Bajaj Hindusthan Sugar Limited · NSE:BAJAJHIND
Bajaj Hindusthan Sugar — Bajaj Hindusthan — Investor Presentation (April 2008)
56 slides from Bajaj Hindusthan Sugar's investor presentation, Apr 10, 2008
Slide 1: Bajaj Hindusthan Group Corporate Presentation
Bajaj Hindusthan Group Corporate Presentation April 2008 1
Slide 2: Presentation Outline
Presentation Outline Global Industry Overview Indian Industry Overview Group Overview 2
Slide 3: Global Sugar Industry Overview
Global Sugar Industry Overview 3
Slide 4: World Sugar
World Sugar Produced in more than 120 countries About 78% is produced from sugarcane Beet sugar has gone down from 40% in 1990 to 22% in 2006-07 The cost of sugar from cane is less than the cost of sugar from beet About 70% of production is consumed in the country of origin The balance 3
Slide 5: World Sugar Production
World Sugar Production MM T, Raw Value Country / Reg ion 2007-08e 2006-07 2005-06 2004-05 2003-04 Brazil 34.23 32.64 32.64 27.73 26.14 India 28.50 30.77 20.94 13.80 14.74 EU 17.45 17.38 21.03 21.95 20.21 China 13.59 13.04 9.58 9.86 10.90 USA 7.66 7.66 6.71 7.15 7.85 Thailand 7.89 7.03 5.08 5.43 7.28
Slide 6: World Sugar Balance
World Sugar Balance MM T, Raw Value Sugar 2008-09e 2007-08e 2006-07 2005-06 2004-05 2003-04 Opening Stock 80.0 72.9 64.1 61.3 67.2 68.1 Production 160.0 168.9 166.9 151.3 141.1 143.8 Imports 52.0 51.1 51.8 54.1 51.0 49.2 Consumption 162.0 157.7 153.8 146.2 144.0 141.4 Exports 52.0 55.1 56.2 56.3 54.
Slide 7: Ethanol Production in Brazil
Ethanol Production in Brazil Source: Datagro 7
Slide 8: Sugarcane output breakdown in Brazil
Sugarcane output breakdown in Brazil Source: Datagro Use of Sugarcane for Ethanol to grow from around 50% in 2006-07 to around 57% in 2008-09 8
Slide 9: International Retail Prices
International Retail Prices Prices in India amongst lowest in the world Source: Illovo Sugar 9
Slide 10: Per Capita Sugar Consumption
Per Capita Sugar Consumption Factors determining consumption: Per Capita Sugar Consumption of Top 7 Consumers Sugar prices versus alternate 70.0 sweeteners 60.0 57.6 47.8 Per capita income 50.0 43.8 38.1 Population growth Kilograms 40.0 31.4 30.0 The age profile 20.0 18.6 8.6 Sugar avail
Slide 11: Growth in consumption in Asia
Growth in consumption in Asia 90 Going towards 47% 80 Currently, ~44% 70 Was 40% of total of consumption Asia's Consumption (MMT) World consumption 60 50 40 30 20 10 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 99 00 01 02 03 04 05 06 07 08 09
Slide 12: Indian Industry Overview
Indian Industry Overview 12
Slide 13: Sugar Production Process
Sugar Production Process Sugarcane Transporting Harvesting Sugarcane to Plants Planting of Cane Crushing & Sugarcane Juice Extraction Farms – Cultivation Evaporation - of Land for Converting Juice Sugarcane Planting into Syrup Boiling of Syrup - Packing of Crystallization of Sugar Sugar Centrifugal
Slide 14: Sugarcane – Varieties & Crop Cycle
Sugarcane – Varieties & Crop Cycle Early Maturing Variety – 10 to 11 month crop General Variety – 11 to 12 month crop Late Maturing Variety – 12 to 14 month crop Planting can be done anytime in the year, except from May to September In UP cane planting is done during 2 periods – 80% duri
Slide 15: Factors affecting Cane Cultivation
Factors affecting Cane Cultivation Soil – Sandy loam soil Climate – Warm and humid Temperatures – Between 20 to 40 degree centigrade Rainfall – Between 700 mm to 1200 mm Seed Selection – Quality and treatment of seeds Mill Support – Support / Subsidies for seed procurement and treatmen
Slide 16: Crop Dynamics for Farmer
Crop Dynamics for Farmer Crop Yield SP To tal Cultivation Net Earnings (Qtl./Acre) (Rs./Qtl.) Earnings Cost Earnings as a % (Rs./Acre) (Rs./Acre) (Rs./Acre) of Cost Sugarcane 250 110 27,500 17,215 10,285 60% Wheat 20 1,000 20,000 7,029 12,971 185% Pad dy 20 800 16,000 8,500 7,500 88% 1 Wheat+1 Pad d
Slide 17: Sugar Cane Material Balance
Sugar Cane Material Balance Typical Sugar Cane Material Balance W ater, 45% Bagasse, 33% Recoverable Press Mud, 4% Sugar, 11% Molasses, 5% Sugar Losses, 2% 17
Slide 18: Typical Sugar Cycle
Typical Sugar Cycle Chart 1: Sugar - Production cycle lower sugarcane de yr t ica aetna utilisation for sugar production m production decline in the area under sugarcane cultivation lower sugar production lower sugar availability high sugarcane arrears delayed payments to farmers increase in sugar p
Slide 19: India's Sugar Demand-Supply Equation
India’s Sugar Demand-Supply Equation M MT Particulars F Y01 FY02 FY03 FY04 FY05 FY06 FY07e FY08f FY09f FY10f Opening Stock 9.3 10.6 11.2 12.4 8.2 4.6 3.7 7.7 7.7 5.2 Production 18.5 18.5 20.1 13.5 12.7 19.3 28.0 26.0 21.0 24.0 Demand - Total 17.2 17.9 19.0 18.1 18.5 20.1 24.0 26.0 23.5 24.0 - Domest
Slide 20: Potential Demand for Sugar
Potential Demand for Sugar Demand based on Demand based on Year historical growth rate g rowth rate of 2% of 4% (Million MT ) (M illion MT) 1 2009-10 24.0 24.0 2 2010-11 25.0 24.5 3 2011-12 26.0 25.0 4 2012-13 27.0 25.5 5 2013-14 28.1 26.0 6 2014-15 29.2 26.5 7 2015-16 30.4 27.0 8 2016-17 31.6 27.6
Slide 21: Alcohol Demand – Supply Projections
Alcohol Demand – Supply Projections Mln. Ltrs. Alcohol Production / Demand - All India Basis PARTICULARS Year 07-08 Year 08-09 Year 09-10 ALCOHOL PRODUCTION 2,400 2,100 2,350 Demand POTABLE 1,000 1,080 1,170 INDUSTRIAL 1,100 1,160 1,220 BLENDING WITH PETROL AT 5% LEVEL 500 560 600 Total Demand 2,600
Slide 22: Import Dynamics of Sugar
Import Dynamics of Sugar Import Dynamics - Per MT Sugar 0% Duty 10% Duty Base Price (US$ fob) 320 340 360 320 340 360 Freight * 45 45 45 45 45 45 C&F Price 365 385 405 365 385 405 Import Duty (%) - - - 10% 10% 10% Cost with duty 365 385 405 402 424 446 Port & incidentals 10 10 10 10 10 10 Inland Tra
Slide 23: Sugar: Largely price-inelastic
Sugar : Largely price-inelastic Wholesale Price Index - Commodities Basket Imp act of Sugar Price Increase Co mmod ities Weig htage Assu mp tions Primary Articles (98 Items) Per Capita Income 797 US $ / Annum Food Articles 15.40 Per Capita Income (@ Rs.40 / $) 31,880 Rs. / Annum Non Food Articles 6.
Slide 24: Sugar Industry Risks
Sugar Industry Risks Environmental Risks Climatic conditions such as monsoons, droughts etc. Substitution Risks Crop switching due to non-receipt of timely payment Crop switching due to better realisations for alternate crops Diversion of cane to Gur/Khandsari manufacturers Regulatory
Slide 25: Recent Developments
Recent Developments 25
Slide 26: What went wrong?
What went wrong? Massive Over-production of Sugar – In India and Globally Estimate of 22MT in FY 06-07 wrong, actual production was over 28 MT High sugar prices led to high cane prices Expansion of crushing capacities led farmers to grow more cane High cane prices led to massive crop switchi
Slide 27: Recent Positive Developments
Recent Positive Developments 1. Allahabad High Court Final Order: Quashes SAP (State Government) price for 2006-07 & 2007-08 of Rs.125/qtl Form Committee of Experts to re-fix cane price for 06-07 based on transparent norms, criteria’s and formula. Until then price will be SMP. For all future y
Slide 28: Recent Positive Developments - Continued
Recent Positive Developments - Continued Supreme Court Interim Order: Interim relief to the Sugar Mills by reducing 2006-07 Cane price from Rs.125 / Qtl. to Rs. 118 / Qtl – potential saving of around Rs.100 Cr. Adjustment of excess payment allowed from amount payable to farmers No coercive a
Slide 29: Recent Positive Developments - Continued
Recent Positive Developments - Continued 2004 UP Government Sugar Promotion Policy Stayed by Lucknow High Court on basis of Promissory Stopple Group continuing to avail benefits 4. Ethanol Blending Program – All India 5% blending mandatory from October 2007 at Rs. 21.50/litre for 2 yrs 10%
Slide 30: Recent Positive Developments - Continued
Recent Positive Developments - Continued Supreme Court Judgment on Molasses Sales – Companies having sufficient captive consumption not required to compulsorily sell 20% of molasses production to liquor manufacturers – positive impact of around Rs.15 – 20 Crore Sugar Levy Price – Being revised u
Slide 31: Going Forward
Going Forward 1. Sugar production in SS 2007-08 to be around 26 Million Tons, lower than the earlier estimate of 31-32 Million Tons 2. Major reasons being: 25-30% Lower Sugarcane prices Higher prices for other crops – Wheat (Rs. 1,000/MT) Massive Crop switching from Sugarcane to Wheat, Mustard
Slide 32: Group Overview
Group Overview 32
Slide 33: Bajaj Hindusthan Group
Bajaj Hindusthan Group # 1 in India # 1 in Asia Amongst the top 5 in the World 33
Slide 34: Group Overview
Group Overview India’s largest Sugar & Ethanol manufacturer Estd. in 1931 – weaving a success story since last 76 years Key products – Sugar, Ethanol & Industrial Alcohol Group has 14 Sugar manufacturing plants – all in UP, the largest Sugar manufacturing state in India 6 Mfg. plants have
Slide 35: Well Integrated, diversified Business House
Well Integrated, diversified Business House BHL Sugar – 96,000 TCD • Integrated operations Distillery – 640 KLPD enable the group to tide Surplus Co-gen – 90 MW over business cycles BHSIL BEPL Sugar – 40,000 TCD Distillery – 160 KLPD PB – 50,000 m3 p.a. Surplus Co-gen – 15 MW MDF – 160,000 m3 p.a. 2
Slide 36: Success factors in the Indian Sugar Industry
Success factors in the Indian Sugar Industry – How is BH Group placed? 1 Raw Material Security 2 Location Proximity to sugarcane critical (Uttar Pradesh & Maharashtra) Uttar Pradesh most favorably positioned * **** • Dominant producer accounting for more than 30% of total *** ***** sugarcane pro
Slide 37: Manufacturing Facilities
Manufacturing Facilities • Gangnauli (Distt.Saharanpur) • Thanabhawan and Budhana (Distt. Muzaffarnagar) • Bilai (Distt Bijnor) • Kinauni (Distt Meerut) • Barkhera (Distt. Pilibhit) • Gola, Palia and Khambarkhera (Distt.Lakhimpur) • Maqsudpur (Distt. Shahjahanpur) • Kunderki (Distt. Gonda) • Rudauli
Slide 38: Group Capacity Expansion & Production
Group Capacity Expansion & Production Year Su gar Distillery Exportable Sugar Alco hol Cap. Cap. Power Prod. Pro d. TCD KL/Day MW M MT Lac L trs. FY 03 17,000 85 - 0.4 199 FY 04 24,000 145 - 0.3 245 FY 05 31,000 160 - 0.4 283 FY 06 56,200 320 - 0.8 648 FY 07 95,000 800 - 1.4 894 FY 08 Est. 136,000 8
Slide 39: BHL Financials – Profitability
BHL Financials – Profitability Rs. Crores Description F04 F 05 F 06 F 07 F 08 Qtr. CAGR 1 F04-F07 Revenue 515 855 1,487 1,744 353 50.1% EBITDA 111 218 350 248 103 31.0% EBIT 91 183 278 102 60 3.6% PAT 61 140 191 51 30 -5.8% Financial Year : Oct – Sep 39
Slide 40: BHL Financials – Key Ratios
BHL Financials – Key Ratios Description F04 F 05 F 06 F 07 EBITDA / Revenue 21% 25% 24% 14% PAT / Revenue 12% 16% 13% 3% Debt / Equity 2.3 0.8 1.1 2.0 Current Ratio 2.1 1.9 2.5 2.4 Inventory (Days) 55 24 30 83 ROCE 20% 16% 10% 2% ROE 44% 23% 14% 4% Financial Year : Oct – Sep 40
Slide 41: BHL – Sustained Sugar Profitability
BHL – Sustained Sugar Profitability 1,800 1,668 1,761 1,600 1,416 1,295 1,331 1,363 1,257 1,292 1,290 1,400 1,180 1,146 1,200 (Rs./Bag) 1,037 1,020 956 977 1,000 900 1,033 800 860 600 522 471 357 320 379 343 400 336 318 298 200 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 Avg. Sell
Slide 42: BHSIL
BHSIL 42
Slide 43: Company Overview
Company Overview 1. BHSIL among India’s top 5 Sugar manufacturers 2. Capacities in place: Sugar : 40,000 TCD (4 Units, all in Eastern UP) Distillery : 160 KLPD Co-Gen : 15 MW Exportable surplus 6. Ideally positioned to service sugar deficient North Eastern / Eastern markets, where Sugar realisations
Slide 44: Capacity Expansion
Capacity Expansion SS 2008 - 3 new Sugar mills with 34,000 TCD Capacity SS 2006 SS 2007 taking total capacity to 1 Mill, 3200 Cap expanded 40,000 TCD TCD - New Distillery of 160 to 6000 TCD KLPD - Exportable Co-gen 15 MW 210 44
Slide 45: BEPL
BEPL 45
Slide 46: Products Overview
Products Overview Particle Board (PB) second generation substitute of plywood made from small pieces of wood chips and other agro waste cellulosic materials, bonded with resin under pressure Medium Density Fibre Board (MDF) third generation substitute of plywood made by defribrizing wood
Slide 47: Indian Industry Overview
Indian Industry Overview Industry size estimated at Rs. 1,000 Crores, about 0.49 mln. m3 90 % pre-laminated, 10% plain 60% Cheaper than Plywood Particle Board Industry growing at 20 % + 50% imported Very few players – about 10 manufacturers – only 3 Agro based, rest wood based Dominate
Slide 48: Cost Comparison – Plywood / PB / MDF
Cost Comparison – Plywood / PB / MDF LAMINAT ING PLYWOO D (18 mm thickness) Rs./Sq .F t. Plywood One Sheet - 8 x 4 size Costs Approx. Rs. 2,000 Avg. 63 Lamin ate Top Side - One Sheet - 8 x 4 size Costs Approx. Rs. 1,250 Avg. 39 Other Side - Polish, Paint or Cheap Laminate 15 Ad hesive (F evicol) 1 K
Slide 49: Demand Supply Dynamics
Demand Supply Dynamics Growing Demand Demand Substitution Rising Demand for Panels & Furniture Demand Substitution by Particle Board & MDF • IT & ITES Sector alone demand 150 mln. sq. ft. • Substitution of demand from traditional wood space creation over next 5 years* sources such as timber and
Slide 50: India's Demand Supply Equation
India’s Demand Supply Equation m 3 p.a. 2005 2006 2007 2008 2009 2010 2011 Addl. Demand 2011 / 2006 Plywood Dem and * 8,400,000 8,820,000 9,261,000 9,724,050 10,210,253 10,720,765 11,256,803 2,436,803 Supply 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 8,000,000 Deficit *** (400,000)
Slide 51: PB & MDF from Sugarcane Bagasse
PB & MDF from Sugarcane Bagasse India is second largest producer of sugarcane in the world Lot of sugarcane bagasse is generated every year Bagasse is a valuable cellulose and can be utilised better by making PB & MDF Board, instead of simply burning Technology for making PB & MDF from Bagas
Slide 52: Co-generation, Paper or Boards?
Co-generation, Paper or Boards? Value Addition per MT of Bagasse Used for Co-generation, Manufacturing Paper & Manufacturing Boards Details Unit Co-generation Kraft Paper Writing Paper MDF / PB Boards Bagasse MT 1.00 Steam Generated MT 2.20 Kg. 2,200 Steam to Power Ratio Kg. / KWH 5.00 Power Generat
Slide 53: BEPL – Competitive Advantage
BEPL – Competitive Advantage 1. Very Strong Parent Promoted by Bajaj - India’s No. 1 Sugar and Ethanol manufacturing company 2. Assured Raw Material Availability 100 % raw material (bagasse) available from parent company 3. Captive Generation of Steam and Power 100 % generation of steam and po
Slide 54: Project Details
Project Details Plants • Total 3 Plants, one each in Western, Central and Eastern U.P. – 1 Particle Board Plant – Capacity 50,000 m3 per annum – 2 MDF Plants – Capacity 80,000 m3 per annum, each – Total manufacturing capacity – 2,10,000 m3 per annum Production started in Feb Product Mix • Particle B
Slide 55: Summing Up… Going beyond Sugar...
Summing Up… Going beyond Sugar... 1. Sugar Business: Capacities in place – India’s largest Policies on Sugarcane pricing likely to be favourable 3. Ethanol: The largest producer of Ethanol/Alcohol in India Taking advantage of Ethanol blending program 3. Power Co-generation: About 105 MW of
Slide 56: Thank You
Thank You 56
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