Reliance Industries Limited · NSE:RELIANCE
Reliance Industries — FY2008 Earnings Presentation
115 slides from Reliance Industries's earnings presentation, Apr 21, 2008
Slide 1: FY 2007-08 Results
FY 2007-08 Results April 21, 2008
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements which may be identified by their use of words like “plans,” “expects,” “will,” “anticipates,” “believes,” “intends,” “projects,” “estimates” or other words of similar meaning. All statements that address expectations or
Slide 3: Contents
Contents Performance PerformanceHighlights Highlights Financial FinancialPerformance Performance Business BusinessReview Review Summary Summary www.ril.com 3
Slide 4: Performance Highlights
Performance Highlights E&P Days of ‘easy’ oil over – paradigm shift in prices 9 additional oil and gas discoveries in several blocks Sr. Block & Well Well Name Oil/Gas No. Discovery 1 KG- D6 R1 Gas 2 CY-D5 A1 Oil & Gas 3 KG-D4 MD1 Oil 4 KG III 5 P1 Gas 5 KG III 5 J1 Gas 6 KG V D3 A1 Gas 7 NE-25
Slide 5: Performance Highlights
Performance Highlights R&M Refining complexity, higher yields, superior product mix and wide crude slate enabled RIL to achieve superior GRM GRM at $15.5/bbl for the quarter and at $15/bbl for the full year Strong product cracks in Asia result in high Singapore complex margins Petrochemicals
Slide 6: Financial Performance FY 2007-08
Financial FinancialPerformance PerformanceFY FY2007-08 2007-08
Slide 7: Financial Performance FY 2007-08
Financial FinancialPerformance PerformanceFY FY2007-08 2007-08
Slide 8: Financial Results – FY 2007-08 (USD)
Financial Results – FY 2007-08 (In USD Million) % Change % 4Q FY08 3Q FY08 4Q FY07 FY08 FY07 over 4Q Change FY07 9,645 9,103 6,735 43% Turnover 34,713 27,227 27% 1,572 1,541 1,218 29% PBDIT 6,032 4,722 27% 975 2,050 726 34% Net Profit 4,850 2,747 77% Net Profit [excl. 975 985 726 34% 3,804 2,747 38%
Slide 9: Financial Results – FY 2007-08 (Rs. Crores)
Financial Results – FY 2007-08 (In Rs. Crores) % Change % 4Q FY08 3Q FY08 4Q FY07 FY08 FY07 over 4Q Change FY07 38,697 35,880 29,276 32% Turnover 139,269 118,354 18% 6,308 6,074 5,293 19% PBDIT 24,201 20,525 18% 3,912 8,079 3,156 24% Net Profit 19,458 11,943 63% Net Profit [excl. 3,912 3,882 3,156 2
Slide 10: Segment Results (US$ Million)
Segment Results (In US$ Million) 4Q 3Q 4Q Chg. Over FY08 FY07 Change In US$ Million FY08 FY08 FY07 4Q FY07 YoY Refining 7,150 6,636 4,837 48% Revenues 25,110 19,768 27% 708 663 523 35% EBIT 2,575 1,777 45% 9.9% 10.0% 10.8% EBIT (%) 10.3% 9.0% 15.5 15.4 13.0 GRM (US$ / bbl) 15.0 11.7 Petrochemicals 3
Slide 11: Segment Results (Rs. Crore)
Segment Results (In Rs. Crore) 4Q 3Q 4Q Chg. Over FY08 FY07 Change In Rs. Crore FY08 FY08 FY07 4Q FY07 YoY Refining 28,686 26,154 21,025 36% Revenues 100,743 85,932 17% 2,839 2,614 2,275 25% EBIT 10,332 7,724 34% 9.9% 10.0% 10.8% EBIT (%) 10.3% 9.0% 15.5 15.4 13.0 GRM (US$ / bbl) 15.0 11.7 Petrochem
Slide 12: Segment EBIT Bridge – FY08 Vs FY07
Segment EBIT Bridge – FY08 Vs FY07 Net Impact EBIT Variance Rs. Crore Rs. 3,352 Crore 45 (32) 18,988 334 366 2,639 15,636 FY07 R& M Petchem Oil & Gas Others Depreciation FY08 Operating Operating Operating Profit Profit Profit Higher EBIT due to higher operating profit from all three operating segmen
Slide 13: Net Profit – FY08 Vs FY07
Net Profit – FY08 Vs FY07 (Rs crore) Net Profit FY07 11,943 Operating Profit 3,260 Net Profit (before Other Income 417 exceptional) up by Rs 3,318 crore Interest 112 compared to previous year Depreciation 32 Tax 439 Net Profit FY08 15,261 Improved operating profits from Refining and higher other inc
Slide 14: Business Mix for FY08
Business Mix for FY08 Revenues FY08 EBIT FY08 Oil & Gas Others Oil & Gas Others 1.7% 0.5% 7.9% 0.2% Petchem 33.7% Petchem Refining Refining 37.5% 54.4% 64.1% Refining and petrochemicals contributed 98% of revenues and 92% of EBIT www.ril.com 14
Slide 15: Financial Ratios – FY08
Financial Ratios – FY08 Ratios Mar-08 Mar-07 Net Debt : Equity 0.35 0.34 Net Gearing 22% 25% Interest Cover 12.3 11.9 Weighted Avg. Cost of Debt (% ) 5.9 7.1 Avg. Maturity of Debt (years) 5.0 5.4 Forex Debt (% ) 85.0 73.0 ROCE (% ) 20.1 20.5 ROE (% ) (Adjusted) 23.0 24.0 Strong balance sheet with co
Slide 16: Capex – FY08
Capex – FY08 4Q 3Q 4Q FY08 FY08 FY07 (in US$ Million) FY08 FY07 855 1,236 758 Oil & Gas (E&P) 3,351 1,317 232 136 76 Refining & Marketing 663 329 18 57 22 Petrochemicals 126 106 294 136 15 Common 721 314 1,399 1,565 871 Total 4,861 2,066 Almost 70% of the capex incurred in Oil & Gas business Cash pr
Slide 17: RIL Financial: 5 Year Trends
RIL Financial: 5 Year Trends (Rs. Crores) 140,000 Revenues 25,000 EBITDA 120,000 – 23% – 21% G R 20,000 GR 100,000 CA CA 80,000 15,000 60,000 10,000 40,000 5,000 20,000 0 0 FY04 FY05 FY06 FY07 FY08 FY04 FY05 FY06 FY07 FY08 16,000 PAT 12,000 8,000 30%CAGR 30% CAGRin in PAT PAT 4,000 0 FY04 FY05 FY06
Slide 18: RIL Financial: 5 Year Trends (Contd.)
RIL Financial: 5 Year Trends (Contd.) 30% 350,000 Market Cap. (Rs. Crs.) ROCE - ROE ROCE ROE 300,000 25% 250,000 % 54 20% – GR 200,000 CA 15% 150,000 10% 100,000 5% 50,000 0 0% FY04 FY05 FY06 FY07 FY08 FY04 FY05 FY06 FY07 FY08 Consistent performance across all key metrics www.ril.com 18
Slide 19: Stock Performance
Stock Performance Source: Bloomberg Significant out-performance over benchmark indices www.ril.com 19
Slide 20: Business Review
Business BusinessReview Review
Slide 21: Exploration & Production (E&P)
Exploration Exploration&&Production Production(E&P) (E&P) www.ril.com 21
Slide 22: E&P Environment
E&P Environment 120 ($/bbl) IPE Brent Futures Energy demand driven by secular growth Brent Average – OECD slowdown mitigated by demand 110 from Middle East and Emerging Economies 100 Energy supply challenge - production from existing fields declining at about 5% 90 May-08 Jun-08 Jul-08 3Q08 4Q08
Slide 23: Limited access to New Resources
Limited access to New Resources Resource Nationalism - larger state 1960s 2008(a) National Oil control of oil and gas resources Company Reserves Full International Oil Company Access 1% Soviet 16% – Restricted access to large Reserves 14% resources Limited International – Increasing fiscal terms F
Slide 24: New Resources in Challenging Frontiers
New Resources in Challenging Frontiers Future oil and gas deepwater potential in the world New Finds are in Frontier areas – Arctic, Deepwater, Oil Sands, Shale Exploitation of Deepwater resources remain low – Deepwater resources aggregate to 300 Billion barrels – About 30% discovered and only 2
Slide 25: Key Trends in LNG
Key Trends in LNG 1600 Asian LNG prices to rise with demand, (MMSCD) Global LNG Demand cost escalation and a tight supply market 1200 New and future LNG contracts expected China India ROW to have higher crude linkages 800 General trend of shorter contracts 400 Spot LNG prices still high due
Slide 26: Indian Business Environment
Indian Business Environment Energy demand mirroring growth in 300 Domestic Gas Scenario 261 280 economy 250 226 196 197 202 200 190 179 Gas demand set to treble by 2012 150 from current level of 110 MMSCMD - 110 120 supply unlikely to keep pace 100 81 50 Dependence on LNG imports to 0 increase
Slide 27: E&P Strategy
E&P Strategy Grow domestic business and also look beyond – Early development to supply into Indian markets – Reserve accretion in India and other countries Transfer competencies to replicate success – Business structure and processes to support organic and inorganic growth globally Portfolio d
Slide 28: RIL Upstream Business
RIL Upstream Business Exploration Development Production Pipelines Marketing Largest acreage KG-D6 gas 30% stake in East –West Bulk gas in the private KG-D6 oil PMT fields pipeline network marketing sector NEC25 gas — Joint under Development of Domestic CBM gas operator developme
Slide 29: Key Differentiating Factors for RIL
Key Differentiating Factors for RIL Large acreage especially in the emerging hydrocarbon region along the east coast of India Pioneering exploration and development work in India’s deepwater basins Commercial discoveries in four of India’s major offshore basins in the recent past Efficient p
Slide 30: RIL E&P Business – Journey So Far
RIL E&P Business – Journey So Far Acquisition Exploration Appraisal Development Production & Marketing KG Blocks NEC Blocks KG D6 MN Blocks NEC 25 KG D6 (D1/D3 & CY Blocks MA) KG D6 KG D6 GS 01 NEC25 GS Blocks NEC25 PMT CY D5 PMT CB Blocks KG III 5 & 6 Yemen KG -V-D3 Yemen KK Blocks Yemen KGD4 Inter
Slide 31: RIL – Domestic Portfolio
RIL – Domestic Portfolio No. of Acreage - Deepwater Description Blocks '000 Sq KM Acreage % PMT 2 2.7 Pre NELP 4 22.5 Nelp 1 5 38.7 59% Nelp 2 2 14.6 Nelp 3 9 113.5 99% Nelp 4 1 25.6 100% Nelp 5 5 51.5 99% Nelp 6 7 76.1 100% CBM 5 3.9 International 11 78.8 70% 51 427.8 80% Success Ratio Success Dril
Slide 32: RIL - International Portfolio
RIL - International Portfolio Consolidated presence in Middle East – Plan to drill Oman Block 18 – 2H FY2008-09 Tapping opportunities in Columbia and Peru – Signed a deal in Peru for exploration International footprint with focus on Asia-Pacific & Latin American opportunities www.ril.com 32
Slide 33: Domestic Exploration Performance
Domestic Exploration Performance Discoveries in 2007-08 Basin Location Block & Well Disc. No. Discovery Guj. SW GS-01 - B1 D33 Gas Saurashtra Godavari DW KG- D6 - R1 D34 Gas Cauvery DW CY-D5 - A1 D35 Oil & Gas Krishna DW KG-D4 - MD1 D36 Oil Krishna SW KG III 5 - P1 D37 Gas Krishna SW KG III 5 - J1 D
Slide 34: Discoveries in FY08
Discoveries in FY08 KG basin Discoveries: – Extension of the 'Biogenic Gas Corridor' across the basin Cauvery Discovery – Field Delineation and reservoir characterization underway – Further prospecting underway to establish the extents of this play Gujarat Saurashtra Discovery – Discovery esta
Slide 35: Rig Fleet Update
Rig Fleet Update Current fleet - 4 rigs ‘000 US$ per day – 2 deep / ultra deepwater Market Average Rate Day Rates of Deepwater Rigs RIL Average Contract Rate 800 – 2 Jack-ups 700 Rigs contracted for FY 2009 600 – 3 deepwater 500 400 – 1 onshore rig 300 3 more deepwater rigs 200 contracted – cu
Slide 36: KG-D6: Accelerating Monetisation of reserves in India
Accelerating Monetisation of reserves in India Deepwater Fields – Estimated Time From First Discovery to Production 24 22 20 18 16 Time (Years) 14 12 Global Average of 9 Years 10 8 6 4 2 0 Project X KG-D6-RIL Project T Project Z Project I Project J Project C Project D Project H Project N Project R P
Slide 37: Operating under severe resource constraints
Operating under severe resource constraints Market for deepwater rigs is expected to remain tight in the coming years – New deep water discoveries 800000 Drill Ship Day Rates (> 7500 Feet) – Limited Vendors globally 700000 600000 – High oil prices supporting record 500000 upstream spend 400000 300
Slide 38: D1 D3 Gas Fields - Project on Track for First Gas
D1 D3 Gas Fields - Project on Track for First Gas by 2H 2008 Drilling & Well Offshore Onshore Completions ■ Drilling of wells: 17 drilled Subsea, CRP Terminal ■ Well completions hardware delivered ■ XMT: 6 nos. recd at site. 3 No. ■ Structural: 78% completed ■ Two rigs deployed for well completions
Slide 39: KG D6 - D1 D3 Gas Field Development
KG D6 - D1 D3 Gas Field Development Sub Surface, Drilling and Onshore Terminal and Sub Sea Installation Well Completions Infrastructure Facilities Development Concept: Full Sub-sea Production System with Shallow Water Control & Riser Platform and Onshore Processing. Shallow Water Compression Platfor
Slide 40: Tog Mor Laying pipelines
Tog Mor Laying pipelines www.ril.com 40
Slide 41: Offshore Installation Works
Offshore Installation Works Audacia – Stringer Stemat 82 – Umbilical Laying www.ril.com 41
Slide 42: Lorelay laying pipelines
Lorelay laying pipelines www.ril.com 42
Slide 43: Lorelay installing PLET
Lorelay installing PLET www.ril.com 43
Slide 44: Sub-Sea Installation Activities: Express
Sub-Sea Installation Activities: Express SDA2 Rigging SDA2 in Splash Zone ROV Monitoring during Installation www.ril.com 44
Slide 45: Installation of Deepwater PLEM
Installation of Deepwater PLEM www.ril.com 45
Slide 46: CRP Installation Completed
CRP Installation Completed NORTH DECK LOAD OUT www.ril.com 46
Slide 47: LFP to OT Pipe Lines & Umbilicals
LFP to OT Pipe Lines & Umbilicals Pipe Welding Activities in Progress www.ril.com 47
Slide 48: Onshore Terminal - Then and Now
Onshore Terminal - Then …….and Now Onshore Terminal 25 km from Kakinada Spread over approx 300 acres of land April 2008 May 2006 Peripheral bund constructed. About 2 Million meters band drains installed for the peripheral bund to facilitate drainage OT site raised to +4.2 m above MSL by hydr
Slide 49: MEG Regeneration / Reclamation area
MEG Regeneration / Reclamation area www.ril.com 49
Slide 50: Fuel Gas Skids
Fuel Gas Skids www.ril.com 50
Slide 51: Flare and Hot Oil Heaters
Flare and Hot Oil Heaters www.ril.com 51
Slide 52: Chemical Injection skids – MEG area
Chemical Injection skids – MEG area www.ril.com 52
Slide 53: MA Status - Project on Track for First Oil
MA Status - Project on Track for First Oil by 2H 2008 Drilling & Well Offshore FPSO Completions Subsea ■ Drilling of Wells : Drilling of 3 wells ( 2 ■ All subsea Hardware received. ■ All Major modules received and production wells + 1 Gas Injection installed on FPSO except for Gas well) completed ■
Slide 54: Key Components - MA Field Development
Key Components -MA Field Development www.ril.com 54
Slide 55: FPSO
FPSO www.ril.com 55
Slide 56: FPSO
FPSO www.ril.com 56
Slide 57: FPSO Gas Compression and Dehydration
FPSO FPSO Gas Compression and Dehydration www.ril.com 57
Slide 58: FPSO Handling Capacities
FPSO Handling Capacities Oil storage = 1.3 MM bbls Liquid handling = 80,000 BPD Gas processing = 9.0 MMscmd Gas dehydration unit = 9.0 MMscmd Gas injection = 3.0 MMscmd Gas export = 9.0 MMscmd www.ril.com 58
Slide 59: Key Challenges
Key Challenges Weather uncertainties: Met / Oceanic conditions Complex logistics: Vessel Mobility Management - 70 vessels Sensitivity to local issues: Managing local fisherman Resource constraints − Tight supply chain market − Global shortage of manpower Project on track to deliver first gas
Slide 60: Other Development Projects
Other Development Projects Commerciality of nine satellite gas discoveries in KG D6 approved Development of NEC25 – Concepts and other G&G studies underway – Drilled 11 Exploration wells with 8 discoveries Development Plan for CBM discoveries in Sohagpur East and West Blocks approved Apprais
Slide 61: Panna-Mukta and Tapti Update
Panna-Mukta and Tapti Update Panna – Mukta: Crude production up 9% to 1.91 MMT and Gas production up 22% to 2,030 MMSCM Tapti block: Condensate production up 82% to 232,000 MT and Gas production up 51% to 3,365 MMSCM Panna-Mukta EPOD yielded incremental production of 850bopd Tapti NRPOD comp
Slide 62: Summary
Summary KG-D6 - amongst most complex deep water projects - on schedule for delivery of first gas and oil by H2 FY2008-09 Growing market and competitive pricing assures off take in the domestic market Resources mobilised to continue exploration, appraisal and development in other blocks E&P t
Slide 63: Refining & Marketing Business
Refining Refining&&Marketing MarketingBusiness Business www.ril.com 63
Slide 64: Global Business Environment
Global Business Environment Crude oil touched an all-time high - crossed $110/bbl in Mar’2008 OPEC remains unfazed with price rally. Keeps quota unchanged Non-OPEC capacity additions suffering schedule delays; Spare capacity only in the hands of OPEC Geopolitical concerns persist Asian Sou
Slide 65: Global Business Environment (Contd.)
Global Business Environment (Contd.) Middle distillate cracks crossed $30/bbl; Light distillate cracks under pressure Oil demand remains healthy, forecast to grow at 1.3 MMBD in 2008 – Global economic growth positive, supported by emerging economies – Driven largely by China, India, Middle East
Slide 66: Why is crude so bullish
Why is crude so bullish….. SUPPLY CONCERNS $/BBL NYMEX WTI Daily Closing Prices 115 – OPEC did not increase quota 110 105 – Nigeria remains a concern 100 amidst renewed threats for 95 90 kidnapping and militants attacks 85 OTHERS 80 75 – Weakening of US dollar 70 65 – Flow of investor funds into
Slide 67: Product Price Scenario
Product Price Scenario Gasoline / Gasoil price performance $/bbl US Singapore Q4-2007 Q1-2008 Q4-2007 Q1-2008 WTI (Cushing) Dubai 90.47 97.86 82.83 91.27 RBOB (Gasoline) Gasoline 95.77 104.28 94.10 104.13 Heating Oil Gas Oil 104.38 113.21 102.13 114.13 In US, Gasoline cracks improved only marginal
Slide 68: Singapore Product Deltas
Singapore Product Deltas US$/bbl 35 35 Gasoil - Dubai Crack Jet/Kero - Dubai Crack 30 30 25 25 20 20 15 15 10 10 D 7 07 Au 7 8 N 7 Se 7 Fe 8 7 M 8 D 7 M 7 Ju 7 07 7 Au 7 N 7 8 Se 7 Fe 8 7 M 8 7 O 7 Ja 7 -0 l- 0 -0 -0 -0 0 0 0 0 -0 r-0 -0 l- 0 -0 -0 -0 0 0 0 r-0 0 -0 n- n- n- g- b- n- p- g- b- p- ov
Slide 69: RIL - Refinery Operating Highlights
RIL - Refinery Operating Highlights Refining complexity, higher yields, superior product slate and export revenues enabled RIL to achieve GRM at $15.5 /bbl for the quarter Average GRM at US$ 15 / bbl in FY08 - with continued strong performance against all global benchmarks Refinery utilization
Slide 70: Export markets
Export markets Europe Africa 20% 18% Americas 7% Asia / Middle East 55% Thrust on emerging markets continued for transportation fuels Commenced export of 50ppm Ultra Low Sulphur Diesel to Europe www.ril.com 70
Slide 71: Refinery Product Sales: FY08
Refinery Product Sales: FY08 2007-08 2006-07 Export Domestic Total Export Domestic Total LPG - 2,712 2,712 - 2,671 2,671 HSD 11,482 929 12,411 9,147 2,031 11,178 MS 3,607 322 3,929 3,154 388 3,542 ATF 3,276 20 3,296 2,834 31 2,866 Naphtha 3,273 3,965 7,238 2,276 5,093 7,369 Propylene - 1,019 1,019 -
Slide 72: Margin Benchmarking
Margin Benchmarking 18 16 15.0 14 11.7 12 10.3 US$ / bbl 10 8.8 8.9 8 7.6 6.1 5.1 6 4.9 4 4.8 2 0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 RIL US Gulf Coast Mediterranean Rotterdam Singapore Cracking margins Source: Reuters / Company Data Increasing out-performance over the global benchmarks
Slide 73: RIL Refining Business Trends
RIL Refining Business Trends 120000 Refining Revenues (Rs. Crs) 5 Yr. CAGR – 24% 80000 40000 0 FY03 FY04 FY05 FY06 FY07 FY08 24 Export Performance 22.1 18 16 20 63% CAGR in value 16.1 14 16 12 10 12 8 8 1.4 6 4 4 6.6 2 0 - FY03 FY04 FY05 FY06 FY07 FY08 Volume (MMT) Value (US$ Billion) www.ril.com 73
Slide 74: RIL Margin Trends
RIL Margin Trends EBIT (Rs crore) RIL GRM ($/bbl) Singapore GRM ($/bbl) 16 15.0 12,000 14 10,000 12 8,000 10 8 6,000 5.3 7.6 6 4,000 4 2,000 2 2.4 0 - FY03 FY04 FY05 FY06 FY07 FY08 Refining EBIT records a CAGR of 36% over the last 5 years Premium over Singapore complex margins have more than doubled
Slide 75: Crude Oil Outlook
Crude Oil Outlook Demand outlook positive, despite fears of slower economic expansion Vigilant OPEC not looking to add production even at all-time high prices New investment and index funds chasing commodities as a hedge Ailing US economy leading to low interest rates, weaker dollar and flig
Slide 76: Product Outlook
Product Outlook Global demand is expected to grow by a estimated 1.3 MMBPD – Agency forecasts range between 1.21 – 1.30 MMBPD – Downward revision by about 0.2 mbd from previous quarter estimates Demand growth is expected to come from Asia Pacific, Middle East, Latin America and Russia. US demand
Slide 77: RPL Project Progress
RPL Project Progress Overall implementation progress at 90% Project engineering efforts completed Procurement activities nearing completion Overall construction progress nearing 80% mark for the complex Nearly 65% of project scope of equipments already installed Startup planning and oper
Slide 78: GAPCO Update
GAPCO Update Acquired towards enhancing wider footprint in petroleum retailing Owns 250 retail outlets and 225,200 KL of storage capacity with 2 large coastal terminals at Dar-es- salaam and Mombassa in East Africa Significant progress made already – Successfully revived business in Tanzania –
Slide 79: Refining Business Summary
Refining Business Summary Oil demand growth expected to stay firm, supported by rising consumption in emerging economies. Demand softening likely in the US and Europe WTI prices likely to average upwards of $90/bbl in 2008 Product spec changes to present exciting trade opportunities Extended
Slide 80: Petrochemicals
Petrochemicals Petrochemicals www.ril.com 80
Slide 81: Business Environment: Polymers
Business Environment: Polymers Global – Firm price trends across the value chain – Global polymer demand growth strong at 5.5% – New cracker capacities on-stream ( in million tonnes) FPC, Taiwan Æ 1.2 (Q1FY08) Qapco, Qatar (expansion) Æ 0.2 (Q2FY08) Arya Sasol, Iran Æ 1.0 (Q4FY08) Jam Petr
Slide 82: Product Deltas
Product Deltas USD/MT Q4 FY08 Q3 FY08 Q4 FY07 FY08 FY07 PE - Naphtha 694 628 697 651 704 PP - Propylene 134 211 52 163 54 PVC - EDC 461 448 345 457 387 Margins remained robust in ’07-08 www.ril.com 82
Slide 83: Ethylene: Global Demand Supply
Ethylene : Global Demand Supply 200 100% Demand / Capacity Op Rate % MMTPA Demand Op Rate 150 95% Capacity 100 90% 50 85% 0 80% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source -CMAI Operating rates peaked at 91% in 2008 Startup delays in Middle East can push operating rates to 93% www.
Slide 84: Middle East Capacity Expansions Update
Middle East Capacity Expansions Update In MMTPA 2007 2012 Saudi Arabia 9.5 17.6 Iran 5.0 7.6 UAE 1.4 2.0 Qatar 2.9 4.0 Kuwait 0.8 1.8 Total 19.6 32.5 # in bracket indicate capacity in 2012 32 mmta of new capacities underway; 11 mmta to go onstream by 1H 2009 www.ril.com 84 Source : CMAI web site
Slide 85: Global Cracker Vintage
Global Cracker Vintage 2007 2012 10% 23% 29% 31% 17% 9% 19% 10% 31% 21% 0-5 Yrs 5-10 Yrs 10-20 Yrs 20-30 Yrs 30+ Yrs 30% of global capacity is vulnerable to a down cycle www.ril.com 85
Slide 86: Growth Opportunities
Growth Opportunities Current Market Size Estimated Market Size 148 Mn Tons 192 Mn Tons in 2012 India 4% India 5% China 23% China Rest of the 28% Rest of World World 50% 51% US US 22% 17% Source : CMAI 52% of incremental demand to come from India and China www.ril.com 86
Slide 87: RIL Downstream Portfolio
RIL Downstream Portfolio Capacity Site Polymer Remarks KTA Baroda LD 95 Only domestic producer PP 165 Only plant with Adipol technology in Asia PVC 55 Gandhar PE 160 Speciality HM Grades PVC 245 High value - Low K grades Hazira PE 450 Swing plant - Quick to respond to market needs PP 400 ICP Capabil
Slide 88: Polymer Production: FY 2007-08
Polymer Production: FY 2007-08 Industry RIL FY07 FY08 % change FY07 FY08 % change PE 1,925 2,004 4.1% 1,011 1,084 7.2% PP 1,917 1,978 3.2% 1,641 1,712 4.3% PVC 889 958 7.8% 561 578 3.0% TOTAL 4,731 4,940 4.4% 3,214 3,374 5.0% Slowdown in industry capacity addition despite strong demand due to concer
Slide 89: Polymers – Demand / Supply Outlook
Polymers – Demand / Supply Outlook PE – Global demand at 68 MMT in 2007; growing at over 5% annually – 50% incremental demand to come from China and India – China and India growing 10% annually, aided by robust demand from downstream user industries PP – Global demand grew by 5.6% to 44.5 MMT in
Slide 90: PE – Sector Outlook
PE – Sector Outlook Demand likely to grow at healthy pace – Driven by large consumption base and retailing Key Growth Sectors – HD : HM Film, HD/HM Pipe and Blow Molding – LLD : Flexible Packaging, Roto Molding Films/ Pipes continue to grow over 20%. – Packaging: Retail boom – Pipes: Infrastru
Slide 91: PP – Sector Outlook
PP – Sector Outlook Demand: Double digit growth likely to continue in ’08-09 – Likely to double in next 7 years reaching 4.0 MMT by 2014 Raffia and BOPP with 50% sector share would remain mainstay – Cement industry to drive growth Films/ Sheets/Moulding would also grow over 10% – Packaging Æ R
Slide 92: PVC – Sector Outlook
PVC – Sector Outlook With infrastructure growth demand would continue to be healthy – Likely to double in next 7 years reaching 2.7 MMT by 2014 Pipes and fittings with 70% sector share would remain mainstay – Government focus on Irrigation / Sanitation Films/ Sheets and Calendering would also
Slide 93: Polymer Price Outlook
Polymer Price Outlook 1600 $/MT PE PP PVC Long Term Averages 1400 1200 1000 800 600 400 Source: Platts 03-04 04-05 05-06 06-07 07-08 10 yr 5 yr Prices to remain firm in the near term www.ril.com 93
Slide 94: Polymer Summary
Polymer Summary Demand outlook remains positive, particularly in India and China Polymer prices likely to stay firm, pending new capacity additions in ME RIL to continue focus on fast growing domestic market RIL cost competitiveness to remain with refining off-gas based cracker at Jamnagar w
Slide 95: Polyester
Polyester Polyester www.ril.com 95
Slide 96: Business Environment: Polyester
Business Environment: Polyester International cotton prices averaged 25% higher at US$ 1631/MT in 2007 Polyester margin improved, despite higher input costs High MEG prices due to unplanned capacity shutdowns in Middle East Slowdown in capacity additions in China due to monetary tightening,
Slide 97: Margin Environment
Margin Environment Q4 FY08 Q3 FY08 Q4 FY07 FY08 FY07 PX - Naphtha 338 339 620 430 672 PTA - PX 83 92 77 107 86 MEG - Naphtha 626 1,022 508 712 499 POY - PTA/MEG 455 320 375 348 301 PSF - PTA/MEG 327 195 257 222 168 PET - PTA/MEG 262 126 226 188 172 Standalone polyester margins improve - chain margin
Slide 98: Global Polyester Fiber Production
Global Polyester Fiber Production Polyester Growth: 5.4% ; All fiber growth 3% (CAGR 2005-15) Key Growth Drivers 45000 • Economic growth, 40000 New applications, Life 35000 style changes and 30000 growing affluence 25000 • Higher cotton prices KT 20000 15000 • Short term driver: 10000 Beijing Olympi
Slide 99: Global Per Capita Fibre Consumption
Global Per Capita Fibre Consumption 6 Polyester Filament 5 Polyester Staple Cotton struggling Polyamide Filament 4 Polyamide Staple Acrylic 3 PES filament to overtake PES staple to overtake Polypropylene cotton by 2015 cotton by 2020 2 Cellulosic Cotton 1 Wool 0 1980 1985 1990 1995 2000 2005 2010 20
Slide 100: World Fibre Demand
World Fibre Demand CAGR 2005-2010 -0.4% 70000 Nylon -0.5% Acrylic 6% 60000 Cellulose Cotton 1% 50000 40000 KT 30000 4.2% PSF 20000 6.5% PFY 10000 - Source: PCI Textile industry growth 3% Fibre growth rate : Positive correlation with GDP Polyester: Foundation to the growth of global industry www.ril.
Slide 101: Cotton: Global Supply Demand Outlook
Cotton: Global Supply Demand Outlook 2006-07 2007-08 (E) 2008-09 (P) Acreage Mn Ha 34.7 33.8 33.8 Yield Kg/Ha 766 763 794 Production Mn MT 26.7 26.0 26.9 Year on year growth -2.6 3.3 Consumption Mn MT 26.7 27.1 27.5 Year on year growth 1.8 1.3 Closing Stock Mn MT 12.7 11.6 11.0 Stock-to-use ratio %
Slide 102: Cotton Outlook
Cotton Outlook USD/MT Cotlook ‘A’ 1900 Long term avg: $ 1428/MT 1500 5 Yr avg: $ 1366/MT 1100 PSF 700 2008 (P) 2009 (P) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Cotlook ‘A’ c/lbs 63 58 71 94 86 79 72 59 53 57 42 59 68 52 56 59 74 80 83 Cotton prices on Upc
Slide 103: Indian Business Environment
Indian Business Environment Demand Growth FY 2007-08 26% 18% 12% PFY PSF PET Custom duty of polyester products reduced to 5% from 10% (mid year revision to 7.5%) Major filament capacity (~1.3 MMT) being planned in view of strong domestic demand – Backward integrated texturisers have better margi
Slide 104: Polyester Production: FY 2007-08
Polyester Production: FY 2007-08 Industry RIL FY07 FY08 % change FY07 FY08 % change POY 1,415 1,684 19.0% 616 683 10.9% PSF 774 897 15.9% 610 621 1.8% PET 490 510 4.1% 256 268 4.7% TOTAL 2,679 3,091 15.4% 1,482 1,572 6.1% Growth in RIL production reflects full year impact of additional capacity adde
Slide 105: Upstream & downstream squeezing PX
Upstream & downstream squeezing PX 1800 1800 Naptha in PSF PX Delta Cotton prices PTA Delta MEG in PSF capping Polyester 1600 PSF Price Cotton Price 1600 1400 1400 1200 1200 MEG prices Skyrocket on the 1000 back of global 1000 outages 800 800 600 PX deltas 600 under pressure 400 400 200 Crude drivin
Slide 106: Domestic Market Outlook: 2008-09
Domestic Market Outlook : 2008-09 Cotton prices to remain firm; to support polyester prices Polyester operating rates to improve Margins to improve with easing of raw material supplies New capacity addition in China slowing down or deferred India: Government action review – Extended DEPB s
Slide 107: Domestic Fiber Market: Growth outlook
Domestic Fiber Market: Growth outlook KTA 2006-07 2011-12 CARG (07-12) Raw Cotton 3580 5914 10% PSF 676 1907 23% PFY 1160 3273 23% Others 627 906 8% Grand total 6043 12000 12% Source: CITI Incremental polyester demand of 3.4 MT in the next 5 years www.ril.com 107
Slide 108: Polyester: Journey beyond Apparels
Polyester: Journey beyond Apparels India World Home Home Textiles Textiles Automotive 5% 16% 3% Apparel 41% Industrial Automotive 2% 20% Industrial Apparel 90% 23% Source: PCI Huge untapped potential in non-apparel applications in India www.ril.com 108
Slide 109: Innovations
Innovations New Products Recron Polylon Recron Stretch Octagonal Black Deep Dye Low Shrinkage FDY Carpet fibre Low Pill Tow Recrobulk Short cut fibers for wet laid application Developed a strategy for implementing “open innovation” Self sustaining innovative process capability for id
Slide 110: Growth Strategy
Growth Strategy Pursue both organic and inorganic growth opportunities Integrated POY-PTY for new capacity to reduce packing and logistic costs Participate in high value growing business segments Enhance innovation through integration of efforts between research, manufacturing and business d
Slide 111: Trevira Performance
Trevira Performance 2006 2007 Sales (KT) 126 138 New Product Development Four new patent applications Marketing Focus on premium automotive, functional wear, home and technical textiles market Thrust on quality conscious markets in Germany, France, Italy, US and Spain Leading customers inclu
Slide 112: Recron Malaysia (Hualon): Update
Recron Malaysia (Hualon): Update Management control taken over in Dec ’07 – Physical control of assets in Jan ‘08 Complete overhaul of production being done to optimize assets Quality improvement being undertaken to bring it to RIL standards Strategic initiatives taken to reduce cost, utilit
Slide 113: Summary
Summary Summary
Slide 114: Summary
Summary Superior performance from world-class assets in all our businesses Best-in-class project execution for RPL refinery project - Reliance’s refining capacity to double - Jamnagar to be the largest refining hub in the World Production of 80 MMSCMD gas from D1 & D3 fields to double India’s
Slide 115: Thank You
Thank ThankYou You