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11
Hindalco Industries LimitedHindalco Industries Limited
Performance Review Performance Review Q3 FY09Q3 FY09
Investor PresentationInvestor Presentation3030thth January 2009January 2009
2
Backdrop: Financial Crisis & Global MeltdownAs the Financial crisis spread through the Globe….
The financial system witnessed severe liquidity crunch
Banks lost trust in the peers
Stock markets collapsed as funds felt redemption pressure
Suddenly Fear & uncertainty engulfed till then vibrant Global financial markets
This led to ….
Sudden brakes on all booming commodity intensive sectors such asinfrastructure, automobile and Real estate
Slowdown in emerging economies, notably BRIC economies; the global demand drivers in the recent times
The recession that had started in the US expanded to the Globe
3
1,485
3,341
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3/Apr/06 22/Aug/06 29/Jan/07 9/Jul/07 12/Nov/07 23/Apr/08 30/Sep/08800
1,300
1,800
2,300
2,800
3,300
3,800
LME CSP-$/Mt
Exchange Stock= Comex+LME+Shanghai
-56%
Slowing Global demand… ….Resulted in stock buildup & price collapse
• Aluminium price down by 56% within 6 months
• Overall Inventories at 4.5 Mn Tonnes- highest levels since 1994Source: CRU Jan’09
Demand slow down led to a crash in commodities …… Aluminium
30
35
40
2006 2007 2008
34.4
10%
37.8 38.10.8%
Mn Tonnes
Source: Reuters
Tonnes $/Tonne
4
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
03-A
pr-0
6
25-S
ep-0
6
15-M
ar-0
7
06-S
ep-0
7
27-F
eb-0
8
15-A
ug-0
8
010002000300040005000
6000700080009000
10000
Demand slow down led to a crash in commodities …… Copper
-55%
Slowing Global demand… ….Resulted in stock buildup & price collapse
Copper prices down by 55% within 3 months Source: Brok Hunt Dec’08
17150172001725017300173501740017450175001755017600176501770017750178001785017900179501800018050
2006 2007 2008
17.5
17.9
18.0
2.7%
0.6%Mn Tonnes
Source: Reuters
Tonnes $/Tonne
5
Key Industry Drivers
Driver Q3 FY08 Q3 FY09Change
%Impact
Aluminium LMEAverage($/ton)
2,443 1,821
3,940
48.8
97,142
Copper LMEAverage ($/ton)
7,239
(25%)
(46%)
24%
(6%)
ExchangeRate(Rs/$)
39.5
Domestic AlIngot Realisation
(Rs/ton)1,03,137
6
Financials:
Rs Crores Q3 FY08 Q3 FY09 Change (%)
Net Sales 4,539 4117 -9%
-3%
-4%
0%
-16%
14,191 14,448 2%
EBIDTA 801 779 2,604 2,722 5%
PAT 543 545 1,784 1,962 10%
675
3.37
706
4.01
9M FY08 9M FY09 Change(%)
2,335
14.1
8%
-4%
PBT 2,532
EPS 13.61
Number of shares: 170.05 Cr in Q3 FY09122.57 Cr in Q2 FY08
7
Hindalco Highlights…Hindalco’s robust business model kept it in relatively good stead
Copper business acted as a natural hedge against the vagaries ofcommodity cycle
Underlines the importance of conversion business model
The role Novelis is expected to play in the long term
Copper business performance depicted a sharp improvement even inthese troubled times
Copper EBIT increased by over 23%
Low cost operations in aluminium helped Hindalco in partially offsetting the sharp fall in prices and decline in offtake
Brownfield expansions yieding higher volumes
8
Aluminium BusinessPerformance
9
Backdrop: All-round drop in Aluminiumdemand
De-growth in Sheet & Plate consumption
in USA and Canada
Source: CRU Jan’09
1131 1140 1130
959 957
850
900
950
1000
1050
1100
1150
1200
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 09 F
(Kt)
7.1
8.67
1212.5
18.70%
22.10%
4.10%
38.40%
0
2
4
6
8
10
12
14
2005 2006 2007 20080%
5%
10%
15%
20%
25%
30%
35%
40%
45%Consumption (Mn T)Growth%
Source: Antaike-Jan’09
Chinese demand -Plummeted
10
Supply: At Current Prices, > 90% of the Smelters are unviable
Production cuts Announcement By Month
Production cuts By Region
800
1442
679
920
840
1139
0
1000
2000
3000
4000
5000
6000
Sept'08& before
Oct'08 Nov'08 Dec'08 Jan'09 Total
Kt
5020
Completed
CountryAug'08 Prodn-
annualisedAnnounced Curtailment %Curtailed
China 14.0 3.0 21%North America 5.7 0.8 15%Eastern Europe/Russia 4.7 0.6 12%Western Europe 4.6 0.2 5%Asia/Middle East 4.0 0.1 2%Latin America 2.7 0.1 3%Oceania 2.3 0.1 4%Africa 1.7 0.1 6%Total 39.6 5.0 13%
Announced curtailment of 5 Mn Tonnesamounts to ~13% of Global output
Source: Alcoa Jan’09
(Kt)
(Mn Tonnes)
11
Aluminium: Performance at a glance
Rs Crores Q3 FY08 Q3 FY09 Change(%)
1736
578
14%
-8%
Net Sales & Operating Revenue 1980
EBIT 530
12
Higher Sales of Specialty Alumina
95099 85802
102050 108185
0
50000
100000
150000
200000
250000
9M FY08 9M FY09
Standard Specials
-10%
+6%
197149 193987*
(Mt)
* Overall sales declined due to higher captive consumption
13
Increase in Production volumes
Alumina (Hydrate) Aluminium
305123
319074
290000
300000
310000
320000
330000
Q3 FY08 Q3 FY09
122026
135096
110000
120000
130000
140000
Q3 FY08 Q3 FY09
TonnesTonnes
4.6%
10.7%
14
Peer Comparison: Hindalco - Creditable performance
-175
-150
-125
-100
-75
-50
-25
0
25
50
75
100
125
GlobalPeer 1
GlobalPeer2
GlobalPeer3
GlobalPeer4
Hindalco
Q3FY08 Q3FY09-12
-7
-2
3
8
13
18
23
28
GlobalPeer 1
GlobalPeer2
GlobalPeer3
GlobalPeer4
Hindalco
Q3FY09
EBIT - Indexed: Q3FY08=100 %
How the players performed vis viscorresponding quarter last year
EBIT Margins for the current quarter
15
Copper Business Performance
16
Challenging Times
TC/RC down by 33% vis-a- vis Q3FY08
Sharp decline in demand of refined copper globally
Sharp fall in By-product prices
17
Declining Demand
(Mn T)
17.94
18.16
18.03
0.60%-0.50% 1.30%
17.8
17.85
17.9
17.95
18
18.05
18.1
18.15
18.2
2008 2009 2010-10%
0%
10%Consumption (Mn T)Growth%
Global demand – Moderate Decline
Source: Brook Hunt Dec’08
Global demand for refined copper set to
decline in 2009 due to apparent Global
recession
Global slowdown in Copper intensive
sectors such as housing, infrastructure &
consumer durables
18
High Cost Smelters Cutting down production as by-product credit dries up
Production cut Announcement
4970
356358
78
213
0
50
100
150
200
250
FMI
PT S
mel
ting
Sum
itom
o
PPC
/Nip
pon
PPC
/Hib
i kyo
do
MI ,
Nao
shi,a
MI ,
Ona
ham
a
Kt
Announced curtailment of around 566 ktamounts to ~ 3% of Global output
Source: Fertilizer Week 16.01.09
(Kt)
Particular
Total Estimated
production in 2009 (kt)
Production Cut (%)
Production Cut (kt)
US 640 -25.0% 213Indonesia 700 -10.0% 78Japan 3591 -6.3% 226China 445 -10.0% 49Total 5376 -10.5% 566
19
Impressive Performance in challenging times
Production performance vis a vis Q3 FY 08……
Improved efficiency & lower conversion cost
On the back of bi-annual shutdown in smelter III,
Output declined by 12%
Highest ever smelter output in Dec’08
Cathode production declined by 7%
However, Value added Rod production increased by 15%
Higher contribution from Fertilisers stream
20
Copper: Performance at a glance
Rs Crores Q3 FY08 Q3 FY09 Change(%)
2,806
94
(24%)
23%
Net Sales & Operating Revenue 2,139
EBIT 116
21
Projects
2222
HAALProject commissioned during Q3 FY09
Value accretive project with enormous potential
Commercial production started in December
1060 MM Dia billet cast on 6th of Dec 2008
(Largest Aluminium alloy billet ever produced in
India)
First shipment dispatched to local forging units.
Exports commenced during Jan’09.
2323
Muri Alumina Expansion
Statutory Clearances – Obtained
Project – Commissioned; under stabilization
Commissioning:
Bauxite Handling & Bauxite Grinding- - commissioned.
HT Digestion and Precipitators commissioned.
Railway network operational.
Overall plant commissioned & stabilization under progress.
The entire steam and power requirement is being met by the
new captive power plant.
Muri plant has reached a capacity of 210 KT from 100 KT.
2424
Muri Project Site
Bauxite Handling HT digesters
New tracks & BTAP wagonsNew 10,000 T Alumina silo
2525
Hirakud Smelter and Power Plant ExpansionPhase 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 155 KTA is in progress and is expected to be completed by Aug- 09. First group of pots mechanically completed in Jan-09.
The power generation capacity has been raised from 267.5 Mw to 367.5 Mw.
2626
Greenfield Projects Greenfield Projects –– Mahan Mahan AluminiumAluminiumLand: Section 9(1) letter issued to 1 of 4 villages by Dist authorities. Balance villages in process.Coal: Coal block allotted. Production of Coal likely to start in FY 10Environmental, Rail & Water clearances have been obtained. Land for compensatory afforestation identified. Basic Engineering packages from AP received on schedule.Detailed Engineering work by EIL is in progress and enquiries/orders for major packages already placed/being placed.DCPL : consultant for power plant and detailed engineering. BTG order finalization by Feb -09. Final negotiations are in progress. Milestones :
First Metal by July 2011First TG unit by Mar-2011Coal by Jan 2011
2727
Greenfield Project – Utkal Alumina
Detail engineering for the main plant area is substantially completed.
All necessary statutory approvals are in place for construction of Project
Team is in place for the execution of project
About Rs. 750 crores have already been spent, Commitment made for about
Rs.3000 Crore
Most of Major Orders (long delivery) placed
L & T has been finalized for the civil, structural and tankages. This is expected to
expedite the project.
Environment Clearance – MoEF Clearance received for 3 million TPA.
Bauxite mining activities to start by mid 2010.
Mechanical Completion Date – Jan’ 2011
2828
Utkal Alumina
Township: Civil foundations work under progress (M/s Gulf Oil)
CPP area: Piling work commenced in boiler and coal bunker area (M/s Rammana Rao & associates
CPP area: Civil foundations work under progress in power plant area (M/s GDCL)
2929
Greenfield Projects Greenfield Projects –– AdityaAditya Smelter & CPPSmelter & CPPTechnology agreement with AP signed for Smelter. SIA clearance received.Basic Engineering is 70% complete, received on time.Detailed engineering consultant EIL- for smelter & DCPL for CPP. Work is in progressMajor proprietary equipments for smelter ordered.Plans to finalize orders in Feb-09 – Boilers, turbines, conversion substation. Total order value : Rs. 3000 Cr.Commitment made till Dec-08: Rs. 1264 Cr.Land acquisition is at an advance stage. 1357 acres registered in the name of the company. Water : Agreement signed for drawl of water. Coal Block: JV Company MNH Shakti Ltd. Registered office opened at Burla, first Board meet done.Expected date of Smelter Project completion( first metal ) : Oct -2011
3030
Greenfield Projects Greenfield Projects –– AdityaAditya Refinery & mines.Refinery & mines.
Alumina Technology tie up with ALCAN signed. SIA clearance for Alumina
Technology received.
Land acquisition is at an advance stage.
EPCM for Co-Gen plant awarded to M/s M N Dastur & Co.
Construction & Operation power : Work is going on as per plan.
Railways: Rail layout plan approved by East Coast Railways.
Expected date of Refinery Project completion( delayed ) : June – 2013.
3131
JharkhandJharkhand AluminiumAluminium
Land Acquisition: 7000 acres of land earmarked till date and Topographic
and Demographic survey completed. Socio-economic survey is started now.
CSR activities are ramped up. Visit of Sonahatu people to Renukoot
complex was done. This was extremely fruitful and positive.
Tubed Coal Mine Allotted- Joint venture formed between Tata power and
Hindalco.
Water Allocation – Clearance received from GoJ for 55 MCM water from
Subernrekha basin. Feasibility studies for establishing water sources
completed, reports being evaluated
Expected Commissioning date: June 2012.
32
To Sum Up……. ‘ Difficult times’
Financial Market turmoil has reversed the commodity bull run
Demand destruction, pricing pressures poses a serious & continuous challenge
Hindalco’s robust integrated model has helped in partially offsetting the impact of
sharp fall in the commodity prices
Copper business performance improved in these challenging times; underlying the
importance of conversion business model in the falling commodity price cycle
These are challenging times for the business, however with a ‘focused approach’
the management would face these challenges to overcome them
33
Financials
34
Results
34
Rs Crores Q3 FY08 Q3 FY09 Change (%)
Net Sales 4,539 4,117 -9%
Expenditure 3,738 3,338 -11% 11,586 11,726 1%
Other Income 114 150 32% 349 542 55%
Interest 62 93 50% 182 255 40%
PBDIT 915 930 2% 2,953 3,264 11%
Depreciation 147 161 10% 436 477 9%
PBIT 768 769 0% 2,517 2,786 11%
-4%
-20%
0%
14,191 14,448 2%
Tax 163 131 551 572 4%
675
545
706
543
9M FY08 9M FY09 Change(%)
2,335
1,784
8%
10%
PBT 2,532
PAT 1,962
35
Segment Results
35
82% 18%
48% 52%
58% 42%
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1Aluminium Copper
CE
Net Sales
EBIT
Rs Crores Aluminium Change (%)
Q3 FY08 Q3 FY09 Q3 FY08 Q3 FY09
14%
-8%
11%
Net Sales 1,736 1,980 2,806 2,139 -24%
EBIT 578 530 94 116 23%
Capital Employed 7,814 8,666 5,756 6,224 8%
33% 27%
30% 25%
Copper Change(%)
3%
7%
EBIT Margins 5%
ROCE 8%
36
Aluminium Production
Production Unit Q3 FY08 Q3 FY09 % Chg 9M FY08 9M FY09 % Chg
Alumina MT 304,059 319,074 5% 888,781 918,959 3%
Metal MT 121,971 135,073 11% 356,397 390,274 10%
37
Production Unit Q3 FY08 Q3 FY09 % chg 9M FY08 9M FY09 % chg
Copper Cathodes MT 78,334 72,877 -7% 236,748 210,851 -11%
CC Rods MT 34,471 39,737 15% 103,901 104,195 0%
Copper Production
38
Product Q3 FY08 Q3 FY09 % Chg 9M FY08 9M FY09 % Chg
Chemicals 131 138 5% 441 494 12%
Primaries 612 1,025 67% 1,834 2,646 44%
Aluminium Sales Revenue (Rs Crs)
39
Product Q3 FY08 Q3 FY09 % chg 9M FY08 9M FY09 % chg
Copper Cathodes 1,402 717 -49% 4,462 3,530 -21%
CC Rods 1,072 1,019 -5% 3,453 3,366 -3%
Copper Sales Revenue (Rs Crs)
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