Tata Chemicals Limited · NSE:TATACHEM
Tata Chemicals — Investor Presentation (March 2006)
38 slides from Tata Chemicals's investor presentation, March 2006
Slide 1: On the growth path
“On the growth path” March 2006 1 Table of contents < India - Economic overview < The Tata Group - overview < Tata Chemicals - Business overview ¡ Segment overview Chemicals Fertilisers < Financial overview 2 1
Slide 2: India - Economic overview
India - Economic overview 3 India–poised for strong economic growth... Supported by a government committed to economic reforms Real GDP growth § World’s third largest economy in purchasing power parity (PPP) 9% 8.5% terms, second fastest growing after China 7.9% 8% § Nominal GDP estimated at US$625
Slide 3: Strong consumption & infrastructure growth; The India Advantage
..underpinned by strong consumption & infrastructure growth Consumption accounts for 64% of GDP Government emphasising infrastructure growth Roadways § Large scale projects like ‘The Golden Quadrilateral ’ & § Strong GDP growth and growing proportion of higher ‘North East South West Corridor ’ under
Slide 4: The Tata group - overview
The Tata group - overview 7 Tata Group – India’s largest and the most respected business group § Software § Automobiles § Telecom Services § Automation & IT and § Auto Components Control Systems Communications Engineering § Air Conditioning Sales:19% Sales:31% PAT: 13% PAT: 20% Assets: 26% Assets: 1
Slide 5: The Tata group - portfolio restructuring
The Tata group –portfolio restructuring unlocking significant value The Group’s aim is to double revenues every 4 years and profits every 3 years § Under the leadership of Ratan Tata, the The changing face of the Tata group over the last decade Tata Group has undergone a transformation Entries Exits
Slide 6: Tata Chemicals at a glance; Investment highlights
Tata Chemicals at a glance Sales break-up – FY2005 § Listing: Stock Exchange, Mumbai (BSE) and National Stock Exchange (NSE) STPP Others Cement 2.7% 4.2% § Ticker: TTCH IN 3.7% Salt Phosphatics § Founded: 1939 9.0% Fertilisers 33.9% § Market Capitalization US$1,149mm Urea § Revenue3 (US$mm): 664 26.
Slide 7: Strategic roadmap
Strategic roadmap 2006–present Strategy 2011 < Soda ash: 3rd largest player < Integrate Brunner Mond’s < Largest and most efficient globally operations player globally < Capacity expansion < Consolidate domestic market < Amongst the top 3 in < Fertilisers: One of the most domestic market < Expand TK
Slide 8: Strong revenue growth and operating profit
Strong revenue growth and operating profit through various market conditions and economic cycles Revenue Growth Operating Profit Growth & Margin Merger of HLCL1 Merger of HLCL1 700 674 150 30 28 27 600 561 % 125 25 : 33 GR 500 CA 419 100 20 US$ million 400 339 323 18 17 288 % 75 15 300 141 115 133 5
Slide 9: Experienced & committed management team
Experienced & committed management team Managing Director Prasad Menon COO (Food COO (Chemical) CFO COO (Fertiliser) Executive Director Additives) R. Mukundan Prashant .K. Ghose Kapil Mehan Homi Khusrokhan Satish Sohoni § Strong focus on shareholder returns - Tata Chemicals stock price has appreciat
Slide 10: Chemicals - soda ash; Global soda ash industry
Revenue Mix Chemicals Chemicals - & Food Additives 38% soda ash 19 Global soda ash industry The global demand supply situation favours producers with capacity utilisation of over 90% End markets by volume § Strong global demand at 47 million mt 2% 4% with China accounting for 21% of the 19% demand §
Slide 11: India - sector dynamics
India- sector dynamics Tata Chemicals is a dominant player with over 34% market share § Domestic demand is approximately 2.2 Demand Supply Position million mt and estimated to be growing at 4-5% 2.5 2.1 2.1 2.2 2.2 2.3 million mt 1.8 1.8 1.9 1.9 2.0 2.0 1.5 § Demand is being driven primarily by the
Slide 12: Tata Chemicals evolving into a global soda ash player
Tata Chemicals is evolving to become a global player in the soda ash business STRATEGIC ROADMAP Evolve into a true global player (7 - 10 years) • World’s best customers • World’s best resources • World’s best processes Develop as strong regional player (3 - 5 years) • Develop regional markets • Iden
Slide 13: Brunner Mond - a transformational acquisition
Brunner Mond—a transformational acquisition Resultant synergies will enhance Tata Chemicals ’ profitability Shareholder structure § TCL acquired 63.5% stake in Brunner Mond for US$112 million; EV <1x 2004 sales in December 2005 37% § 44% Brunner Mond is the second largest producer of Soda Ash in Eur
Slide 14: Other chemicals businesses
Other chemicals businesses § TCL is one of only two manufacturers in India, Marketshare: ~75% STPP § 65% sales through processing agreement with Hindustan Lever Revenues: [2.7% ] § Capacity expansion to cater to strong demand § Sales restricted to Gujarat region, Marketshare: ~5% Cement § Stable pri
Slide 15: Global salt industry overview
Global salt industry overview Salt (sodium chloride) is one of the largest-volume inorganic raw materials used by the chemical industry World production of sodium chloride § World production at 214 million metric tons 23.2% 31.3% § Historically, salt production has grown by 3.5% 1.3% per annum and g
Slide 16: Tata's positioning in domestic salt industry
Tata’s positioning in the domestic salt industry Tata Salt is the largest salt brand in India with approximately 40% market share Market shares in India § The Indian branded salt industry is growing at 21% 20% p.a 40% § ‘Tata Salt’ is a pioneer in branded salt market 10% 4% § High brand equity and p
Slide 17: Fertilisers - global market overview
Fertiliser segment Revenue Mix Fertilisers 62% 33 Fertilisers—global market overview A large and mature market, growing fastest in developing countries Global Fertiliser Demand § The Fertiliser market is worth around US$70 billion 180 180 3.9 4.5 in terms of 2005E sales Tonnes (m) 150 28.6 150 Tonne
Slide 18: Fertilisers - key drivers
Fertilisers—key drivers Several macroeconomic drivers influence long-term demand, while numerous microeconomic drivers affect short and medium-term demand Key Macroeconomic Drivers Change in Global per Capita World Population Growth Total Acreage GDP Fertiliser Demand Health of Farm Government Polic
Slide 19: Natural gas is the major cost driver for nitrogen
Natural gas is the major cost driver for nitrogen… Cost structure for urea 250 Alaska 2003 Urea price1 200 1.5 Netherlands 0.7 150 $ / MT 3.7 Ukraine U.S. —Henry Club 1.5 100 5.4 Middle East 5.4 50 Trinidad 0.5–0.75 1.6 Algeria 0 Indonesia 3 4 5 6 7 8 1.7 $ / MMBtu Other cash prod. cost Process gas
Slide 20: Agriculture - the demand driver
Agriculture – the demand driver The growth of the food processing industry will trigger the next ‘Green Revolution’ § India is amongst the lowest fertiliser users in the 200 20 Fertiliser consumption (Mn tonnes) world; can achieve higher yields by increased fertiliser Production of food grains (Mn t
Slide 21: Domestic urea policy and price perspective
Domestic urea policy and price perspective Urea policy perspective Urea price perspective Policy perspective Urea Prices—Actual and Forecasted § Prices for farmer decided by Government on a 300 300 quarterly basis Fertiliser consumption (Mn tonnes) Production of food grains (Mn tonnes) § Increase in
Slide 22: Tata Chemicals' Fertiliser business
Tata Chemicals’ Fertiliser business Source of stable revenues in a pre-dominantly government-controlled environment Domestic position § One of the leading players in urea and phosphatic Revenue mix of fertiliser business fertiliser segments STPP SSP 5% 3% Energy costs § Dual feedstock Babrala facili
Slide 23: Financial overview
Financial overview 45 Growing revenue & operating profit Revenue Growth Operating Profit Growth & Margin Merger of HLCL* Merger of HLCL* 700 674 150 30 28 27 600 561 % 125 25 : 33 GR 500 CA 419 100 20 US$ million 400 339 323 18 17 288 % 75 15 300 141 115 133 50 101 10 200 87 78 254 100 221 25 5 156
Slide 24: Current capitalization; Cash flow growth
Current capitalization Capital Structure Reducing cost of Debt Average interest cost 14 (US$m) March-05 Dec 05-(9 Mths) 11.7 Cash/ Packing Credit 12.2 2.2 12 Term Loans 20.0 20..0 FCCB 150.0 150.0 9.7 10 Short Term Loans 106.6 148.0 (%) 7.9 8 Total Debt 288.7 320.2 Shareholder's Equity 456.2 519.0 6
Slide 25: Financial ratios; Share price performance
Financial ratios ROACE ROE 12 11.6 11.5 20.0 16.9 11 10.7 15.0 12.3 12.0 10.5 (%) (%) 10 9.8 10.0 9.5 5.0 9 8.5 0.0 FY03 FY04 FY05 FY03 FY04 FY05 Profitability margins Credit ratios Net Debt/Equity 30.0 30.6 30.6 21.8 (1.9) 20.0 18.4 25.0 21.8 20.0 20.1 15.0 15.0 12.0 (%) 11.9 10.0 12.9 10.0 5.0 7.6
Slide 26: Investment highlights; Thank you
Investment highlights Third largest soda One of the most ash player efficient fertiliser globally players in the domestic market Strong financials to support growth Leveraging plans strong 'Tata' brand name Experienced and committed management team Excellent distribution platform 51 Thank you 52 26
Slide 27: Appendix: Tata Group profile
Appendix 53 Tata Group profile 54 27
Slide 28: Key milestones
Key milestones … 1868 < J N Tata started a trading firm, laying the foundation of Tata Group 1874 < Central India Spinning, Weaving and Manufacturing Company 1902 < Indian Hotels Company set up India's first luxury hotel 1907 < Tata Iron and Steel Company (now Tata Steel) set up India's first iron &
Slide 29: Brunner Mond acquisition
Brunner Mond acquisition 57 Brunner Mond’s production Light soda ash BULK 310 kte <Lostock PACKED 50 kte <Delfzijl Dense soda ash BULK 770 kte <Winnington PACKED 40 kte <Lostock <Delfzijl 58 29
Slide 30: Brunner Mond's production and soda ash sales
Brunner Mond’s production Sodium Bicarbonate 72 kte <Winnington (80 kte – planned) <(Delfzijl/Lostock) 59 Brunner Mond’s Soda Ash sales Sector wise Geography wise UK 66% Other Metals etc 7% 2% Detergents 12% Container Glass 37% Europe 31% Global 3% Sweden Other 5% 5% Chemicals Other Glass France 37%
Slide 31: Brunner Mond's sodium bicarbonate sales
Brunner Mond’s Sodium Bicarbonate sales Sector wise Geography wise UK 55% Personal Care 1.9% Fire Blasting Foam 1.1% 0.2% 4.4% Food FGT 5.2% 20.6% Chem. 5.9% Europe Detergents 29% 6.2% Global Pharm. Animal Feed 16% 8.8% 17.6% Other 17% Distributor Netherlands 11.9% 4% Sweden Haemo. Germany 47% 16.3%
Slide 32: Local sales and top export customers
Local sales—year 2005 Others 18% Athi River 25% Unilever 3% Kel Chemicals 3% Wotta Products Li 4% Osho Chemical Eastern Chemical 4% 11% Limes & Alums 4% Pan African Paper Central Glass 9% 5% Milly Glass 6% KNTC -Magadi Acco 8% 63 Top export customers: 2005 Berli Asiatic 16% Others 28% Hindustan Nati
Slide 33: Tata Kisan Sansar
Tata Kisan Sansar 65 Tata Kisan Sansar (TKS) - creating rural entrepreneurship Objectives < Help farmers create value < Improve our relationship with the farmers < Strengthen the Tata Brand in rural areas < Create a new distribution channel for agricultural inputs 66 33
Slide 34: Tata Kisan Sansar: delivering value
Delivering value 67 Tata Kisan Sansar: the road ahead 68 34
Slide 35: Tata Kisan Sansar: future direction
Tata Kisan Sansar: future direction < Improve reach, by adding more centres < Improve services ¡ Make credit facilitation more robust ¡ Help the farmer understand risk mitigation through crop diversification ¡ Help facilitate crop insurance < Improve supply chain efficiencies and provide farm-gate l
Slide 36: Fertiliser industry overview
Fertiliser industry overview 71 Dynamics of domestic fertiliser industry 1 2 Reforms 3 Identity 4 5 Dynamic Stable Refocus Emerge Crisis Competition Monopoly < Existing companies span customer’s hierarchy of needs – Govt.controls; Partial Knee-jerk Consolidation Survival of ‘solution Companies decon
Slide 37: Coke price perspective; Natural gas reserves
Coke price perspective China Coke - Export Prices 450 USD Per Metric Ton FOB 400 § Coke is a key component in the manufacture of synthetic soda ash comprising 50% of raw 350 material costs and 35% of variable costs 300 § Prices steeply increased over the last three 250 years primarily due to 200 § I
Slide 38: Global cost of production - natural soda ash
Global comparison – cost of production – natural soda ash 79.37 80 75 70.73 68.02 70 66.99 63.45 65 T/T of soda ash 60 53.21 55 50 45 40 FMC Wyoming FMC Wyoming TG Soda, USA General Chemical ANSAC, USA Magadi, Kenya Corp. (Mono Corp. (ELDM Partners, USA Plants), USA Plants), USA Ref.: CRU report on