Tata Steel Limited · NSE:TATASTEEL
Tata Steel — Q2 FY2010 Earnings Presentation
36 slides from Tata Steel's earnings presentation, Nov 26, 2009
Slide 1: Consolidated Financial Results Quarter Ended September 2009
C Consolidated lid t d Fi Financial i lRResults lt Quarter Ended September 2009 Press Meet – Mumbai November 26 , 2009 1
Slide 2: Agenda
¾ Global Steel Environment ¾ Second S dQQuarter t Performance P f : Tata T t Steel St l Europe E ¾ Second Quarter Performance : Tata Steel India & South East Asia ¾ Recent Corporate Developments ¾ Second Quarter Consolidated Financial Performance ¾ Financing g Strategy gy and Capital p Raising g ¾ C
Slide 3: Agenda: Global Steel Environment
¾ Global Steel Environment ¾ Second S dQQuarter t Performance P f : Tata T t Steel St l Europe E ¾ Second Quarter Performance : Tata Steel India & South East Asia ¾ Recent Corporate Developments ¾ Second Quarter Consolidated Financial Performance ¾ Financing g Strategy gy and Capital p Raising g ¾ C
Slide 4: Global steel production and demand recovery
Ex- China Steel Production & Growth ¾ Apparent A steell usage iis expected d to d decline li 8.6% YoY in 2009 but estimated to increase in 2010 by around 9% ¾ Brazil, India, China & Middle East are the Chinese Steel Production & Growth drivers of global demand recovery ¾ Global recovery has begun bu
Slide 5: Regional market outlook: Europe, India, South East Asia
¾ Europe • Manufacturing output stabilizing at low levels • Construction sector and its funding are still depressed • St l iindustrial Steel d t i l orders d rising, i i lleading di tto hi higher h capacity it utilization tili ti • Steel stocks are low throughout the value chain • Recovery in end us
Slide 6: Agenda: Tata Steel Europe
¾ Global Steel Environment ¾ Second S dQQuarter t Performance P f : Tata T t Steel St l Europe E ¾ Second Quarter Performance : Tata Steel India & South East Asia ¾ Recent Corporate Developments ¾ Second Quarter Consolidated Financial Performance ¾ Financing g Strategy gy and Capital p Raising g ¾ C
Slide 7: Tata Steel Europe key performance indicators
Q1 Q2 H1 H1 H1 FY2010 vs FY2010 FY2010 FY2010 FY2009 H1 FY2009 Safety – Lost time injuries (LTIF – 1.5 1.4 1.5 1.9 21% employees & contractors) Capacity Utilization (%) – Inc TCP 56 78 67 100 33% Capacity Utilization (%) – Ex TCP 53 75 64 100 36% Li id steel Liquid t l production d ti ((mt) t) 28 2.
Slide 8: Revenue and deliveries H1 FY10 vs H1 FY09
H1 FY10 vs. H1 FY09 Revenue Collapse : 51% Tonnage Fall :41% 1300 1200 1,138 verage Price (US$) 1100 1000 900 938 800 700 600 Av H1 FY2010 H1 FY2009 500 Turnover : US$ 6.7 Bn Turnover : US$ 13.7 Bn 400 300 200 100 7.1 12 1 2 3 4 5 6 7 8 9 10 11 12 13 Deliveries (Mn t) 8
Slide 9: Tata Steel Europe divisional deliveries and EBITDA trend
Strip Products Long Products ** Distribution & Building*** 1.8 1.6 1,200 1 0.90 1,200 1.2 1,200 1.6 0.9 0.80 1.0 1,000 1,000 1.0 0.95 1,000 1.4 0.8 1.2 1.2 800 0.7 0.77 800 0.8 0.9 800 1.2 0.6 1 600 0.5 600 0.6 600 0.8 0.4 0.6 400 0.3 400 0.4 400 0.4 0.2 200 200 0.2 200 0.2 0.1 0 ‐ 0 ‐ 0.0 ‐ Q4 FY09
Slide 10: Capacity utilization and blast furnace restarts
90% 75% 80% ¾ IJmuiden Blast Furnace reignited 70% in July’09 60% 54% 53% 50% ¾ Port Talbot Blast Furnace 40% reignited in Oct’09 30% 20% ¾ Llanwern rolling facilities 10% temporarily restarted in July – Sep’09 0% Q4 FY09 Q1 FY10 Q2 FY10 Year End capacity y utilization likely y to continue at simila
Slide 11: Teesside Cast Products update
¾ Long term off takers unilaterally terminated 10 year contract in April 2009 ¾ Two potential buyers of TCP cancelled MOU in June 2009 ¾ Tata Steel Europe immediately exposed to over 3mt of slabs to sell in depressed market with high raw material carry – over costs ¾ Arbitration and legal proceeding
Slide 12: Tata Steel Europe outlook for H2
¾ Adverse HI Impact of Teesside, minimized as operated at profit or mothballed ¾ Reduction in average raw material cost per tonne of liquid steel on new benchmark rates of iron ore and coal feeding through product costs in H2 ¾ Higher volume and capacity utilization in Strip Division ¾ Construction
Slide 13: Agenda: Tata Steel India & South East Asia
¾ Global Steel Environment ¾ Second S dQQuarter t Performance P f : Tata T t Steel St l Europe E ¾ Second Quarter Performance : Tata Steel India & South East Asia ¾ Recent Corporate Developments ¾ Second Quarter Consolidated Financial Performance ¾ Financing g Strategy gy and Capital p Raising g ¾ C
Slide 14: Tata Steel India key performance indicators
Q1 Q2 H1 H1 H1 FY2010 vs. FY2010 FY2010 FY2010 FY2009 H1 FY2009 Safety – Lost time injuries (LTIF – 0.54 0.59 0.59 1.13 48% employees & contractors) Capacity Utilization (%) 88 96 92 104 12% Crude steel production (mt) 1 50 1.50 1 64 1.64 3 14 3.14 2 61 2.61 20% Steel deliveries (mt) 1.42 1.46 2.88
Slide 15: Flat and long products; EBITDA trend India
Flat Products Long Products 800 735 1.08 1.20 700 0.70 0.80 635 580 0.66 700 615 1.00 600 0.70 600 0.85 0.79 651 500 0.48 535 545 0.60 557 0.80 0.57 500 0.59 0.50 400 400 0.60 0.40 300 300 0.30 0.40 200 200 0.20 0.20 100 100 0.10 0 0.00 0 0.00 Q3 FY09 Q4 FY09 Q1 FY10 Q2 FY10 Q3 FY09 Q4 FY09 Q1 FY10
Slide 16: Savings from improvement initiatives
US$ Mn FY10 Target > Break up of Savings achieved in FY’10 through US$ 208 M Mn improvement initiatives: 140 11 120 107 119 11 11 100 9 89 80 13 5 60 98 108 40 76 20 93 ‐ FY2008 FY2009 FY2010E Aspire TOC Marketing Initiatives Synergy Process Improvement p Synergy y gy Initiatives resulting in Saving
Slide 17: Nat Steel and Tata Steel Thailand
Nat Steel Finished Steel Production (Mt) 0.8 Deliveries (Mt) 0.50 0.46 07 0.7 0.7 0.45 0.40 0.38 0.6 0.33 0.5 0.35 0.5 0.30 0.4 04 0.4 0.25 0.20 0.3 0.15 0.2 0.10 0.1 0 05 0.05 0 0.00 Q4 FY09 Q1 FY10 Q2 FY10 Q4 FY09 Q1 FY10 Q2 FY10 Tata Steel Thailand 0.35 Crude Steel Production (Mt) Deliveries (Mt)
Slide 18: Outlook for India and South East Asia
¾ Focus on higher volumes in H2 FY10 across India & SE Asia ¾ Lower cost of production on account of lower price of imported coal & declining scrap prices ¾ Performance Improvement measures in India to exceed the benefits realized in H1 FY10 ¾ Rebound in regional economies to positively impact const
Slide 19: Agenda: Recent Corporate Developments
¾ Global Steel Environment ¾ Second S dQQuarter t Performance P f : Tata T t Steel St l Europe E ¾ Second Quarter Performance : Tata Steel India & South East Asia ¾ Recent Corporate Developments ¾ Second Quarter Consolidated Financial Performance ¾ Financing g Strategy gy and Capital p Raising g ¾ C
Slide 20: Orissa greenfield project progress
¾ Land 3,400 acres of land acquired and compensation paid ¾ Rehabilitation & Resettlement 70% families shifted to rehabilitation colonies Work to relocate the balance people is moving full steam ahead ¾ Site Progress Incoming Material Section construction work in progress Intake Well for s
Slide 21: Benga coal project, Mozambique
¾ Government of Mozambique has approved the mining contract ¾ Feasibility study completed by JV partners for Benga Project ¾ Alternate options on low cost transportation being evaluated ¾ Riversdale and Tata Steel have approved development of Benga Stage 1 at a cost of $ 270 Mn ¾ Production is likel
Slide 22: Iron ore direct shipping ore JV
¾ Signed g JV Agreement g for the DSO p project j ¾ Estimated reserves of over 100mn tons of direct shipping quality ore ¾ 100% offtake rights ¾ Feasibility study for the DSO project underway ¾ Expected production of 4mn tons per annum of iron ore from May 2011 ¾ Project j cost estimate of C$300 mil
Slide 23: Agenda: Consolidated Financial Performance
¾ Global Steel Environment ¾ Second S dQQuarter t Performance P f : Tata T t Steel St l Europe E ¾ Second Quarter Performance : Tata Steel India & South East Asia ¾ Recent Corporate Developments ¾ Second Quarter Consolidated Financial Performance ¾ Financing g Strategy gy and Capital p Raising g ¾ C
Slide 24: Consolidated deliveries, turnover, EBITDA and PAT
7 7,000 US$ Mn 6.2 5.9 Deliveries (Mt) 5,833 , Turnover 6 6 000 6,000 5.3 5,280 4,842 5 5,000 4 4,000 3 3,000 2 2,000 1 1,000 0 ‐ Q4 FY09 Q1 FY10 Q2 FY10 Q4 FY09 Q1 FY10 Q2 FY10 Underlying EBITDA Underlying PAT * 300 279 400 254 300 250 200 200 100 0 150 ‐100 Q4 FY09 Q1 FY10 Q2 FY10 92 ‐200 ‐20 100
Slide 25: Q2 FY10 results by entity
US $ Mn Tata TS NSH* TSTH Tata Steel Steel Europe Group** Deliveries (mt ) 15 1.5 39 3.9 07 0.7 03 0.3 62 6.2 Turnover 1,183 3,486 371 170 5,280 EBITDA – Reported 415 (375) 20 17 84 – Underlying 415 (205) 20 17 254 EBITDA margin (%) 35 - 5 10 2 PBT – Reported 281 (802) 9 9 (497) – Underlying 281 (44
Slide 26: Reported to underlying earnings
US$ Mn Q2 FY FY’10 10 EBITDA PBT PAT Q2 Q1 Q2 Q1 Q2 Q1 FY10 FY10 FY10 FY10 FY10 FY10 Numbers as Reported 84 42 (497) (419) (563) (459) Add: Adverse Impact of Teesside Cast Products 170 50 170 50 170 50 Restructuring ,Impairment & Disposals - - 189 45 189 45 Underlying Earnings 254 92 (138) (324) (20
Slide 27: Cash and undrawn lines
US $ Mn 4,000 3,543 3,602 3 500 3,500 2,893 3,000 1,320 1,377 2,500 1,012 2,000 1,500 1,000 , 2,223 2,225 1 881 1,881 500 ‐ Mar'09 Mar 09 June'09 June 09 Sep'09 Sep 09 Cash & Cash Equivalents Undrawn lines (*) Excludes other JVs, Subsidiaries & share of profit of Associates of the Tata Steel Group 2
Slide 28: Gross debt and net debt movement
US$ Mn 1,342 12,453 159 12,893 ( (1,062) ) 9,874 (2,343) (676 ) ‐ ‐ ‐ Gross Debts New Loans Repayments Reval. Impact Gross Debts Cash & Cash Hedge on Net Debts Mar‐09 Sep‐09 Eq Sep‐09 Foreign Sep‐09 Exchange Loans 28 * Cash and cash equivalents includes current investments
Slide 29: Pension fund surplus and asset mix
Combined Surplus of all Tata Steel Europe Pension Funds BSPS Asset Mix US$ Mn 120% 2140 100% 1% 2% 3% 5% 2% 80% 51% 65% 68% 66% 64% 60% 986 6% 40% 595 561 4% 4% 531 5% 5% 20% 42% 26% 25% 28% 29% 0% Mar'07 Mar'08 Mar'09 Jun'09 Sep'09 Mar'07 Mar'08 Mar'09 Jun'09 Sep'09 Equities Real estate Bonds Cash
Slide 30: Agenda: Financing Strategy and Capital Raising
¾ Global Steel Environment ¾ Second S dQQuarter t Performance P f : Tata T t Steel St l Europe E ¾ Second Quarter Performance : Tata Steel India & S.E Asia ¾ Recent Corporate Developments ¾ Second Quarter Consolidated Financial Performance ¾ Financing g Strategy gy and Capital p Raising g ¾ Conclusi
Slide 31: Debt amortization and de-risking steps
Scheduled Debt Amortization vs. Post – Restructuring Repayments ¾ The company will seek to de-risk the balance sheet through a combination of: – Restructuring existing debts in order to reduce the risk of bunching repayment obligations – Using existing cash reserves to pay down high cost debt – Port
Slide 32: Raising of finances and debt repayment
1) Issue of Non Convertible Debentures – US$ 447 Mn 2) New Term Loan taken : US$ 591 Mn Raising of 3) Issue of Commercial Papers – US$ 104 Mn Finances 4) GDR Issuance of US$ 500 Mn in Q2 FY’10 FY 10 1) Pre / Repayment of Term Loans : US$ 410 Mn 2) Prepayment of US$ 160 Mn of Senior Facility in TS Pr
Slide 33: New convertible bonds exchange for CARs
New Bonds Description New Bonds convertible into fully paid up ordinary shares in exchange of existing CARS Issue Size Exchange of US$ 493 Mn of CARs with US$ 546.94 Mn New Bonds Maturity 21st November 2014 vs. CARs maturity of September 2012 YTM 4.50% vs. CARs YTM : 5.15% Conversion Premium 15.00%
Slide 34: Agenda: Conclusion
¾ Global Steel Environment ¾ Second S dQQuarter t Performance P f : Tata T t Steel St l Europe E ¾ Second Quarter Performance : Tata Steel India & S.E Asia ¾ Recent Corporate Developments ¾ Second Quarter Consolidated Financial Performance ¾ Financing g Strategy gy and Capital p Raising g ¾ Conclusi
Slide 35: Conclusion and H2 FY10 outlook
¾ H2 FY10 consolidated lid t d EBITDA would ld b be ttrend d reversall ffrom H1 FY10 ¾ Higher Capacity utilization across the Group ¾ Lower cost base in H2 FY10 than H1 FY10 across the Group ¾ Adverse Impact of Teesside minimized ¾ Increased benefits from ‘Fit for Future’ in Europe ¾ Lower financing
Slide 36: Thank You
Thank You 36