Grasim Industries Ltd. · NSE:GRASIM
Grasim Industries — Non-Deal Roadshow (September 2001)
57 slides from Grasim Industries's roadshow presentation, September 2001
Slide 1: Grasim Industries Limited
Grasim Industries Limited Investor Presentation - September 2001
Slide 2: Presentation Structure
Presentation Structure ! Grasim's Business Profile " Cement " VSF " Sponge Iron " Textiles ! Divisional Overview ! Restructuring Efforts ! Financial Highlights ! Q1FY02 Performance Review (Annexure) 2
Slide 3: Business Profile
Business Profile ! Balanced business-mix over 80% revenue from core businesses of Cement and Viscose Staple Fibre ! Cement business, after 3 years of investment phase and restructuring, is on the threshold of profitable growth ! Share of Cement business is set to rise with incremental new investment
Slide 4: Business Mix
Business Mix Sponge Iron Others Sponge Iron Others 9% 5% 8% 8% VSF, Pulp & Chemical 33% Cement Cement 47% 39% VSF, Pulp & Textiles Chemical 6% Textiles 39% 6% Q1FY02 (Rs. 1,176 Crs.) FY 2001 (Rs. 4,822 Crs.) 4
Slide 5: PBIDT Mix
PBIDT Mix Others Others Sponge Iron 1% 9% Sponge Iron 3% VSF, Pulp & VSF, Pulp & 9% Chemical Chemical 56% 31% Cement Cement 60% 34% Textiles -1% Textiles (-) 2% Q1FY02 (Rs.248 Crs.) FY 2001 (Rs. 912 Crs.) 5
Slide 6: Cement – a growth area for Grasim
Cement – a growth area for Grasim Revenue Mix 100% 4 3 6 9 12 7 8 5 12 9 10 7 6 6 9 10 9 10 8 9 80% 9 11 12 8 19 22 60% 25 37 38 23 29 47 40% 56 57 48 20% 46 42 39 39 33 0% FY95 FY96 FY97 FY98 FY99 FY00 FY01 Q1FY02 VSF Cement Sponge Iron Textiles Others Cement will be a key driver of growth in futur
Slide 7: Business Overview
Business Overview 7
Slide 8: Cement
BIRLAaSe 53 GRADE CEMENT READY MIX =S— _ SS —- NN WH a
Slide 9: Grasim's Cement Business
Grasim’s Cement Business ! Amongst three largest producers in India " 10.36 Mn TPA existing capacity across 5 locations " 2.2 Mn TPA additional grinding facilities at split locations (by Dec. 01) " 1.14 Mn M3 RMC plants (6 Nos.) and 0.65 Mn Ton Bulk Terminal " Captive power plant at all locations, m
Slide 10: Industry Outlook Positive
Industry Outlook Positive Annual Production Per Capita Consumption Volume in Mn. MT (Kgs.) 1970-71 14.22 22 1980-81 18.66 28 1990-91 48.90 54 2000-01 93.52 87 2010-11(F) 200(E) 153(E) Source : NCAER Study ! Cement consumption to more than double in next 10 years " 6% GDP growth to drive 7-8% annual
Slide 11: Industry Outlook Positive (Contd..)
Industry Outlook Positive (Contd..) ! Demand growth will be accelerated by : "Strong growth in housing sector # Rural demand to pickup with normal monsoon # Fiscal incentives for private housing to continue # Changing preference towards nuclear families # Impending recovery and pickup in industrial
Slide 12: Long term supply pressures to ease
Long term supply pressures to ease ! Cement production exploded after decontrol " 50 Mn MT added in last 10 years " Sharp rise in capacity coupled with sluggish growth in demand resulted in domestic surplus and pricing pressures ! Capacity additions to slow down " Stringent financing environment (e.
Slide 13: Short term surplus to continue
Short term surplus to continue ! Demand growth to recover in second half of FY 02 on the back of good Monsoon in almost all key cement consuming states and infrastructure spending ! Supply pressures to continue " Present capacity utilisation offers room for increased supplies " On-going de-bottlenec
Slide 14: Price outlook remains firm
Price outlook remains firm ! Prices recovered during 2HFY01 ! Significant downside in cement prices unlikely " Economic compulsion – #Substantial cost increase in last 3 years " Stressed gearing of large players " Valuations of recent acquisitions assume higher price levels " Producers wanting to ex
Slide 15: Going Forward
Going Forward ! Key Challenges " Greater competition among majors " Focus on improving market position " Retention of market share " Cost Control ! Strategies to overcome challenges " Maintain market position " Capital and manpower productivity " Maintaining competitive cost structure 15
Slide 16: Strategy : Market Position
Strategy : Market Position ! Focus on identified core markets (North, Western corridor and South) ! Strengthen brands to ensure regional dominance ! Improve realisation thru " Change in product mix " Change in market mix # Better penetration into new markets of South and North # Grinding unit at Bha
Slide 17: Strategy: Capital and Manpower Productivity
Strategy :Capital and Manpower Productivity ! Capacity expansion from 9.10 Mn. MT to 10.36 Mn. MT achieved without major capex. ! Cost effective expansion of capacities " Adding 2.8 Mn MT in next 15 months through change in product mix and de-bottlenecking " Capital cost per ton to reduce from Rs.18
Slide 18: Strategy : Cost Control
Strategy : Cost Control 97-98 98-99 99-00 00-01 Power (KWH / MT) 100 95 90 90 Fuel (KCal/Kg) 751 735 728 720 Freight Distance (Kms) 551 539 490 465 ! Further reduction in energy costs " Increase proportion of thermal power " Reduce unit energy consumption further " Change in fuel mix - increase use
Slide 19: Viscose Staple Fibre
FOR FEEL, COMFORT & FASHION Viscose Staple Fibre 19
Slide 20: VSF - Another Key Business for Grasim
VSF - Another Key Business for Grasim ! Largest domestic producer with strong competitive advantage " 3 fibre plants with 2,20,000 TPA installed capacity ! Market leader with over 90% domestic share ! Amongst lowest cost producers in the World ! Fully integrated operations " Caustic Soda and Power r
Slide 21: VSF Industry Profile
VSF Industry Profile ! Two producers with a production capacity of 277000 MT " FY 01 Grasim’s production - 218847 MT " FY 01 Other Producer - 17326 MT ! Cellulosic fibre and filament segment is around 15% of total man made fibre segment ! VSF constitutes 6% of overall textile fibre segment ! Over la
Slide 22: VSF to Remain Stable Performer
VSF to Remain Stable Performer Outlook ! Recent fall in volumes due to down-turn in textile industry and low yarn demand " VSF yarn prices in European and Asian markets declined from its peak of US$ 2.27/kg in May 00 to US$ 1.90/kg in June 01. Exports from India declined from 2800 MT per month in Ma
Slide 23: VSF to Remain Stable Performer
VSF to Remain Stable Performer Outlook (contd..) ! Operating profit expected to improve in second half " Operating profit will get support from lower pulp prices. " Closure of non-viable Mavoor operation to add Rs.27 Crs. per annum to bottom line ! Towards ensuring long term growth, Grasim will focu
Slide 24: Fibre - Turnover volume and Realisation Trend
Fibre - Turnover volume and Realisation Trend Turnover Realisation 55000 75000 53308 52889 52081 73511 74000 50000 49429 48228 73000 47512 72000 Realisation (Rs/PMT) 46048 46194 47024 72590 45000 71000 Turnover (MT) 44682 43755 44100 44978 69660 42663 70000 68358 68472 69000 40000 67380 39011 66963
Slide 25: VSF and Pulp prices Trend
VSF and Pulp prices Trend 75000 900 VSF Pulp 70000 800 CIF US $/MT Rs./MT 65000 700 60000 600 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY 00 FY 01 FY 02 25
Slide 26: Grasim Share in World VSF Market
Grasim Share in World VSF Market 14 12 11.5 10.8 10.2 10 9.3 9.0 Grasim share in World Cellulosic % Share 8 Industry 6 VSF Share in world 4.1 textile 4 3.7 3.4 3.4 3.4 2 0 1996 1997 1998 1999 2000 26
Slide 27: Other Businesses
Other Businesses !Sponge Iron !Textiles 27
Slide 28: Sponge Iron
Sponge Iron ! Overview " Largest merchant producer in India #Market share exceeds 35% #Installed capacity of 900,000TPA (Gas Based) " Enjoys strong competitive advantage,HYL Technology enables- #Flexibility to produce both HBI and DRI #Dual feedstock facility (Natural Gas & Naphtha) ! Outlook " Glob
Slide 29: Textiles
Textiles ! Overview " 222 looms and 43,500 spindles " Two strong brands – Grasim and Graviera ! Outlook remains challenging " Fabric volumes and prices to remain under pressure # Over capacity, commoditisation of suiting fabrics market and gradual shift towards ready-to-wear products # Price competi
Slide 30: Restructuring Efforts
Restructuring Efforts 30
Slide 31: Debt Restructuring
Debt Restructuring ! Restructuring of high cost debt " Swapped high cost debt of Rs.327 crores with lower coupon debt, in FY00 " Coupon reduced on Rs.27 crores debt in FY00 " Coupon reset on debt worth Rs.331 crores in FY01 " Prepayment of high cost debt of Rs.41 crores in FY01 ! WAC of long term de
Slide 32: Business Restructuring
Business Restructuring ! Dharani Cement Ltd., a wholly owned subsidiary, merged effective 1st Nov 2000 ! Software Business Hived-off into a wholly owned subsidiary effective 1st February 2001 ! Closure of Mavoor Fibre and Plup Plants -Effective 1st July 01 " One time extraordinary loss in annual acc
Slide 33: Capex Plan – FY02
Capex Plan – FY02 Rs. Crores To be Spent in Amount Completion FY02 FY03 Schedule !Expenditure : A New Projects : - Cement Grinding Unit at Bhatinda (1 Mn MT) (Total Cost Rs.83 Crs.) * 59 59 -- Q3 FY02 - Ready Mix Concrete 3 Plants (745,200 M3 ) (Total Cost Rs.28 Crs.) * 15 15 -- Q2 FY02 - Cement Cap
Slide 34: Capex Plan – FY02 (Contd..)
Capex Plan – FY02 (Contd..) Rs. Crores Amount To be spent in FY02 FY03 B Normal Modernisation : - VSF 60 53 7 - Cement 178 153 20 - Others 54 30 17 Sub Total (B) 292 236 44 Total (A + B) 586 425 149 !Financing : Debt (Already raised) 160 -- Internal Accruals/New Debts 265 149 Total 425 149 34
Slide 35: Financial Highlights FY99 – FY01
Financial Highlights FY99 – FY01 35
Slide 36: Profitability FY99 –FY01
Profitability FY99 –FY01 FY99 FY00 FY01 Gross Turnover Rs. Crs. 4,325 4,982 5,582 Net Turnover Rs. Crs. 3,757 4,273 4,822 PBIDT Rs. Crs. 678 756 912 PBIDT Margin % 18.1 17.7 18.9 Interest Rs. Crs. 292 256 239 PBDT Rs. Crs. 386 500 673 Depreciation Rs. Crs. 210 237 252 PAT (before deferred tax) ** Rs
Slide 37: Financial Snapshot (FY99 – FY01)
Financial Snapshot (FY99 – FY01) FY99 FY99(R)* FY00 FY00(R)* FY01 FY01(R)* Gross Block Rs.Crs. 4,937 4,937 5,206 5,206 5,312 5,312 Net Block Rs.Crs. 3,354 3,354 3,401 3,401 3,303 3,303 Equity Rs.Crs. 91.7 91.7 91.7 91.7 91.7 91.7 Net Worth Rs.Crs. 2,616 2,142 2,777 2,220 3,075 2,488 Avg.Capital Empl
Slide 38: To Sum Up…
To Sum Up… ! Focus " Deliver enhanced value to shareholders on a sustained basis " Value creation and not asset creation alone ! Strategy " Focus on core businesses – VSF and Cement " No unrelated diversification / Investments " Improve asset utilisation through market expansion and better penetrati
Slide 39: Plant Locations
Plant Locations Bhatinda(G) Noida Gurgaon % T Bhiwani Jodhpur Shambhupura Jawad % T Bharuch Gwalior F F C Nagda F Fibre plants Raipur P Pulp plants Raigarh C S Hotgi(G) Chemical plant Hyderabad T Textiles units Malkhed Grey cement plants / Grinding Units (G) White cement plant Bangalore Harihar B Ch
Slide 40: Thank You
GRASTM, ADITYA BIRLA GROUP Thank You
Slide 41: Annexure: Results – Q1/FY2002
Annexure Results – Q1/FY2002 41
Slide 42: Financial Performance – Q1FY02
Financial Performance – Q1FY02 Rs. Crores Q1FY02 Q1FY01 % Chg. FY01 Net Turnover & Operating Income 1,184.2 1,195.9 (1) 4,839.8 Other Income 14.5 12.3 18 89.7 PBIDT 247.7 188.4 31 911.5 Interest and Finance Charges 47.5 61.3 (22) 238.8 Gross Profit 200.2 127.1 58 672.7 Depreciation 62.6 62.3 1 251.9
Slide 43: Performance Highlights – Q1FY02
Performance Highlights – Q1FY02 ! Excellent performance due to improved scenario of Cement, AND despite poor off take of VSF and curtailed operations of Chemical division ! Turnover marginally down due to lower volume of VSF, curtailed operation of Chemical division and planned reduction of trading
Slide 44: Performance Highlights – Q1FY02 (Contd..)
Performance Highlights – Q1FY02 (Contd..) ! Deferred Tax Liability " Provision of Rs. 10 Crs. in Q1FY02 made as per AS-22 " Liability for corresponding Q1FY01 would have been Rs.4.7 Crs. " Provision for liability for the past year upto FY01 estimated at Rs. 587 Crs. which, as per AS requirements, wi
Slide 45: Divisional Turnover - Q1FY02
Divisional Turnover - Q1FY02 Rs. Crores Net Turnover Q1FY02 Q1FY01 FY01 Amount Share Amount Share Amount Share % % % FIBRE VSF 311 26 370 31 1,470 31 Pulp 32 3 41 3 158 3 343 29 411 34 1,628 34 Chemical 44 4 61 5 245 5 387 33 472 39 1,873 39 CEMENT Grey 528 45 413 35 1,719 36 White 28 2 27 2 133 3 5
Slide 46: Divisional Quarterly Turnover Trend
Divisional Quarterly Turnover Trend 1400 1263 1192 1184 1185 1176 1200 101 92 93 102 54 98 106 100 97 101 1000 69 81 85 72 77 Others 800 530 Sponge Iron 440 426 457 556 Textile 600 Cement Fibre / Chemical 400 473 480 457 465 200 387 0 Q1 FY01 Q2 FY01 Q3 FY01 Q4 FY01 Q1 FY02 Net Turnover (Rs. Crs.) 4
Slide 47: Divisional Quarterly PBIDT Trend
Divisional Quarterly PBIDT Trend 300 261 270 248 23 219 226 3 240 21 188 2 7 210 25 20 6 180 17 141 56 Others 81 150 37 148 Sponge Iron Textile 120 Cement 90 Fibre/ Chemical 133 140 60 121 111 78 30 0 -5 -4 -4 -11 -3 -2 Q1 FY01 Q2 FY01 Q3 FY01 Q4 FY01 Q1 FY02 -30 PBIDT (Rs. Crs.) 47
Slide 48: Viscose Staple Fibre
Viscose Staple Fibre % Q1FY02 Q1FY01 Chg. FY01 Capacity TPA 220,775 220,775 220,775 Production MT 32,757 52,395 (37) 218,847 Sales Volumes MT 39,011 53,308 (27) 203,854 Net Turnover Rs.Crs. 311 370 (16) 1,470 Avg. Realisation Rs./MT 72,590 66,048 10 69,733 PBIDT Margin * % 22 31 29 * Before employee
Slide 49: Viscose Staple Fibre (Contd..)
Viscose Staple Fibre (Contd..) Highlights – ! Capacity utilisation down at 59% due to closure of Nagda Plant for part of the current quarter ! Plant operations resumed June 01 end ! Sales volumes down 27 %, at 39,011 MT due to adverse market conditions (lower demand) ! Realisation up 10% from Rs.66/
Slide 50: Cement
Cement % Q1FY02 Q1FY01 FY01 Chg. Grey Cement Capacity Mn. MT * 10.36 9.10 ** 9.86 Production Mn. MT 2.57 2.46 4 9.10 Sales Volumes Mn. MT 2.55 2.47 3 9.16 Net Turnover Rs. Crs. 528 413 28 1,719 Avg Realisation Rs./MT 2,046 1,646 24 1,894 White Cement Capacity TPA 400,000 360,000 ** 400,000 Productio
Slide 51: Cement (Contd..)
Cement (Contd..) Highlights – ! Capacity utilisation at 99% ! Sales volume grew by 3% " Sales volumes up in South 22% and East 9%; but down in West 6% and North 2% #Better penetration into new Southern market ! Average realisation up by 24% at Rs.2,046/MT reflecting better price environment prevaili
Slide 52: Textiles
Textiles % Q1FY02 Q1FY01 FY01 Chg. Divisional Revenue Rs.Crs. 77 81 (5) 306 PBIDT Margin* % (2) (6) (7) * Before employees separation cost Highlights ! Divisional performance remained subdued ! Fabrics (64% of revenue) remained under pressure " Sluggish market condition " Intense price competition a
Slide 53: Sponge Iron
Sponge Iron % Q1FY02 Q1FY01 FY01 Chg. Capacity TPA 900,000 900,000 900,000 Production TPA 166,493 174,312 (4) 663,998 Sales Volumes MT 165,217 180,489 (8) 673,852 Net Turnover Rs. Crs. 101 106 (4) 401 Avg Realisation Rs./MT 5,907 5,631 5 5,733 PBIDT Margin % 21 16 21 53
Slide 54: Sponge Iron (Contd..)
Sponge Iron (Contd..) Highlights – ! Capacity utilisation marginally down from 77% to 74% " Continued restricted Natural Gas supplies from GAIL " Use of Naptha discontinued since July 00 due to prohibitive costs ! Sales volumes lower by 8% ! Average realisation up by 5% " Improved demand " Reduced c
Slide 55: Caustic Soda
Caustic Soda Q1FY02 Q1FY01 % Chg. FY01 Capacity MT 160,600 160,600 160,600 Production MT 21,950 32,893 (33) 131,253 Net Turnover MT 20,588 34,607 (41) 133,450 Avg Realisation Rs./MT 15,139 10,265 47 11,085 Net Turnover Rs. Crs. 44 61 (27) 245 PBIDT Margin % 18 28 32 Highlights – ! Capacity utilisati
Slide 56: Production Data (MT)
Production Data (MT) Q1FY02 Q1FY01 FY01 Capacity Capacity Capacity Production % Production % Production % TPA TPA TPA VSF * 220,775 32,757 59 220,775 52,395 95 220,775 218,847 99 Pulp 58,000 18,267 126 58,000 18,143 125 58,000 69,729 120 Chemical 160,600 21,950 55 160,600 32,893 82 1,60,600 131,253
Slide 57: Divisional Turnover – Qty & Realisation
Divisional Turnover – Qty & Realisation Quantity (MT) Realisation (Rs. /MT) Product Q1 Q1 Q1 Q1 FY01 FY02 FY01 FY02 FY01 FY01 VSF * 39,011 53,308 203,854 72,590 66,048 69,733 Pulp * 13,419 18,405 70,148 23,914 22,450 22,500 Chemical 20,588 34,607 133,450 15,139 10,265 11,085 Grey Cement** 2.55 2.47
Grasim Industries — Non-Deal Roadshow (September 2001) on 6ix