Hindalco Industries Limited · NSE:HINDALCO
Hindalco Industries — FY2008 Earnings Presentation
125 slides from Hindalco Industries's earnings presentation, Jun 20, 2008
Slide 1: Performance Review Consolidated 2007-08
Hindalco Industries Limited Performance Review Consolidated 2007-08 Presentation to the Investors 20th June’08 1
Slide 2: The Big Picture - Backdrop & Highlights
The Big Picture - Backdrop & Highlights Business Performance – Standalone Hindalco Consolidated Hindalco – An Overview 2
Slide 3: Hindalco: Impressive Growth
Hindalco: Impressive Growth FY 00 FY 08 CAGR Sales $Bn 0.47 14.8 64% EBIDTA $Bn 0.25 1.8 33% PAT $Bn 0.15 0.6 22% Capital employed $ Bn 1.00 14.1 46% Business Segments 1 2 Spread Plants 2 46 Across 5 Countries 1 13 continents 3
Slide 4: Hindalco Growth Path 2000-2008
Hindalco Growth Path 2000-2008 HINDALCO – ALM EX AEROSPACE Expansion Copper Increase stake business JV agreement Acquisition in Utkal from acquisition Acquisition of signed with 20% to 55%. and expansion Nifty & Mt. Almex for Others Further to 250,000 Gordon aerospace Acquisition of increased to tpa
Slide 5: Hindalco: Global Non Ferrous Metals Company
Hindalco: Global Non Ferrous Metals Company Copper Aluminium 3 years ago A India: One of the largest India: India's largest aluminium producer single location Smelters with having low cost upstream operations with Bluechip integrated port facilities power / coal backup, and strategically Indian loca
Slide 6: Consolidated Hindalco: Dimensions
Consolidated Hindalco: Dimensions Number Of Entities FY 07 FY 08 Subsidiaries 18 57 Associates 01 06 Joint Ventures 02 02 6
Slide 7: 46 Operations in 13 countries
46 Operations in 13 countries EUROPE RENUKOOT (U.P) CANADA ASIA Locations Bauxite USA Alumina Primary Rolled Products Extrusion S. AMERICA Recycling Wheels Power Coke Regional Office AUSTRALIA Executive Office Sales Center Research and Development Copper Mines 7 Copper Smelter
Slide 8: Growth Multiple
Consolidating position in two of the fastest growing metals in the world 10.00 Aluminium Growth Multiple 7.50 Copper Nickel 5.00 Zinc Steel 2.50 Lead - Tin 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Tin Lead Crude Steel Zinc Nickel Copper Aluminium 8
Slide 9: Global Portfolio: FY07 vs FY08 Operational Performance
Global Portfolio:FY07 VS FY08 Operational Performance Higher Production Volumes Volume Growth in Volume Growth in Volume Growth in Aluminium Metal Aluminium FRP Aluminium Extrn. 31% 1429% 13% Volume Growth in Volume Growth in Volume Growth in Copper Cathodes Copper Concentrate CC Rods 12% 74% 28% 9
Slide 10: Consolidated Financial Highlights
Consolidated Financial Highlights (Rs. Crores) (Bn US$) FY FY FY FY Results 2006-07 2007-08 2006-07 2007-08 Net Sales 19,316 60,013 4.2 14.8 EBITDA 4,840 7,291 1.1 1.8 EBIT 3,975 4,835 0.9 1.2 Profit before Tax 3,662 2,986 0.8 0.7 Net Profit 2,686 2,387 0.6 0.6 Capital Employed 23,285 56,266 5.4 14.
Slide 11: Towards Sustainable Predictable Growth
Towards Sustainable Predictable Growth 2007 Sustainable Future •India centric Operations De-risked Operations owing to •Globally cost Competitive due to secured • Presence in multiple geographies key inputs • Costs and revenues in different •Presence in upstream predominantly currencies commodity se
Slide 12: Novelis: Significant EBITDA & Free Cash Flow improvement
Novelis: Significant EBITDA & Free cash Flow improvement FY07 FY08 Change Normalised 303 491 62% EBITDA ($Mn) Free cash Flows improved by $ 164 Mn Driven By…….. o Reduced price ceiling exposure o Product Mix & Price Gains o Volume improvements o WC management 12
Slide 13: Hindalco Standalone Overview
Hindalco Standalone Overview 13
Slide 14: Backdrop: FY08, a Challenging year
Backdrop : FY08, a Challenging year Adverse Global Macro economic factors Sharp appreciation of INR Vs USD Average Al LME lower than last year 3100 US$/Mt 48 FY 07 Average- US$2,664 3000 46.37 FY08 Average- US$2,623 46 45.47 Avg FY 07 - 45.5 2900 2800 44 2700 FY 07 11% 2600 42 FY 08 Avg FY 08 - 40.5
Slide 15: Adversities On Domestic Front Too
Adversities On Domestic Front Too…… Aluminium import duty • Reduced Import duty differential 33.0% 31.0% 28.0% 19.0% 15.0% o Aluminium Customs duty 10.6% 8.1% 5.7% down from 8.08% to 5.72% • Annual Impact- Rs.109 Cr FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Copper Duty Differential 33.0% 30.0% 20.0% 1
Slide 16: Impact Of Adverse Macroeconomic Trends
Impact Of Adverse Macroeconomic Trends Sharp fall in Aluminium Realisation (Rs/Mt) (Rs/Mt) 135000 130000 131,124 125,400 130000 125000 QOQ drop15% YOY drop11% 125000 120000 120000 115000 115000 111,098 111,748 110000 110000 105000 105000 100000 100000 FY07 FY08 Q4 FY07 Q4 FY08 16
Slide 17: Copper - Strong Demand & Prices
Copper- Strong Demand & Prices Copper LME continues to be Weakening spot TC/RC strong with falling stock 250 (Mt) US$/Mt 1,600,000 9,000 Indexed 1,400,000 8,000 200 LME CSP US$ 7,000 1,200,000 FY07 Avg 6,000 1,000,000 150 5,000 800,000 4,000 100 600,000 3,000 400,000 2,000 50 200,000 1,000 FY08 Avg
Slide 18: Backdrop: FY08, a Challenging year
Backdrop : FY08, a Challenging year Incessant Cost Push Energy prices reached all time highs Surging Freight costs 110 10 100 97.9 9 9000 8626 8.75 Baltic Dry Freight Index 90 8000 8 7107 80 7000 70 7 6000 60 5000 4442 6 4000 50 3141 5 WTI Crude ($/bbl) 3000 40 4 2000 Nymex Natural gas ($/mbtu) 30 1
Slide 19: Performance Overview
Performance Overview: The following steps had already been taken which helped in mitigating the adverse macro economic impact • Aluminium o Brownfield expansion: • Timely progress of Hirakud expansion led to incremental production growth of 35% compared to FY07 o De-bottlenecking smelter assets • At
Slide 20: Performance Overview continued
Performance Overview continued….. • Copper o Improved operating efficiency • Cathode production increased by 12% to 324KT (19% growth excluding production from Cu II in FY07) • Continuous Cast Rod production rose by 28% to 140KT • Conversion costs improved significantly o Improved geographic & produ
Slide 21: Operations: FY 2008 at a Glance
Operations: FY 2008 at a Glance • Highest ever Aluminium production at 477,726 T 8% • Highest ever FRP production at 215,198 T 2% • Highest ever Extrusion Production at 43,315 T 13% Vs FY 2007 • Highest ever Copper cathode Production at 323,883 T 12% 19% growth excluding Cu II production in FY 07 •
Slide 22: Hindalco Stand-alone Financials: Recap FY08 vs FY07
Hindalco Stand-alone Financials: Recap FY08 VS. FY07 (Rs. Cr) (Mn US$) Change Change FY07 FY08 % FY07 FY08 % 18,313 19,201 5% Net Sales & Op revenues 4025 4741 18% 4,385 3,894 -11% EBIDTA 964 961 - 3505 3026 -14% PBT 770 747 -3% 2564 2320 -10% PAT (before tax write backs) 564 573 2% 2564 2861 12% PA
Slide 23: Aluminium Business
Aluminium Business 23
Slide 24: Aluminium Performance affected by metal realisation drop
Aluminium Performance affected due to 11% drop in metal realisation & sharp increase in input Aluminium costs. (Rs.Cr) (Mn US$) Change Change FY 07 FY08 FY07 FY08 (%) (%) Net Sales & 7,344 7,145 -3% Operating 1,614 1,764 9% Revenue 2,929 2,423 -17% EBIT 644 598 -7% Note: As per SEBI Format 24
Slide 25: Cost escalations: Cost Push to Continue
Cost escalations: Cost Push to Continue Aluminium CP Coke Price at all time high Fuel Oil Price at High Levels Rs/Mt (Indexed Base=100) 120 120 Rs/Mt (Indexed Base=100) 140 110 127 130 100 100 120 112 110 100 100 80 90 80 70 60 2005-06 2006-07 2007-08 60 2005-06 2006-07 2007-08 Coal price gone up by
Slide 26: Adversity Mitigation: Consistent production growth
Adversity Mitigation: Consistent production growth Aluminium (Mt) 477,726 442,685 FY 06 FY 07 FY 08 429,140 215,198 211,088 190,580 71,814 68,998 67,730 43,315 38,282 28,721 27,645 32,328 26,184 Primary Metal Wire Rods FRP Extrusions Foils _______________________ Source: Company Data All round impro
Slide 27: Adversity Mitigation: Maximising sales revenue
Adversity Mitigation: Maximising sales revenue through Consistent increase in value added sales Improved Aluminium sales volume … volume 480,000 (Mt) ‘000 Mt 475,000 473,429 200 FY 06 FY 07 FY 08 180 470,000 180 170 465,000 160 152 460,000 +7% 140 455,000 120 450,000 100 445,000 80 441,301 440,000 6
Slide 28: High input costs affecting even global leaders
High input costs & adverse macro-economic factors are affecting even the global leaders; but our margins maintained EBIT comparison EBIDTA Margin fall contained 50% Q4 FY07 Q4 FY08 46% 120 100 100 100 100 45% 42% 100 39% 76 38% 40% 80 72 37% 56 34% 60 30% 31% 40 26 26% 20 22% 0 Hindalco Global Globa
Slide 29: Copper Business
Copper Business 29
Slide 30: FY08 key levers of performance
FY 08 key levers of performance ……….. Cathode Production KT Copper • All round improvement in performance… 350 323.9 290.4 o In FY 08, compared to FY 07 300 250 o Cathode production increased by 12% 200 o Continuous Cast Rod production rose by 28% 150 o Sulphuric Acid production increased by 15 % 10
Slide 31: Improvement in bottom line despite drop in TCRC
Improvement in bottom line in spite of drop in the TCRC Copper TCRC , PBT & EBIT Indexed. Base=100 150 140 130 120 120 Reduction in finance cost by 110 better working 100 capital Management 100 100 97 100 90 Operational and by- product credits 80 Improvements 70 PBT EBIT TCRC 70 60 FY07 FY08 Better
Slide 32: Copper Business performance
Copper Business performance Copper (Rs.Cr) ($ Mn) Change Change FY07 FY08 FY07 FY08 (%) (%) Net Sales & 10,978 12,066 10% Operating 2413 2979 23% Revenue 517 503 - 3% EBIT 114 124 9% Note: As per SEBI Format 32
Slide 33: Aluminium Outlook
Aluminium Outlook 33
Slide 34: Aluminium demand expected to be robust
Aluminium demand expected to be robust. World Aluminium consumption to grow Regional Metal Imbalance to grow, leading sharply driven largely by China to deficit in the relevant markets 4,000 (Kt) Asia’s Supply Gap (excluding China 60000 3,000 &Asia’s Supply Middle east) to remain large. 55153 China
Slide 35: Major investments required for production to catch up with demand
Major investments required for the production to catch up with demand 100000 Kt Required capacity Projected capacity 5,000 90000 Avg. Capex 4,604 4,500 Asia’s Supply 80000 4,000 3,823 70000 3,500 60000 2,791 3,000 US$/Mt 50000 2,500 40000 2,000 30000 1,500 1,000 20000 500 10000 Source: CRU Long term
Slide 36: Operating cost Increase to Keep the Prices Up
Operating cost Increase to Keep the Prices Up CRU Aluminium Cash cost curve 3000 US$/t • Last quartile of the cost 2699 2500 between US$2,014 and 2014 2000 US$2,700 in CY2007 as per CRU 1728 1540 1500 • 2008 will be even higher 1000 1129 • 1/4th of the world capacity has 500 to be shut down if the p
Slide 37: Other Drivers influencing price
Other Drivers influencing price • Power shortages: Almost a million tonne metal production was lost in last 12 months; of which Chinese smelters lost around 600,000 tonnes • South African power supplier ESCOM is running short of power generating capacity and also facing issues with coal supplies o A
Slide 38: Conclusion: Prices to remain strong
Conclusion: Prices to remain strong Aluminium 1,300,000 3,800 1,200,000 3,240 In recent months, in-spite of an LME US$-CSP 3,300 1,100,000 1,000,000 3,007 2,800 increase in LME stock, prices have 900,000 2,300 800,000 shown an upward trend in 1,800 700,000 600,000 1,300 anticipation of supply concer
Slide 39: Copper Outlook
Copper Outlook 39
Slide 40: Copper Price Forecast
Copper Price Forecast Copper • Prices expected to remain strong through 2008 on account of continued strong demand & concerns about Supply o Demand: Chinese copper consumption continue to drive the market o US consumption decline will be offset by demand from emerging markets o Supply: Restricted Ch
Slide 41: Low global copper inventories & strong price forecast
Low global copper inventories & strong price forecast USD/t USD/t 9,500 8,300 7,100 5,900 4,700 3,500 2008 2009 2010 2011 Merril Lynch JP Morgon Chase & Co Deutsche Bank Societe Generale Source : Brrok Hunt May 2008 Source : Bloomberg (14-06-2008) Bloomberg Year Average LME Copper stock at historica
Slide 42: Copper Consumption growth
Copper Consumption growth Copper 6.0% 6% 9.2% 4% 7.0% 6.6% 3.34% 3.42% Growth in 4.5% 2008-10 Driven by 1.7% 1.2% 0.6% 0.4% Russia USA India China Germany W Europe E.Bloc Brazil World Consumption Growth 2003-06 2007 2008 2009-20 Source Q4 2007 Brook hunt India and China followed by E.Bloc are the ma
Slide 43: India Presents Significant Growth Potential
India Presents Significant Growth Potential … Copper Kg/Person 30 27.8 Copper Per Capita Consumption 25 20 16.4 14.9 15 10.0 10 6.9 4.7 5 3.5 0.5 0 Italy Japan Germay China Russia Taiwan India USA Source : Population CIA fact book July’07 estimates Copper consumption Q4 2007 Per capita consumption o
Slide 44: Custom smelters: No immediate relief
Custom smelters : No immediate relief Copper • TC/RC expected to continue to remain subdued on account of • Tightness in concentrate supply as incremental supplies finding difficult to keep pace with demand o High input costs, rising capex ,credit crunch & environmental issues resulting into delay i
Slide 45: Projects
Projects 45
Slide 46: Muri Alumina Expansion
Muri Alumina Expansion • Basic & Detailed Engineering - Completed • Environmental Clearance -“Consent to Operate” application filed on 24.11.07. o Inspection completed. Deemed consent • Other Statutory Clearances - Obtained • Land for future mud disposal site - Notification & acquisition by Govt. aw
Slide 47: Hirakud Expansion
Hirakud Expansion • Smelter – Phase-I (35 kTPA expn.)- o Completed in Dec’06 & operation stabilized. o Phase-II (43 kTPA expn.)– o Conversion of 314 pots completed and operations stabilized o Conversion of balance 86 pots in progress. Line #2 pots after prebaked o Completion Date of Phase II: Q2 ’FY
Slide 48: Utkal Alumina Project
Utkal Alumina Project Project Highlights Mining 4.5 million tpa bauxite mining capacity at Baphlimali (Rayagada District) Refinery 1.5 million tpa alumina refinery at Doragurha (Rayagada District), which after debottlenecking can produce 2 million tpa within 3 years of Bauxite mine & refiner
Slide 49: Aditya Alumina and Aluminium Project
Aditya Alumina and Aluminium Project Project Highlights Mining 4.2 million tpa bauxite mining capacity at Kodingamali (Koraput District) Refinery 1.5 million tpa alumina refinery at Kansariguda (Rayagada District), which after debottlenecking can produce 2 million tpa within 3 years of start
Slide 50: Mahan Aluminium Project
Mahan Aluminium Project District HQ Bhopal Bhopal Project Highlights Smelter 359 ktpa capacity aluminium smelter near JHARKHAND Bargawan, Singrauli District of Madhya Pradesh Power 900 MW capacity captive thermal power plant near Bargawan, Sidhi District of Madhya Pradesh Coal 3.5 millio
Slide 51: Jharkhand Aluminium Project
Jharkhand Aluminium Project Project Highlights Proposed site Smelter 359 ktpa capacity aluminium smelter at Jharkhand Power 900 MW capacity captive thermal power plant at Jharkhand Coal 4.6 million tpa of coal from Tubed Coal Mine of Auranga Coal Fields, Jharkhand (in JV with Tata Power)
Slide 52: Summary: Hindalco Operations
Summary: Hindalco Operations A Challenging year, on account of macroeconomic factors & these factors are here to stay…… Anticipation of the adverse trend and the remedial steps taken to face the emerging challenges have helped in containing the adverse impact TCRC will continue to have a negative in
Slide 53: Aditya Birla Minerals
Aditya Birla Minerals 53
Slide 54: ABML – Highlights
ABML – Highlights • Highest Metal production since acquisition of mines. • Long Hole – Stope mining has successfully been implemented in the Nifty underground mine. • The project for Oxide Heap re-treatment has been taken forward – construction of screening and washing plant is in progress. • Explor
Slide 55: ABML Financials – FY08
ABML Financials – FY 08 (Rs. Crs) FY07 FY08 Chg (%) Net Sales 1127 2335 107% EBIT 39 562 1342% Operating Cash Flow* -390 447 215% * Operating Cash Flow is after capex and mine development expenditure 600 562 500 EBIT Trend (Rs. Crs) 400 300 Rs. Crs 200 100 0 39 FY 05 FY 06 FY 07 FY 08 -100 -40 -200
Slide 56: Novelis
Novelis 56
Slide 57: Novelis Acquisition – A Recap
Novelis Acquisition – A Recap • In May 2007, Hindalco acquired Novelis for US$6 billion • The rationale: o Immediate global reach and scale along with technological expertise o Downstream business derives its margin through conversion mark-up, should act as a natural hedge for LME-driven, volatile,
Slide 58: Challenges of the Acquisition
Challenges of the Acquisition • Quick completion: Approvals from government agencies, company boards, lenders and courts • Integration: Integration of companies with diverse cultures, nationalities across various levels and functions • Retaining cutting edge: Spirit and capability of innovation, key
Slide 59: Sustaining Global Leadership
Sustaining Global Leadership • Fusion Technology : Process Stabilisation, Research on new end-uses, Expansion of Fusion Facilities. • Thrust on recycling Capacities: New investments and de-bottlenecking • Increasing rolling capabilities through mill upgrades and innovative practices • Renewed focus
Slide 60: To Sum Up: Beginning of an exciting new era
To Sum Up: Beginning of an exciting new era • Hindalco has embraced an aggressive growth plan, a combination of organic & inorganic growth • Upstream growth through organic route; a prudent mix of Brownfield & Greenfield expansions • Downstream growth through acquisition (Novelis) Maintain Growth Re
Slide 61: Novelis Fiscal Year 2008 Presentation to Investors
Brighter ideas with aluminium Novelis Fiscal Year 2008 Presentation to Investors Martha Brooks, President and COO Steve Fisher, CFO June 20, 2008
Slide 62: Safe Harbor Statement
Safe Harbor Statement Statements made in this presentation which describe Novelis' intentions, expectations or predictions may be forward- looking statements within the meaning of securities laws. Forward-looking statements may include statements preceded by, followed by, or including the words “bel
Slide 63: Operational Highlights
Operational Highlights Martha Finn Brooks President and Chief Operating Officer 63
Slide 64: Significant Financial Improvements
Significant Financial Improvements Normalized Operating EBITDA increased 62% Free Cash Flow improvement: $ 164 M* Normalized Operating EBITDA ($ M) Free Cash Flow ($ M) $500 $80 $60 $400 $40 $20 $300 $0 ($20) $200 ($40) $100 ($60) ($80) $0 ($100) FY2007 FY2008 FY2007 FY2008 * FY’08 FCF reduced by ac
Slide 65: Achieving Higher Profitability
Achieving Higher Profitability Record production in key locations Can ceiling volumes reduced from approximately 20% - 10% of global sales Portfolio improvements $ 65 M Net of input cost increases Price increases Novelis Fusion expanded to each of our four regions Working capital improvements: bette
Slide 66: Overcoming Challenges
Overcoming Challenges New metal risk management program One contract with can price ceiling remains Cost increases in energy, freight and alloys - $110 M Softness in certain North American markets – housing and transportation LME and SHFE volatility Strong Real (BRL) and Euro (EUR) 66
Slide 67: Strong Growth for Flat Rolled Products
Strong Growth for Flat Rolled Products Novelis a Market Leader in All Regions Western Europe +2.6% Eastern Europe & CIS +10.7% North America -6.2% Japan Middle East +10.2% -1.2% Asia Pacific +18.6%* Latin America +9.3% Global growth + 4.2% Source: CRU, 2007 as compared to 2006 flat rolled products c
Slide 68: Growth in Aluminium Beverage Cans
Growth in Aluminium Beverage Cans 5 YR CAGR 2.2% 4,500 4,000 thousands of tonnes 3,500 3,000 2,500 2,000 1,500 1,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: CRU, Aluminium Flat Rolled Products Quarterly, May 2008 68
Slide 69: Novelis is Leader in Can Sheet Market
Novelis is Leader in Can Sheet Market 5 YR CAGR* 5 YR CAGR* North America 0.3% Europe 6.1% 2,000 1000 1,800 900 thousands of tonnes thousands of tonnes 1,600 800 1,400 700 1,200 600 1,000 800 Novelis 500 400 600 400 37% global 300 200 200 0 market share 100 0 2003 2004 2005 2006 2007 2008 2009 201
Slide 70: Aluminium Use in Autos – North America
Aluminium Use in Autos – North America 180 161 157 153 160 149 145 140 134 130 140 125 120 117 114 110 120 106 102 96 Kilograms per vehicle 100 92 87 83 79 75 80 71 68 64 66 62 63 61 60 59 55 54 60 52 45 40 38 38 37 40 20 0 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 9
Slide 71: Aluminium Use in Autos – Europe
Aluminium Use in Autos – Europe 180 150 160 146 142 140 137 135 133 130 140 126 122 120 117 113 120 110 106 100 Kilograms per vehicle 92 100 85 83 81 78 76 80 72 68 64 62 60 61 56 60 52 48 47 46 45 44 43 37 40 32 20 0 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03
Slide 72: Novelis is Leader in Auto Sheet Market
Novelis is Leader in Auto Sheet Market North America Europe Korea Novelis Preferred partner for automakers Over 70 models in production 4.5 million vehicles this year First entry into Asia Source: Novelis estimates 72
Slide 73: Global Footprint for Novelis Fusion
Global Footprint for Novelis Fusion™ Oswego, New York Installation of new melting furnace this spring will significantly increase Novelis Fusion™ casting capacity Ulsan, South Korea Smooth, rapid startup. Commercial volume production started in March Sierre, Switzerland Greenfield casthouse co
Slide 74: Growth Platforms for Novelis Fusion
Growth Platforms for Novelis Fusion™ Global markets Heat exchangers Automotive structures and body panels Regional markets Household Appliances Architectural/Building High Pressure Cylinders Existing Clad Products Transportation Examples of target markets for Novelis Fusion 74
Slide 75: Investments for Strategic Growth
Investments for Strategic Growth Completed in FY’08 Start-up laser cutting center at Sierre ($4M) Install new melting furnace at Pinda ($7M) Start-up Novelis Fusion™ at Ulsan ($5M) Expand rolling mill at Yeongju ($30M) Construct new casthouse at Sierre ($49M) Multi-stand rolling mill in Yeongju In P
Slide 76: Cost-effective Research & Development
Cost-effective Research & Development Kingston Global Technology Center -- innovation partnering and consolidation of footprint through facility sharing with a leading Canadian university Exited Neuhausen, moved resources to market-focused innovation centers at Gottingen, Dudelange and Sierre Opened
Slide 77: Product and Process Innovation
Product and Process Innovation Goals: Generate increasing levels of profits from new products, process or business model breakthroughs Be rated best innovation partner by our customers NIMES: Novelis Innovation Management and Execution System 77
Slide 78: Customer and Industry Recognition
Customer and Industry Recognition World Excellence Award - Ford Motor Co. Supplier of the Year - Alcoa Architectural Products Supplier of the Year - Plus Pack, a leading European packaging company Recycling Industry Award - Valpak, a leading UK provider of recycling solutions Alcoa supplier award
Slide 79: Driving the Conversion Model
Driving the Conversion Model 12% Growth FY 2007 – FY 2008 Price/Mix Currency Volume 79
Slide 80: Regional Highlights: North America
Regional Highlights: North America FY07 vs FY08 FY07 FY08 Growth % FRP Shipments (kt) 1,135 1,102 (3) Sales ($ M) 3,722 4,110 10 Operating EBITDA ($ M) (54) 242 550 Reduced ceiling exposure (one contract remains) Purchase accounting benefit Price increases in face of difficult economic conditi
Slide 81: Regional Highlights: Europe
Regional Highlights: Europe FY07 vs FY08 FY07 FY08 Growth % FRP Shipments (kt) 1,068 1,075 1 Sales ($ M) 3,857 4,341 13 Operating EBITDA ($ M) 276 273 (1) Price increases across all major markets and strong Euro effect Solid operational performance, but capacity constrained in some markets Con
Slide 82: Regional Highlights: Asia
Regional Highlights: Asia FY07 vs FY08 FY07 FY08 Growth % FRP Shipments (kt) 463 495 7 Sales ($ M) 1,726 1,829 6 Operating EBITDA ($ M) 72 52 (27) Challenging mix with decline in Korean industrial market One-time refinancing expenses Yeongju hot mill upgraded and Novelis Fusion™ capacity added
Slide 83: Regional Highlights: South America
Regional Highlights: South America FY07 vs FY08 FY07 FY08 Growth % FRP Shipments (kt) 285 324 14 Sales ($ M) 945 1,028 9 Operating EBITDA ($ M) 181 162 (11) Strengthening Real inhibits smelter profits Price increases across all major markets Record operational performances; Pinda capacity impr
Slide 84: Underlying Cost Drivers
Underlying Cost Drivers: LME Cash, Currencies, Crude Oil Price and Hardeners LME Cash(AoM) Currency Movements (AoM) 30.0% 25.0% 3,200 20.0% 3,000 15.0% 10.0% 2,800 $/MT 5.0% 2,600 0.0% 2,400 -5.0% -10.0% 2,200 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 2,000 Apr-06 Jul-06 Oct-06
Slide 85: Actions to Reduce Costs
Actions to Reduce Costs SG&A reductions Closure of Louisville, Kentucky plant Restructuring: Bridgnorth, UK foil operations Korean finishing lines Ouro Preto, Brazil smelter potline Energy projects (Energy Task Force) Foil rolling at Bridgnorth Continuous Improvement Process 85
Slide 86: Financial Section
Financial Section Steve Fisher Chief Financial Officer 86
Slide 87: Explanation on Financial Materials Presented
Explanation on Financial Materials Presented Under U.S. GAAP, consolidated financial statements for FY 2008 are presented in two distinct periods, as Predecessor and Successor entities, and are not comparable in all material respects. However, to facilitate a discussion of our results, financial
Slide 88: Financial Highlights
Financial Highlights Since the acquisition by Hindalco, the company’s earnings performance on a normalized basis has improved significantly when compared to the prior year. This improvement is driven by: Reduced exposure to the price ceilings Improved pricing and mix Lower corporate costs The
Slide 89: The Conversion Business Model
The Conversion Business Model Product price structure with two components: “Pass-through” aluminium price based on the LME plus specified local market premiums Conversion premium price related to the value added of rolling and the competitive market conditions for the product Elimination of pric
Slide 90: New Risk Management Approach
New Risk Management Approach Metal Price Lag How we manage the risk USD / ton (LME Graph) NVL Selling Price $3,005 / t Historical: Long term metal price lag exposure balances out; short term 2,900 (Mar. '08) exposure exists NVL Buying Price 2,600 $2,446 / t Current: Hedging in place to remove LT
Slide 91: Operating EBITDA Reconciliation
Operating EBITDA Reconciliation FY07 vs FY08 FY07 FY08 Net Income (Loss) (265) (69) Provision (Benefit) for Income Taxes (98) 7 Minority Interests' Share 3 4 Interest Expense and Amortization of Debt Costs, Net 207 199 Depreciation and Amortization 233 395 EBITDA 81 536 Reconciliation to Operating E
Slide 92: Normalized Operating EBITDA
Normalized Operating EBITDA FY07 vs FY08 FY07 FY08 Operating EBITDA 316 644 Normalizations Metal Price Lag (Gain)/Loss (43) 21 Purchase Accounting benefit - (219) Stock Compensation expense 30 45 Normalized Operating EBITDA 303 491 Strong operational and market performance translating to significant
Slide 93: Normalized Operating EBITDA Bridge
Normalized Operating EBITDA Bridge FY07 vs FY08 ($ M) 700 29 8 600 115 119 33 500 US$, millions 400 180 300 491 200 303 100 0 FY07 Mix, Price and Price Ceiling Corporate Brazil Social Higher Currency, Net of FY08 Volume Exposure SG&A Tax Operating Cost Hedge 93
Slide 94: Better Working Capital Management
Better Working Capital Management Free Cash Flow Improvement $164M Operating with lower metal volumes – Inventory reduction by 25 KT year-over-year Improved collection of Receivables – DSO reduced by 6.5 days More rigorous cash management ensuring adequate liquidity and lower interest costs year-ove
Slide 95: Liquidity
Liquidity ($ M) Year Ended Year Ended March March 31 FY07 FY08 Cash and cash equivalents $128 $326 Amount available under senior secured credit 234 582 facilities Total estimated liquidity $362 $908 Facilities refinanced to provide for additional capacity Maintaining forfaiting and factoring arr
Slide 96: Credit Facilities
Credit Facilities ($M) Prior New Current Market Revolver – $500 Revolver – $800 Amount Term Loan – $958 Term Loan – $960 Varies Revolver – 2.5 years Revolver – 5 years Maturity Term Loan – 4.5 years Term Loan – 7 years Varies Revolver – L + 250 bps Revolver – L + 125 bps Revolver – L + 175 bps Rate
Slide 97: Reconciliation from Operating EBITDA to Net Income (Loss)
Reconciliation from Operating EBITDA to Net Income (Loss) Year Ended March 31, Year Ended March 31, Variance 2007 2008 Operating EBITDA 316 644 328 Interest expense (207) (199) 8 Unrealized gain (loss) on derivativies (150) (2) 148 Depreciation and amortization (233) (395) (161) Proportional consoli
Slide 98: Tax Rate Reconciliation – FY 2008
Tax Rate Reconciliation – FY 2008 Q1 Q2 Q3 Q4 Combined Pre-tax income / (loss) (114) (19) (41) 119 (55) 0 0 0 0 Income taxes at statutory rate (37) (6) (14) 38 (19) Increase/(decrease) in valuation allowances: Canada 30 11 8 (37) 12 Europe 4 8 6 (23) (5) 34 19 14 (60) 7 Exchange translation items in
Slide 99: Gains (Losses) on Derivatives
Gains (Losses) on Derivatives FY Q1 Q2 Q3 Q4 2008 Gain (loss) on derivative instruments - net: Realized and included in Segment Income* 39 22 (28) (1) 32 Realized on corporate derivative instruments* 5 29 2 (23) 13 Unrealized (10) (87) (24) 118 (3) Gain (loss) on derivative instruments - net 34 (36)
Slide 100: Summary
Summary Very strong year for cash flow performance Substantial operating improvements Novelis Fusion global footprint Solid progress on risk management Improvements in pricing and portfolio Reduction in price ceilings Reduction in corporate costs 100
Slide 101: Thank you
Brighter ideas with aluminium! Thank you
Slide 102: Financials
Financials Hindalco Standalone Refinancing of Novelis Acquisition Hindalco Consolidated 102
Slide 103: Highlights FY’08
Highlights FY’08 • Sales - We sold more and grew @ 10% (Copper) & 7% (Aluminium) by: X Producing More (Highest ever production of Copper, Aluminium, FRP & Extrusion) • CC Rods ⇧28%, Cathodes ⇧ 12% • Hirakud ⇧ 35%, Renukoot ⇧ 3% • Taloja ⇧ 7%, Mouda ⇧ 24%, Extrusions ⇧ 13%, Wire Rods ⇧ 4%bv 103
Slide 104: Highlights FY’08
Highlights FY’08 Y And Improving Realisations by o Enriching Product Mix – • CC Rods ⇧ 27%, Specials ⇧ 5% , FRP ⇧ 6%, Extrusion ⇧ 12%, o Improving Market Mix • Copper Domestic Sales up 37 % . • Specials - Domestic Sales up from 49% to 52% of total sales • Extrusions – Domestic Sales up from 89% to 9
Slide 105: Highlights FY’08
Highlights FY’08 • Efficiencies o Cost pressure off-set by plant efficiencies: Rs 225 Crs. o Aluminium • Hirakud Pre baked conversion ⇧ Power Efficiency • Energy efficiency improved to offset price escalation o Copper • Recovery improved by 1% • Power generation up by 10% (lower grid drawal & surplu
Slide 106: Highlights FY’08
Highlights FY’08 • Free Cashflow o Cashflow from Operations Rs.2427Crs o Disposal of idle assets – Mouda conductor plant • Treasury/Tax Management o Pre-tax treasury yield 10.7% o ETR down from 26.8% to 23.3% However all macro economic parameters turned adverse Aluminium: LME, Re/$, Duty, Fuel, Coal
Slide 107: Drivers of Performance: FY08
Drivers of Performance : FY08 Particulars Unit FY07 FY08 Change % Re/US$ Rs 45.5 40.5 -11% Al. LME $/t 2664 2623 -2% Effective Al. Customs duty % 8.1 5.7 -30% LME is a Domestic Ingot Realisation Rs/t 125,400 111,098 -11% pass thru but adversely Cu LME $/t 6862 7521 10% impacts working Copper TcRc c/
Slide 108: Stand Alone Financial Highlights – FY08
Stand Alone Financial Highlights –FY08 (Rs. Cr) Change FY07 FY08 (%) Net Sales & Op. Revenue 18313 19201 5% EBIDTA 4385 3894 -11% EBIT 3747 3306 -12% Pre-tax profits 3505 3026 -14% Net Profit before tax write Back 2564 2320 -10% Net Profit 2564 2861 12% Basic EPS (Per Share) 25.52 24.51 -4% 108
Slide 109: Key Ratios: Aluminium Business
Key Ratios: Aluminium Business 1.0 0.9 FY07 FY08 42% 40% 34% 31% EBIT Margin ROCE % Cap. Turnover 41% 40% 130000 125000 39% EBIT Margin Ingot Real Rs/t 125400 120000 37% 115000 111098 110000 35% 35% 105000 34% 33% 100000 98286 95000 31% 90888 90000 29% 30% 85000 109 FY05 FY06 FY07 FY08
Slide 110: EBIT Trends and Peer Comparison
EBIT Trends and Peer Comparison EBIT/Sales % (Aluminium) 55 60 49 FY06 FY07 FY 08 50 38 40 35 34 40 25 25 30 Relatively less 14 20 impacted by LME & 10 INR volatility 0 compared to pure Indian Company 1 Indian Company 2 Hindalco play companies ROCE - Peer Companies Aluminium 60 53 50 42 HIL ROCE
Slide 111: PAT Bridge
PAT Bridge Segment Company Rs.Crs Al Cu Interest Other Unallocable PBT Tax PAT Tax Reported EBIT EBIT Income Expenses W/Back PAT FY07 2929 517 (242) 370 (69) 3505 (940) 2564 0 2564 FY08 2423 503 (281) 493 (113) 3026 (705) 2320 541 2861 Change (506) (14) (38) 123 (44) (479) 235 (244) 541 297 640 534
Slide 112: Stand Alone Financial Highlights – Q4 FY08
Stand Alone Financial Highlights –Q4 FY08 (Rs. Cr) Change Q4FY07 Q4 FY08 (%) Net Sales & Op. Revenue 4749 5010 6% EBIDTA 1173 941 -20% PBIT 1016 789 -22% Pre-tax profits 958 690 -28% Net Profit before tax write Back 721 536 -26% Net Profit 721 1077 49% Basic EPS (Per Share) 7.32 8.78 19% 112
Slide 113: Drivers of Performance: Q4 FY08
Drivers of Performance : Q4 FY08 Particulars Unit Q4FY07 Q4FY08 Change Impact % Rs.Crs Re/US$ Rs 44.4 40.1 -10% 189 Al. LME $/t 2800 2742 -2% 88 Effective Al. Customs duty % 8.1 5.7 -30% 36 Domestic Ingot Realisation Rs/t 131,124 111,748 -15% Cu LME $/t 5949 7684 29% 17 Copper TcRc c/lb 33.8 19.4 -4
Slide 114: Positive trend going into Q1 of FY09
Positive trend going into Q1 of FY09 Aluminium LME Rupee : USD 44 3400 43 3200 42 3000 41 2800 40 2600 39 2400 Avg.$2742 Avg.$2982 Avg.$40.1 Avg.$41.40 38 2200 2000 37 8/Apr 22/Apr 3/Jun 17/Jun 1/Jan 11/Mar 25/Mar 15/Jan 29/Jan 12/Feb 26/Feb 6/May 20/May 2/Apr 2/Jan 2/Feb 2/Jun 2/May 2/Mar 114 Leadi
Slide 115: Improving Domestic Ingot Realisations
Improving Domestic Ingot Realisations LME Strong improves LME, but rupee Spurt in Rupee stronger LME, depreciates 140000 Fall in LME Rupee + Rupee weakens strong + marginally 130000 Duty cut 120000 110000 100000 90000 80000 124312 119403 126678 131124 121355 109139 103137 111748 128469 122471 70000
Slide 116: Funding Structure for the Acquisition of Novelis
Funding Structure for the Acquisition of Novelis Novelis Inc Existing bank loans of US$1.2 billion re- financed through ABL, term loan. Existing US$1.4 billion notes continue. AV Aluminum Inc AV Metals Inc Canada AV Minerals (Netherlands) BV (Total funds US$3.48 billion) Lenders for bridge loan of U
Slide 117: Take out Financing Plans - US$3.03 Bn Bridge Loan
Take out Financing Plans - US$ 3.03 Bn Bridge Loan • Rights Issue Not Exceeding Rs 5000 Crs • Balance o International loan or Bonds o Rupee loan or Bonds o Treasury Put in place Optimal Capital Structure to Preserve Balance Sheet Strength to Fund Value Accretive Projects 117
Slide 118: Consolidation: Dimensions & Schematic
Consolidation: Dimensions & Schematic Relevant Account Number of Entities Relationship Standards (AS) FY 2006-07 FY 2007-08 Subsidiary AS - 21 18 57 Associate AS - 23 1 6 Joint Venture AS - 27 2 2 Relationship Holding/ Control Methodology Subsidiary > 50% Line by line Consolidation Minority Interest
Slide 119: Consolidated Financials (Under Indian GAAP)
Consolidated Financials (Under Indian GAAP) Rs Crores FY 2006-07 FY 2007-08 Increase/Decrease Share of Share of Stand Stand Standalone Consolidated Alone Standalone Consolidated Alone Standalone Consolidated Net Sales 18,313 19,316 94.8% 19,201 60,013 32.0% 4.8% 210.7% EBITDA 4,385 4,840 90.6% 3,894
Slide 120: Consolidated Balance Sheet
Consolidated Balance Sheet Rs Crores US$ Bn. Particulars 31-Mar-07 31-Mar-08 31-Mar-07 31-Mar-08 Application of Funds Fixed Assets and CWIP (net) 10,824 25,454 2.48 6.37 Goodwill 159 8,833 0.04 2.21 Other Intangibles 170 3,817 0.04 0.95 Investments 7,874 13,892 1.81 3.48 Net Current Assets 4,257 4,2
Slide 121: Major Developments
Major Developments During the Year: • On May 15, 2007, the Company acquired Novelis Inc., Canada through its indirect wholly-owned subsidiary AV Metals Inc. (Acquisition Sub) pursuant to a plan of arrangement (Arrangement) entered into on February 10, 2007 and approved by the Ontario Superior Court
Slide 122: Novelis: US GAAP and I GAAP Reconciliation
Novelis : US GAAP and I GAAP Reconciliation Reconciliation of Profit/(Loss) - Rs Crores Item Novelis AV Aluminum AV Metals AV Minerals Total Profit/Loss as per US GAAP (Full Year) (276) (133) (9) (485) (902) Less: Related to Predecessor Period (387) (387) Profit/(Loss) as per US GAAP 111 (133) (9) (
Slide 123: Reconciliation of Net Sales
Reconciliation of Net Sales Rs Crores 2006-07 2007-08 Net Sales of Hindalco Industries Limited (Standalone) 18,313.0 19,201.0 Impact of Subsidiaries:- Novelis Inc. - 39,909.0 Aditya Birla Minerals Limited (Consolidated) 1,561.1 2,517.2 Bihar Caustic & Chemicals Limited 144.0 174.9 Dahej Harbour and
Slide 124: Reconciliation of Net Profit
Reconciliation of Net Profit Rs Crores 2006-07 2007-08 2006-07 2007-08 Net Profit of Hindalco Industries Limited (Standalone) 2,564.3 2,860.9 Total Profit Our Share Impact of Subsidiaries: Dahej Harbour & Infrastructure Limited 37.5 42.8 37.5 42.8 Bihar Caustic & Chemicals Limited 33.6 56.7 20.2 34.
Slide 125: Thank You
HINDALCO ADITYA BIRLA GROUP THANK YOU