Hindalco Industries Limited · NSE:HINDALCO
Hindalco Industries — FY2007 Earnings Presentation
59 slides from Hindalco Industries's earnings presentation, May 4, 2007
Slide 1: Hindalco Industries Limited Performance Review 2006-07
Hindalco Industries Limited Performance Review 2006-07 Presentation for the Investor’s Meet 4th May 2007
Slide 2: FY 2007 at a Glance
FY 2007 at a Glance HIGHEST EVER Turnover : Rs. 18313 Crores (US$ 4455.1 mn) 61% EBIDTA : Rs.4385.1 Crores (US$ 1067 Mn) 54% PAT: Rs.2564.3 Crores (US$ 623.8 Mn) 55% Aluminium production at 442,685 T 3% Copper cathode Production at 290425 T 38% Note: Exchange rate of 30th April’07 consider
Slide 3: Q4 FY 2007 at a Glance
Q4 FY 2007at a Glance HIGHEST EVER IN ANY Q Turnover : Rs.4,748.9 Crores (US$ 1,155 mn) 30% EBIDTA : Rs.1,173.2 Crores (US$ 285.4 Mn) 17% PAT : Rs.721.3 Crores (US$ 175.5 Mn) 15% Aluminium production at 114,334 T 7% Copper cathode Production at 81460 T 22% Note: Exchange rate of 30th April
Slide 4: Financial Highlights – FY07
Financial Highlights –FY07 Rs. Crores Change Change Q4 Full Year (%) (%) Net Sales & Operating Revenue 4,748.9 30% 18,313.0 61% PBDIT 1,173.2 17% 4,385.1 54% Pre-tax profits 957.9 20% 3,504.6 66% Net Profit 721.3 15% 2,564.3 55% EPS - - 25.5 52% 4
Slide 5: Backdrop; Business Performance & Outlook; Detailed Financials
Backdrop Business Performance & Outlook Detailed Q4 & FY07 Financials
Slide 6: Backdrop: Global Macro Trends (FY06 to FY07)
Backdrop : Global Macro Trends (FY06 to FY07) Aluminium prices at high levels & Alumina price again rising Weakening Tc/Rc and Strong copper prices 3,100 690 9000 60 2,900 640 8000 2832 50 590 7000 2,700 540 6000 40 2,500 490 5000 30 2,300 395 440 4000 3000 20 2,100 390 Aluminium ($/t) 340 2000 10 1
Slide 7: Backdrop: Domestic Macro Trends (FY06, FY07 & FY08)
Backdrop : Domestic Macro Trends (FY06, FY07 & FY08) Aluminium import duty Copper Duty Differential 40% 40% 30% 30% 20% 20% 10.6% 10% 5.7% 4.9% 3.1% 7.7% 5.7% 10% 0% 0% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 47 Exchange rate- INR appreciating continuously 46
Slide 8: Significant Progress in the Strategic plan
Significant Progress in the Strategic plan Significant move into value added products accomplished through Novelis acquisition. Aluminium Growth plans Hirakud Phase – I Expansion (upto 100 Kt) completed on schedule. Phase II (143 Kt) on track. Muri Expansion to be completed by Q3 FY08. Hin
Slide 9: Backdrop; Business Performance & Outlook; Detailed Financials
Backdrop Business Performance & Outlook Detailed Q4 & FY07 Financials
Slide 10: Aluminium - Business Performance
Aluminium-Business Performance
Slide 11: Aluminium EBIDTA Margins
Aluminium EBIDTA Margins…. Highest ever EBIDTA Margin Amongst the best in the industry EBIDTA Margin % 60% 50% 50% 40% 44% 42% 36% 50 30% 39 39 34 20% 17 16 10% 0% Vedanta Hindalco Rio Tinto Alcoa Alcan BHP FY04 FY05 FY06 FY07 Note:EBIDTA includes Other income _______________________________________
Slide 12: EBIT: At a new high
EBIT: At a new high (Rs. Crs.) 3500 2,929 3000 Indal Acquisition Smelter 2500 Disruption 2,128 2000 1,619 1500 1,109 1,042 1,092 1000 810 835 500 0 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 _______________________ Source: Company Data 12
Slide 13: Alumina Production and Realisation
Alumina Alumina: Capacity utilisation 60% Special Alumina Sales as % of total 1400 106.0% Alumina Sales 104% 103% 50% 1200 49% 100% 100.0% 40% Capacity Utilisation% 39% Production (Kt) 1000 94.0% 35% 30% 1203.3 1198.6 1159.6 800 88.0% 20% 600 82.0% 10% 400 Alumina Production Capacity Utilisation% 0%
Slide 14: Aluminium Production at an all time high
Aluminium Production…. At an all time high Aluminium Production (KT) 500000 450000 FY 06 FY 07 400000 350000 442685 429140 300000 250000 200000 190580 211088 150000 100000 38282 32328 26184 25699 50000 67730 68998 0 Metal Rolled Wire rods Extrusions Foils Highest Ever Production of Metal, Wire rod,
Slide 15: Value added Products registers continuous improvement
Value added Products ……registers continuous improvement Rolled- Domestic Sales Revenue- FY06 Rs.4955 Crores 35 Mark up 32.2 30 Rolled 25.7 Products 25 1,870 20 Rs/Kg 2,153 VAP Share 15 57% Primary 410 10 Products 522 5 Extrusions 0 Foil & Wheels FY04 FY05 FY06 FY07 Note: Markup normalised for custom
Slide 16: Copper - Business Performance
Copper-Business Performance
Slide 17: FY07 Key levers of Performance
FY 07 Key levers of Performance Cathode production up 80 KT (38%) YoY LME Backwardation has come down from US$162/t in FY06 to 29 $/t in FY 07 (for 3M spread) , In Q4 LME moved from Backwardation to Contango of US$ 18/t Copper cathode sales was up by 73KT (33%) in FY07 Achieved highest ever
Slide 18: FY07 – Copper Production Performance
FY 07 – Copper Production Performance Production trend of Cu III Overall Copper Cathode Production Kt 90 88 Kt 80 170 154 70 150 136 61 60 130 111 50 110 99 45 40 90 70 30 50 20 15 30 10 10 0 H1 FY06 H2 FY06 H1 FY07 H2 FY07 -10 H1 FY06 H2 FY06 H1 FY07 H2 FY07 Copper Production grew by 38% during the
Slide 19: Improving Market share
Improving Market share FY06 FY07 14% 18% 43% 46% 40% 39% BC SIL HCL & SWIL BC continues to be the Market leader Source: Hindalco 19
Slide 20: Aluminium Business Outlook
Aluminium Business Outlook
Slide 21: World Aluminium Market in Deficit during 2006
World Aluminium Market in Deficit during 2006 Aluminium Production Aluminium Consumption Production (Kt) 40000 10% Growth % Al. Consumption (Kt) 9% 40000 12.00% 35000 8.7% Growth % 8% 35000 30000 10.00% 9.6% 34392 7% 30000 7.0% 8.3% 6.7% 31842 25000 6% 8.0% 8.00% 6.0% 25000 30314 20000 5% 27654 2801
Slide 22: Aluminium Stock position (LME+Comex+Shanghai)
Aluminium Stock position (LME+Comex+Shanghai) Inventory (Mt) US$/Mt 1700000 3,800 LME - CSP 1500000 US$/tonne 3,300 US$ 2792/Mt 1300000 2,800 1100000 2,300 962615 Mt 900000 1,800 700000 Total Inventory 1,300 (tonnes) 500000 800 4 9- t-05 -O 4 -O 5 16 3 ug 7- -05 /M 6 -A 5 /D 6 26 n -A n 16 v /F 6 -M
Slide 23: Market expected to return to surplus during 2007
Though market is expected to be back to surplus during 2007; Asia (excl. china and middle east) continues to be major deficit areas 6000 World Metal balance Regional Metal balance 600 KT 576 4000 500 458 400 2000 315 300 226 0 kt 200 100 80 -2000 0 2005 2006 2007 2008 2009 2010 -4000 -100 -200 -6000
Slide 24: Tremendous long term growth potential in the country
There is tremendous long term growth potential in the country…… Per capita consumption (kg/capita) If and when India achieves 50% of Chinese per capita consumption, the 33.8 aluminum consumption in India will 32.9 31.7 reach 4.2 Mn tonnes/annum (More 30.5 than 3 times the existing level) 28.1 20.8 8
Slide 25: Hindalco - Taking the lead in driving the market
Hindalco-Taking the lead in driving the market The Consistent efforts of Our Market Development Cell is expected to result in Aluminium consumption growth in the following markets during FY08. Motor Cycles-Muffler/Handle bar/Connector Windmills-Platforms/Nacelle Cover Pallets- For Yarn Stora
Slide 26: Alumina - Market Outlook
Alumina - Market Outlook Alumina Production expected to reach 74.54 Mn T in 2007 – 10% y-o-y growth. The Alumina market is expected to be in surplus driven mainly by china – approx. 5 million tonnes of alumina capacity expected to be added in China alone during 2007. Average spot Prices at pre
Slide 27: Copper Business Outlook
HINDALCO ADITYA BIRLA GROUP Copper Business Outlook 27
Slide 28: Copper – Demand & Market Balance
Copper – Demand & Market Balance…….. Kt Cu 700 World Concentrate Market Balance Kt Cu World Cu Demand Growth Rate 25000 10% 600 500 20000 CAGR – 3.7 % 2007-09 8% 400 6% 15000 300 4% 200 10000 2% 100 5000 0% 0 -100 2003 2004 2005 2006 2007 2008 2009 0 -2% 2003 2004 2005 2006 2007 2008 2009 -200 Kt Cu
Slide 29: Significant growth prospects in the country
Significant growth prospects in the country …. Copper Per Capita Consumption Pattern Kg/Person 16 15.8 14 12 10.3 10 7.2 8 6 4 3.0 2 0.4 0 Germany Japan USA China India Per capita consumption of Cu in India promises lot of potential in Indian market. 29
Slide 30: To Sum up
To Sum up Strong metal prices in the current fiscal with some softening towards the end. Continued cost push Domestic market expansion to continue Benefits to flow from Focus on value added products Enhanced capacity though its impact in FY08 will be marginal Concentrate availability p
Slide 31: Novelis
Novelis
Slide 32: Novelis: Global Leader in Rolled Aluminium
Novelis: Global Leader in Rolled Aluminium Global leader in rolled aluminium: #1 rolled products supplier worldwide 2005 Global Aluminium 2005 Global Aluminium Rolled Products Production Rolled Products Production Novelis 19% Other Leader in: Transportation 4% – Fusion technology 15% Beverage – Ca
Slide 33: Novelis: Global Aluminium Footprint
Novelis: Global Aluminium Footprint 36 manufacturing facilities in 11 countries Leading Market Position Leading Market Position Leading Market Position North America Europe Asia Employees: 3,000 Employees: 5,500 Employees: 1,600 Revenues: $3.3bn Revenues: $3.1bn Revenues: $1.4bn Shipments: 1,194kt 1
Slide 34: Novelis – Global Market Position
Novelis – Global Market Position 34
Slide 35: Financing Structure
Financing Structure Novelis Enterprise Value ~ USD 6 billion HINDALCO NOVELIS Figures in USD Millions Non Recourse Backstop committed by banks on Novelis Balance Sheet Recourse Financing by banks to refinance existing debt on on Corporate Guarantee of 3100 Change of Control Hindalco Term Loans 1000
Slide 36: Backdrop; Business Performance & Outlook; Detailed Financials
Backdrop Business Performance & Outlook Detailed Q4 & FY07 Financials
Slide 37: Financial Highlights
Financial Highlights FY 2007 Q4 FY 2007 EBIDTA > $1 Bn. Rs. crores 4749 30% Rs. crores 18313 61% 1400 54% 3657 17% 1200 4385 1173 11397 66% 1000 20% 3505 1004 958 55% 800 15% 2852 797 2564 721 600 2106 626 1655 400 200 FY06 FY07 0 Q4 FY06 Q4 FY07 EBIDTA PBT PAT Sales EBIDTA PBT PAT Sales Highest eve
Slide 38: Sustained Performance – Q on Q
Sustained Performance– Q on Q 958 896 Rs. crores 838 797 814 721 626 644 602 598 475 435 379 398 314 336 FY06 Q1 FY06 Q2 FY06 Q3 FY06 Q4 FY07 Q1 FY07 Q2 FY07 Q3 FY07 Q4 PBT PAT
Slide 39: Drivers of Performance: FY07
Drivers of Performance : FY07 UOM FY'06 FY07 LME - Aluminium $/T 2029 2664 Rs/USD 1$ = Rs. 44.17 45.25 Custom Duty on Al. % 10.6% 7.7% Domestic Metal Prices Rs./T 98,256 125,436 Standard Alumina $/T 401 498 % of LME % 19.8% 18.7% Copper LME $/T 4105 6862 TcRc C/Lb 22.03 34.01 Duty Differential in Co
Slide 40: Detailed Financial Results
Detailed Financial Results (In Rs. Crores) % Q4 Q4 % FY07 FY06 Chg FY07 FY06 Chg Net Sales 18,313.0 11,396.5 61% 4,748.9 3,657.4 30% Other Income 370.1 243.9 52% 123.3 74.3 66% PBDIT 4,385.1 2,852.0 54% 1,173.2 1,004.1 17% Interest & Finance Charges 242.4 225.2 -8% 57.7 62.4 7% Depreciation & Impair
Slide 41: Segment Results
Segment Results Business Mix – FY07 C.E 60% 40% EBIT 85% 15% Sales 40% 60% Aluminium Copper Aluminium Copper Particulars Rs Crs. FY07 FY06 % Chg FY07 FY06 % Chg Net Sales & Op. Revenues 7,344 6,042 22% 10,978 5,354 105% EBIT 2,929 2128.1 38% 517.1 19.3 EBIT Margin 39.9% 35.2% 4.7% 0.4% Capital Emplo
Slide 42: Aluminium
ALUMINIUM
Slide 43: Aluminium Business: FY07 Highlights
Aluminium Business: FY07 Highlights Rs. crores 7344 22% First line of 214 pots- Prebake Smelter 6042 38% commissioned at Hirakud 3694 Metal Production increased by 3.2% to 38% 442,685 MT 2929 2684 VAP (Rolled and Extrusion) Production 2128 increased to 249,370 MT, an increase of 12.5% Over FY
Slide 44: Aluminium: Production Performance – FY07
Aluminium: Production Performance – FY07 Unit FY07 FY06 % Chg Q4 FY07 Q4 FY06 % Chg Alumina MT 1,198,658 1,203,383 -0.4% 296,411 299,006 -0.9% Metal MT 442,685 429,140 3.2% 114,334 106,825 7.0% Wire Rods MT 68,998 67,730 1.9% 16,948 16,738 1.3% Rolled Products MT 211,088 190,580 10.8% 48,322 45,536
Slide 45: Aluminium: Sales Revenues
Aluminium: Sales Revenues Sales Revenue FY07 FY06 % Chg Q4 FY07 Q4 FY06 % Chg Alumina Rs.Crs. 732 801 -9% 197 241 -18% Primary Metal Rs.Crs. 1,701 1,448 17% 533 397 34% Wire Rod Rs.Crs. 915 705 30% 233 201 16% Rolled Products Rs.Crs. 2,541 1,860 37% 691 529 31% Extrusions Rs.Crs. 609 410 49% 170 121
Slide 46: De-risk Product Portfolio – Focus on Value Added Products
De-risk Product Portfolio – Focus on Value Added Products VAP Sales Volumes (MT) VAP Revenues (Rs. Crores) 233342 3693 209752 25,366 543 26,003 38,110 2755 609 32,181 Foils 485 Extruded 410 Rolled 169,866 2,541 151,568 1,860 FY06 FY07 FY06 FY07 Recently acquired Mouda Sheet Plant and and Sangam Extr
Slide 47: Aluminium Business Profitability – FY07
Aluminium Business Profitability – FY07 Rs. Crs Sales increased by 21.5% 7,344 EBIT increased by 37.6% YoY. 6,042 Margins improved to 40% from 35%, backed 2,929 by:- 2,128 ¾ Improved realisations and higher volumes 4,415 ¾ Improved operating efficiencies 3,914 Despite ¾ Higher cost of Bauxite, Co
Slide 48: Copper
COPPER
Slide 49: Copper Business: FY07 Highlights
Copper Business: FY07 Highlights Rs. crores 10978105% Copper Cathode Production Increased by 38% to 290,425 MT 304% Sales of value added CC Rods grew 24% to 109,510 MT 774 Gold production increased to 10.334 5354 MT, an increase of 54 % 517 Sulphuric Acid Production increased by 40% to 892,5
Slide 50: Copper: FY07 Production
Copper : FY07 Production Production Unit FY07 FY06 % Chg Q4 FY07 Q4 FY06 % Chg Copper Cathodes MT 290,425 210,227 38.15% 81,460 66,748 22.04% CC Rods MT 109,033 88,687 22.94% 30,076 23,725 26.77% DAP/NPK MT 219,333 218,199 0.52% 53,794 55,850 -3.68% Sulphuric Acid MT 892,597 639,414 39.60% 240,860 2
Slide 51: Copper: FY07 Sales Revenues
Copper: FY07 Sales Revenues Rs. Crs. Product FY 07 FY 06 % Chg Q4 FY 07 Q4 FY 06 % Chg Copper Cathodes 5667 2462 130.2% 1320 984 34.2% CC Rods 3572 1919 86.1% 791 589 34.3% DAP/NPK 348 319 9.2% 84 96 -12.0% Sulphuric Acid 48 47 2.7% 12 18 -33.3% Gold 944 452 109.0% 274 147 86.2% Silver 89 40 122.1%
Slide 52: Copper Business Profitability - FY07
Copper Business Profitability - FY07 Rs. Crs. 12,000 10,97 Sales more than Doubled 8 Segment EBIT Higher than FY 06 517 10,000 due to Higher Sales Volumes 8,000 Improved Efficiencies 5,354 Higher LME 6,000 19 10,46 1 Better TcRc 4,000 Despite 5,335 Target Plus Impact 2,000 Smelter II Imp
Slide 53: Other Income - FY07
Other Income - FY07 Other Income increased due to:- Rs. Crs Higher Interest income on Income Tax refund INR Average Yields 8.50% 7.50% 370 6.50% 244 5.50% 4.50% Overnight 1 year 5 Year 10 Year FY-06 5.66% 5.97% 6.73% 7.12% FY-07 7.22% 6.96% 7.52% 7.78% FY06 FY07 Interim Dividend Companies receiv
Slide 54: Interest & Finance Charges – FY07
Interest & Finance Charges – FY07 Net Interest and finance charges Rs. Crs higher than last year due to Increase in working capital requirement at Copper driven by 418 higher LME Lower interest capitalization due 176 to completion of Copper III 255 Increase in average borrowing 30 cost 225 242
Slide 55: Taxes – FY07
Taxes – FY07 Rs. Crores Provision for Current Taxes higher 940 mainly due to Higher pre-tax profits which 649 rose 66% YoY and 995 Lower proportion of income 450 exempt from tax. 116 Deferred Assets have been created 334 for Impairment of Assets. -55 FY06 FY07 Current Tax Deferred Tax Effective
Slide 56: Thank You
Thank You
Slide 57: Sustained Performance – Q on Q
Sustained Performance– Q on Q Rs. crores 958 896 814 838 797 475 435 398 FY06 Q1 FY06 Q2 FY06 Q3 FY06 Q4 FY07 Q1 FY07 Q2 FY07 Q3 FY07 Q4 PBT
Slide 58: Aluminium: Sales Volumes
Aluminium: Sales Volumes Sales Tonnage Unit YTD YTD % Chg Q4 Q4 % Chg FY07 FY06 FY07 FY06 Alumina MT 299,762 388,646 -23% 86,427 106,295 -19% Primary Metal MT 134,756 146,785 -8% 40,884 35,755 14% Wire Rod MT 69,067 67,895 2% 17,439 16,834 4% Rolled Products MT 169,866 151,568 12% 45,708 39,830 15%
Slide 59: Copper: FY07 Sales Volumes
Copper : FY07 Sales Volumes Sales Volumes Units FY07 FY06 % Chg Q4 FY07 Q4 FY06 % Chg Copper Cathodes & others MT 181,944 130,436 39.49% 51,275 44,182 16.05% CC Rods MT 109,510 88,331 23.98% 31,039 23,851 30.14% DAP/NPK MT 220,935 216,902 1.86% 54,389 51,850 4.90% Sulphuric Acid MT 559,033 294,755 8