Tata Steel Limited · NSE:TATASTEEL
Tata Steel — Investor Presentation (December 2008)
47 slides from Tata Steel's investor presentation, Dec 2, 2008
Slide 1: Tata Steel Group - Creating a Sustainable Future
Tata Steel Group- Creating a Sustainable Future Consolidated Financial Performance April – September ’08 Analyst Meet – Mumbai December 2, 2008 1
Slide 2: Agenda
Agenda Key Highlights H1’09 Performance & Near Term Outlook - India & South East Asia H1’09 Performance & Near Term Outlook – Europe Consolidated Financial Performance Financial Crisis and Steel Industry Tata Steel Group’s response to Financial Crisis Growth plan and projects 2
Slide 3: Key Highlights
TATA STEEL | @eleeesliiale, <p Lay se JO nas pe TATA ; x TATA STEEL Key Highlights
Slide 4: Committed to Group Vision 2012
Committed to Group Vision 2012 We aspire to be a global steel industry benchmark for Value Creation and Corporate citizenship Focusing on ~ Value Creation Increase Tata Steel Group ROIC to 30% Safety Reduce LTIF (Lost Time Injury Frequency Rate) to 0.4 Environment Reduce CO2 emissions to 1.5
Slide 5: Deming Application Prize Awarded to Tata Steel
Deming Application Prize Awarded to Tata Steel Tata Steel India becomes the first integrated steel company in the world, outside Japan, to be awarded the Deming Application Prize for Excellence in Total Quality Management for the year 2008 5
Slide 6: Consolidated Financial Performance: H1'09 vs. H1'08
Consolidated Financial Performance : H1’09 vs. H1’08 Deliveries ( mt) 16.50 15.60 18,912 US $ Mn 13,739 3,322 2,085 1,867 852 Turnover EBITDA PAT H1 FY'09 H1 FY'08 H1 FY'09 H1 FY'08 Diluted EPS (US $) ROIC (%) - Annualized 2.26 33.00 21.00 1.05 H1 FY'09 H1 FY'08 H1 FY'09 H1 FY'08 6 H1 FY08 are Perfo
Slide 7: Half Year Performance Analysis & Near Term Outlook – India & South East Asia
Half Year Performance Analysis & Near Term Outlook – India & South East Asia 7
Slide 8: Key Highlights – Tata Steel India
Key Highlights – Tata Steel India Saleable Steel Production H1 H1 FY’09 FY’08 FY’08 Crude Steel Production 2.61 2.43 5.01 2.52 2.34 (mt) ROIC (%) 114 84 98 Safety ( LTIF) 1.12 1.84 1.70 H1 FY'09 H1 FY'08 Environment ( CO2 2.13 2.11 2.00 Mn tonnes Emissions/ t) Financial Year – April - March 8
Slide 9: Operating Profit Bridge – Tata Steel India
Operating Profit Bridge – Tata Steel India US $ Mn 789 85 1,290 25 (22) (1) (315) 729 H1 FY08 Price Cost Volume Improvement Other Income / Other Profit H1 FY09 Savings Expenses Centres ‘H’ BF reached its rated production within 100 days of start up Use of Jhama Coal instead of costlier anthracit
Slide 10: Marketing Initiatives in India
Marketing Initiatives in India Retail Color Coated Brand “Durashine” launched by Tata Blue Scope Trial Process initiated for auto manufacturers, Nissan and Volkswagen Launched seismic resistance TMT rebars “TATA TISCON S.D” in retail segment in entire North East India Launched long product s
Slide 11: Key Performance Improvements – India
Key Performance Improvements – India Critical Chain Project Management US $ Mn ( TOC) Expeditious Project Execution FY’09 Target : - Stelmor cooling up gradation US $ 191.82 Mn 101.83 - Slab caster up gradation 95.37 - Reduction in shut down time in LD#2 72.33 Solution for Sales (TOC) Distri
Slide 12: Near Term outlook - India
Near Term outlook - India India affected due to de leveraging in Europe and US – Monetary tightening in the earlier part of the year Monetary easing is expected to ease liquidity in the near future Lack of liquidity has impacted demand growth, in the near term Construction sector most affect
Slide 13: Operating Highlights – South East Asia
Operating Highlights – South East Asia Finished Steel Production Mn Tonnes Nat Steel Asia Tata Steel Thailand 0.78 0.75 0.68 0.64 H1 FY'09 H1 FY'08 H1 FY'09 H1 FY'08 High local mesh sales to HDB Govt Housing Projects in Singapore Strong demand from Australian subsidiaries Electricity consumpti
Slide 14: Operating Profit Bridge - South East Asia
Operating Profit Bridge- South East Asia US $ Mn Nat Steel Asia 976 (937) £158m 12 51 H1 FY08 Price Operating costs H1 FY09 Tata Steel Thailand 231 (149) £(55)m £254m £99m 92 10 H1 FY08 Price Operating costs H1 FY09 14
Slide 15: Half Year Performance Analysis & Near Term Outlook – Europe
Half Year Performance Analysis & Near Term Outlook – Europe 15
Slide 16: Key Highlights – Tata Steel UK
Key Highlights – Tata Steel UK H1 H1 Liquid Steel Production FY’09 FY’08 FY’08 10.09 10.21 Liquid Steel Production (mt) 10.09 10.21 20.30 Steel Deliveries (mt) 11.90 11.50 23.10 ROIC (%) 22 14 12 Safety ( LTIF) 1.90 1.90 2.40 H1 FY'09 H1 FY'08 Environment Mn tonnes (CO2 Emissions/t) 1.90 1.85 1.85 F
Slide 17: Operating Profit Bridge – Tata Steel UK
Operating Profit Bridge – Tata Steel UK US $ Mn 1,718 (1,675) 280 1,417 262 (38) 869 Net 43 (F) H1 FY08 Prices Cost Perf ormance Aluminium Financial H1 FY09 Improvement Instruments & Others New monthly production records achieved in IJmuiden on HSM, CM21 and DVL1 in the three months to Sep’08 St
Slide 18: Near Term Outlook – Europe
Near Term Outlook – Europe Demand slowdown has been significant in Europe Production cuts by all major players by 25% - 30% Steel prices have reduced by US $ 250 – 300 / t in Southern Europe Liquidity across the supply chain is a key concern – actions by the Central Banks likely to start sho
Slide 19: Synergies Realized in H1 FY'09
Synergies Realized in H1 FY’09 US $ Mn Tata Steel India Reported Exit rate Manufacturing 20 50 Procurement 2 5 Total 22 55 Tata Steel UK Reported Exit rate Manufacturing 34 61 Procurement 2 4 Corp Center 8 16 Financing 50 100 Total 94 181 TSL( India & UK) Reported Exit rate Total 116 236 19
Slide 20: Consolidated Financial Performance
Consolidated Financial Performance 20
Slide 21: Consolidated Financial Performance
Consolidated Financial Performance US $ Mn H1 FY’09 Tata TSUK NSA TSTH Tata Steel Steel (Corus) Group (*) Deliveries (mt ) 2.4 11.9 1.6 0.6 16.5 Turnover 2,856 14,148 829 591 18,912 EBIDTA 1,390 1,767 74 103 3,322 EBIDTA margin 49% 12% 9% 17% 18% PBT 2,320 PBT margin 12% PAT** 1,867 PAT margin 10% R
Slide 22: Tata Steel Group – EBITDA Performance
Tata Steel Group – EBITDA Performance EBITDA – Tata Steel India EBITDA – Tata Steel UK 2,139 2,274 1,767 1,390 Q2 Q2 1,039 737 Q1 Q1 728 653 H1 FY'09 FY'08 H1 FY'09 FY'08 EBITDA – Nat Steel Asia EBITDA – Tata Steel Thailand 74 126 57 103 24 Q2 Q2 18 Q1 50 Q1 85 22 H1 FY'09 FY'08 H1 FY'09 FY'08
Slide 23: Financial Ratios
Financial Ratios Net Debt / EBITDA Interest Cover 2.65 7.55 6.83 1.75 1.81 5.01 September'08 June '08 March '08 September'08 June '08 March '08 ROIC (%) – Pre Tax – (Annualised) Diluted EPS – (Not Annualised) ( $ ) 4.07 33.00 30.00 19.00 Q2 2.26 Q1 1.01 September'08 June '08 March '08 September'08 M
Slide 24: Working Capital Management – Tata Steel Group
Working Capital Management – Tata Steel Group Inventory In US $ Mn Debtors in US $ Mn 8,000 65 70 8,000 48 47 50 51 54 60 44 6,000 1,577 50 5,280 40 6,000 4,940 1,516 3,972 1,359 40 30 4,000 2,313 4,000 2,001 30 1,538 20 2,000 20 2,000 10 2,845 2,184 10 1,968 0 0 0 0 September'08 June'08 March'08 Se
Slide 25: Financing Position Update
Financing Position Update No bridge / short term loans outstanding – all debt syndicated Around 10% ( GBP 295 Mn ) of TSUK debt prepaid in the last 6 months – hence no repayment obligation till December 2009 Foreign Currency exposure on India Balance Sheet covered, Europe largely swapped in Eu
Slide 26: Tata Steel Group: Debt Position
Tata Steel Group : Debt Position Net Debt Position as on 30th Sep’08 Net Debt / Equity US $ Mn 107 336 9,332 275 3,455 2.23 5,159 1.31 H1 FY'09 H1 FY'08 TSUK TSL NSA TSTH Others Net Debt * Net Debt excluding CARS and Working Capital Loans taken in entities 26
Slide 27: Liquidity Position of Tata Steel Group
Liquidity Position of Tata Steel Group Position as on 28th Nov’08 US $ Mn 655 1,532 877 Cash and Cash Undrawn Lines Total Liquidity Equivalents 27
Slide 28: Covenants – Tata Steel India H1 FY'09
Covenants – Tata Steel India H1 FY’09 Financial Debt / Net Worth Financial Debt / EBITDA 1.80x 1.80x 1.80x 2.00x 4.00x 3.99x 3.99x 3.99x 1.50x 3.00x 2.18x 2.25x 2.23x 1.00x 0.80x 0.81x 2.00x 0.68x 0.50x 1.00x 0.00x 0.00x S eptember '08 J une '08 March '08 S eptember '08 J une '08 March '08 Net Incom
Slide 29: Covenants – Tata Steel UK H1 FY'09
Covenants – Tata Steel UK H1 FY’09 EBITDA / Finance Charges Net Debt / EBITDA 4.25x 4.25x 4.25x 6.00x 4.50x 5.10x 4.70x 4.00x 5.00x 3.30x 4.20x 3.50x 3.00x 4.00x 3.00x 2.70x 2.75x 2.75x 2.75x 2.50x 3.00x 2.00x 2.00x 1.50x 1.00x 1.00x 0.50x 0.00x 0.00x S eptember '08 J une '08 March '08 S eptember '0
Slide 30: Corporate Credit Rating Update
Corporate Credit Rating Update Standard & Poor Moody's Fitch Previous Current Previous Current Previous Current BB / BB / Ba1 / Ba1 / BBB- / BBB- / TS India Stable Stable Stable Negative Stable Negative BB- / BB- / Ba3 / Ba3 / BB / BB / TS UK Positive Stable Stable Negative Stable Negative 30
Slide 31: TSUK Pensions - BSPS
TSUK Pensions - BSPS £ Mn Asset Mix in BSPS Combined Surplus of all TSUK Pension Funds 1% 1,334 2% 4% 51% 69% 65% 819 6% 692 5% 5% 42% 26% 371 25% September '08 March'08 March'07 Equities Property Bonds Cash September'08 June'08 March'08 March'07 31
Slide 32: Financial Crisis & Steel Industry
Financial Crisis & Steel Industry 32
Slide 33: Financial Crisis
Financial Crisis Systematic collapse of the global banking system Sovereign Global Rescue Package US $ 9 Tn announced De- leveraging in the US has led to dollar outflow globally Credit contraction has affected the real economy Global economy especially the developed world has entered a neg
Slide 34: Industry Focus
Industry Focus Production to align with underlying demand - Range of cuts : 30% in Europe ; 35% in US ; 15-20% in Asia Capital Preservation & Liquidity Management Performance Improvement & Cost Reduction 34
Slide 35: Germany SSC Stocks
Germany SSC Stocks Kt 4000 3000 2000 1000 Stocks in kt 0 AMJ J AS OND J FMAMJ J AS ON D J FMAMJ J AS 2006/07 2007/08 2008/09 35
Slide 36: Massive cuts in world steel production now under way
Massive cuts in world steel production now under way Source : Macquarie Research 36
Slide 37: China Consumption Growth, 2000 – 2009e
China Consumption Growth , 2000 – 2009 e Anticipation of a China’s slowdown in consumption growth , but year to date consumption indicates growth of appr. 44 mt (10%) p.a which would have translated into a growth rate of 32% off China’s 2000 consumption The key thematic improvements in China are
Slide 38: India Consumption Growth, 2000 – 2009e
India Consumption Growth , 2000 – 2009 e India’s steel consumption growth is anticipated to slow moderately, but remain positive over the forecast period. Domestic demand has been strong and apparent steel consumption has grown an estimated 10.6% y-o-y to 49 m tonnes for the year ended India i
Slide 39: Europe Consumption Growth, 2000 – 2009e
Europe Consumption Growth , 2000 – 2009 e Europe shows clear cyclical behaviors in steel consumption. 2009 Consumption levels could be lower than 2008 fuelled by both lower economic activity and inventory de stocking Source : IISI, UN,OECD, National Accounts, Citi 39
Slide 40: Tata Steel Group's Response to Financial Crisis
Tata Steel Group’s Response to Financial Crisis 40
Slide 41: Response to the Financial Crisis – India & South East Asia
Response to the Financial Crisis – India & South East Asia Tata Steel India Continue to produce and sell as per plan (H2 > H1) Increased volumes on completion of 1.8 mtpa expansion at Jamshedpur 2.9 mtpa expansion at Jamshedpur to be on schedule Nat Steel Asia Production Cuts in select geogr
Slide 42: Response to the Financial Crisis – UK & Europe
Response to the Financial Crisis – UK & Europe Target Savings above £ 350 m Production cuts of 30% announced to align with underlying demand Major cost reduction drive undertaken to improve profitability Tightening of working capital to release cash Capex review across all divisions Introd
Slide 43: Growth Plans & Projects
TATA STEEL Celeorating’ qe ®) ai Sem, 19 ty O years ic TATA * . TATA STEEL Growth Plans & Projects 43
Slide 44: Tata Steel Group – Growth Plan
Tata Steel Group – Growth Plan • Brownfield expansion at Jamshedpur to 9.7 mtpa • Mozambique project development • On going construction of Dhamra Project • Initiation of Phase I at Orissa 44
Slide 45: New Projects in Pipeline
New Projects in Pipeline Integrated Projects 20 16 C a p a c it y ( m t p a ) 13 15 10 Orissa Ph-2 Orissa Ph-1 Flat Products 10 6.8 Flat Products 2.9 mtpa 5 Flat Products 1.8 mtpa being commissioned 0 2 0 0 7- 0 8 2008-09 2 0 0 9 - 10 2 0 10 - 11 2 0 11- 12 2 0 12 - 13 2 0 13 - 14 2 0 14 - 15 45
Slide 46: Acquisitions & Disposals
Acquisitions & Disposals DSO Project – Canada ¾ Acquired 19.9% in New Millennium Capital Corporation, Canada (NML) for US $ 22 Mn ¾ Reserves estimated to be over 100 million tonnes of direct shipping quality ore Disposal of Grant Rail ¾ Business employed 1,000 people ¾ Enterprise Valuation at £
Slide 47: Thank You
TATA STEEL | @eleeesliiale, qp & em (OO vers TATA as x4 TATA STEEL Thank You 47