forward, contribution from by-product streams may not
Slide 33: Projects
Projects 33
Slide 34: Muri Alumina Expansion
Muri Alumina Expansion Statutory Clearances – Obtained Project – Commissioned; under stabilization Commissioning: Evaporation - commissioned Calcination - commissioned Bauxite Handling & Bauxite Grinding- - commissioned. HT Digestion and Precipitators commissioned. Wagon Tipplers for bauxite c
Slide 35: Muri Project Site
Muri Project Site Bauxite Handling HT digesters New 10,000 T Alumina silo New tracks & BTAP wagons 35
Slide 36: Hirakud Smelter and Power Plant Expansion
Hirakud Smelter and Power Plant Expansion Phase II of the expansion of the smelting capacity from 100,000 TPA to 143,000 TPA was completed in Aug – 08 , as per schedule Further work on expansion to 151 KTA is in progress and is expected to be completed by Aug- 09. The power generation capacity has b
Slide 37: Greenfield Project – Utkal Alumina
Greenfield Project – Utkal Alumina Additional construction resources mobilized at site in full strength. Detail engineering for the main plant area is substantially completed. About Rs. 668 crores have already been spent and a commitment of about Rs. 2570 crores already made as on date. Major packag
Slide 38: Utkal Alumina
Utkal Alumina Laxmipur Jn. To Sorispadar (23.8 Km) under Mines Road : road work under progress to construction, For transportation of heavy project materials make it motorable (21 Km) to site (15 kms Black Topping completed) Mundagaon Culvert – completed 33 KV TL from Laxmipur - Plant Site (33 km )
Slide 39: Greenfield Projects – Aditya
Greenfield Projects – Aditya Technology agreement with AP signed for Aluminium. SIA clearance from Government received, Engineering Packages have started arriving. Alumina Technology tie up with ALCAN signed. SIA clearance for Alumina Technology awaited. EPCM contract for 900MW power plant pla
Slide 40: Greenfield Projects – Mahan Aluminium
Greenfield Projects – Mahan Aluminium Land: a) 3096 acres of private land. Sect(8) notification issued & measurement completed b) Application for 1730 Acres of land submitted Coal: Coal block allotted in Apr’06 in JV with ESSAR. JV formed. Production of Coal likely to start in FY 10 Water: Wat
Slide 41: Jharkhand Aluminium
Jharkhand Aluminium The proposed smelter capacity of the Jharkhand aluminium project is 359 ktpa and a CPP of 900 mw Land Acquisition: Plant location finalized at Sonahatu block ~20 kms from Muri & 55 kms from Ranchi. Application for Govt. land is submitted. Detailed surveys related to land viz;
Slide 42: To Sum Up… 'Testing times ahead'
To Sum Up…… ‘Testing times ahead’ Financial Market turmoil has reversed the commodity bull run Demand slow down, pricing pressures & cost push poses a serious & continuous challenge Hindalco has embraced an aggressive growth plan, a combination of organic & inorganic growth Challenging times
Slide 43: Financials
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Slide 44: Detailed Financials
Detailed Financials Q2 Q2 Change H1 FY08 H1 FY09 Change Rs Crores FY08 FY09 (%) (%) Net Sales 4,967 5,683 14% 9,652 10,331 7% Expenditure 4045 4690 16% 7849 8388 7% Other Income 110 177 61% 234 391 67% PBDIT 1,032 1,170 13% 2,038 2,334 15% Depreciation 145 159 9% 289 316 9% PBIT 886 1011 14% 1,748 2
Slide 45: Segment Analysis
Segment Analysis CE 56% 44% Net Sales 37% 63% EBIT 84% 16% 0 0.2 0.4 Aluminium 0.6 Copper 0.8 1 Change Rs Crores Aluminium Change (%) Copper (%) Q2 FY08 Q2 FY09 Q2 FY08 Q2 FY09 Net Sales 1,792 2,121 18% 3,178 3,565 12% EBIT 662 715 8% 126 138 10% EBIT Margins 37% 34% 4% 4% Capital Employed 7,683 8,7
Slide 46: Other Income
Other Income Rs Crores 29 20 Treasury income higher due 148 to Higher pre-tax treasury 89 yield & Higher average treasury Q2 FY08 Q2 FY09 Treasury Other Income 46
Slide 47: Interest & Finance Charges
Interest & Finance Charges Rs Crores 166 154 Higher Interest and finance charges 86 63 Lower interest capitalization Higher average borrowings Higher average interest cost Net Interest GrossInterest Q2FY08 Q2FY09 47
Slide 48: Taxes
Taxes Rs. Crores 205.6 180.8 37.6 Provision for Taxes Higher mainly 35.6 due to :- 165 Higher PBT & Higher ETR 141.9 Q2FY08 Q2FY09 Current Tax Deferred Tax 48
Slide 49: Aluminium Production
Aluminium Production Production Units Q2 FY08 Q2 FY09 % chg H1 FY08 H1 FY09 % chg Alumina MT 282,292 296,408 5% 584,722 599,885 3% Primary metal MT 118,257 131,314 11% 234,426 255,201 9% Wire rods MT 18,031 17,888 -1% 35,464 36,046 2% Rolled products MT 57,273 45,172 -21% 114,366 96,506 -16% Extrude
Slide 50: Aluminium Sales Volumes
Aluminium Sales Volumes Sales Units Q2 FY08 Q2 FY09 % chg H1 FY08 H1 FY09 % chg Chemicals MT 63,516 80,823 27% 140,087 148,958 6% Primary metal MT 54,871 64,627 18% 104,410 125,040 20% Rolled products MT 45,869 37,818 -18% 87,474 74,174 -15% Extruded products MT 11,165 10,181 -9% 20,741 20,338 -2% F
Slide 51: Copper Production
Copper Production Production Unit Q2 FY08 Q2 FY09 % chg H1 FY08 H1 FY09 % chg Copper Cathodes MT 79,181 77,540 -2% 158,415 137974 -13% CC Rods MT 35,335 34,293 -3% 69,430 64458 -7% DAP/NPK MT 34,117 36,598 7% 70,337 65864 -6% Gold Kg 3,543 1,190 -66% 5,313 2881 -46% Silver Kg 13,166 7,184 -45% 22,10
Slide 52: Copper Sales Volumes
Copper Sales Volumes Sales Volumes Unit Q2 FY08 Q2 FY09 % chg H1 FY08 H1 FY09 % chg Copper Cathodes MT 43,327 44,373 2% 88,015 73803 -16% CC Rods MT 35,318 34,626 -2% 69,048 65083 -6% Gold Kg 3,503 1,190 -66% 5,233 2881 -45% Silver Kg 13,166 7,184 -45% 22,643 17279 -24% 52
Slide 53: Aluminium Sales Revenue (Rs Crs)
Aluminium Sales Revenue (Rs Crs) Sales Q2 FY08 Q2 FY09 % chg H1 FY08 H1 FY09 % chg Chemicals 146 199 36% 310 356 15% Primary metal 610 832 36% 1,222 1,622 33% Rolled products 644 651 1% 1,254 1,218 -3% Extruded products 170 178 5% 322 354 10% Foils 144 142 -2% 274 300 10% Wheels 9 10 2% 19 18 -7% Ot
Slide 54: Copper Sales Revenue (Rs Crs)
Copper Sales Revenue (Rs Crs) Product Q2 FY08 Q2 FY09 % chg H1 FY08 H1 FY09 % chg Copper Cathodes 1375 1601 16% 2,784 2,657 -5% CC Rods 1257 1252 0% 2,381 2,348 -1% Gold 310 142 -54% 462 341 -26% Silver 23 16 -32% 40 39 -4% Others 126 125 -1% 276 153 -45% 54