Indo Rama Synthetics (India) Limited · NSE:INDORAMA
Indo Rama Synthetics (India) — Q4 FY2006 Earnings Presentation
44 slides from Indo Rama Synthetics (India)'s earnings presentation, Apr 21, 2006
Slide 1: Indo Rama Synthetics (India) Ltd. Analyst Meet
Indo Rama Synthetics (India) Ltd. Analyst Meet Quarter 4 & FY 2005-06 Results and The opportunities ahead Mumbai 21 April, 2006
Slide 2: Agenda
Agenda 1. Union Budget implications 2. Reiterating the polyester story 3. Indo Rama Performance • Financial Performance • Operating Performance • Expansion project 4. The Road Ahead 2 2
Slide 3: Implication of the Union Budget
Implication of the Union Budget… Winds of change in the Polyester Industry in India
Slide 4: Prior to Budget: 2006-07
Prior to Budget : 2006-07 Inconsistent and Discriminatory Tariff policies EXCISE DUTY CUSTOM DUTY Cotton Polyester Cotton Polyester Crude Oil -- -- Crude Oil 10% PX -- 16% PX -- 5% PTA/MEG -- 16% PTA/MEG -- 15% Fibre nil 16% Fibre 10% 15% Yarn / PFY nil 8% / 16% Yarn 15% 15% Fabric nil / 4% nil / 8%
Slide 5: Post Budget: Rationalisation of Excise Duties
Post Budget : 2006-07 Rationalisation of Excise Duties… Particular Earlier Current Reduction Polyester Fibre & Yarns 16% 8% 8% RESULT Reduced cost to downstream customers IMPACT • Substantial increase in volumes • Polyester competitiveness vis-à-vis Cotton improves 5 5
Slide 6: Post Budget: Rationalisation of Customs Duties
Post Budget : 2006-07 Rationalisation of Customs Duties… Particular Earlier Current Reduction PTA & MEG 15% 10% 5% RESULT Reduction in cost of manufacturing polyester IMPACT Polyester industry is allowed flexibility to either increase margins or to increase volumes 6 6
Slide 7: Post Budget: Minor inconsistency still persists
Post Budget : 2006-07 Minor inconsistency still persists…. Particular Earlier Current Reduction Excise duty - PTA & MEG 16% 16% Nil Excise duty - Polyester FG 16% 8% 8% RESULT Inverted duty structure IMPACT • Accumulation of CENVAT Credit leading to higher working capital requirements • Second-tier
Slide 8: Impact of Duty change in consumption
Impact of Duty change in consumption Zero 3.5 Cotton duty 3.0 2.5 2.0 1.5 1.0 0.5 0.0 01-02 02-03 03-04 04-05 05-06 06-07 Fibre 01-02 02-03 03-04 04-05 05-06 06-07(E) Polyester 33% 34% 36% 34% 32% 35% Cotton 67% 66% 64% 66% 68% 65% Significant excise duty reduction stimulates huge demand pull…
Slide 9: Overall, budget is quite positive for Indo Rama
Overall, budget is quite positive for Indo Rama 9 9
Slide 10: Increasingly favourable Business Environment
Increasingly favourable Business Environment
Slide 11: Business environment not favourable for polyester industry in recent quarters
Business environment has not been favourable for polyester industry for the last few quarters…. (1) Petrochemical intermediates upcycle Polyester (2) (3) Industry Low Tariff Performance cotton Bias prices Reversal in all these factors are visible…… 11 11
Slide 12: Global PTA Capacity to increase by 30% over next years
Global PTA Capacity to increase by 30% over next 3 years 70,000 60,000 50,000 '000 Tonnes 40,000 30,000 20,000 10,000 - 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 USA Korea Taiwan Indonasia Thailand Rest of the world India China Source: www.pcixp.com Significant new capacities in Ch
Slide 13: PTA Supply Demand imbalance
PTA Supply Demand imbalance – Supply to exceed demand World Asia 250 10 0 % 2,000 100% 200 98% 98% 1,500 150 96% 96% 95% 95% 100 94% 93% 94% 94% 94% 1,000 93% 92% 000' tons 92% 000' tons 50 92% 92% 92% 92% 91% 90% 90% 91% 91% 91% 91% 91% 91% 90% 91% 91% 91% 0 90% 500 90% 89% -50 2003 2004 2005 2006
Slide 14: World Operating Rates & Margins – PTA v/s Polyester
World Operating Rates & Margins – PTA v/s Polyester US$/Tonne 500 95% 450 90% There is an 400 85% inverse 350 relationship 300 80% between PTA 75% 250 margins and 70% 200 polyester 65% operating rates 150 100 60% 1996 1998 2000 2002 2004 2006 2008 Source: PCI PTA Margin PTA Operating Rate Poly Opera
Slide 15: Global MEG Capacity to see expansion by 40%
Global MEG Capacity to also see expansion by 40% over next 3 years 26.0 30 23.3 25 20.4 17.0 18.4 16.6 Million Tons 20 15 10 5 0 03 04 05 06 07 08 20 20 20 20 20 20 North America South America Europe Middle East Africa Other Asia China Source : SBA - CCI • Significant new capacities in Middle East R
Slide 16: MEG Supply Demand imbalance
MEG Supply Demand imbalance – Supply to exceed demand Projected demand increase 1.1 million tonnes MEG DEMAND SUPPLY MEG capacity net increase +1.5 to 1.9 million tonnes 16 16
Slide 17: Crude – PTA / MEG price relationship
Crude – PTA / MEG price relationship increasingly losing co-relation 1,300 70 1,200 65 1,100 60 1,000 55 $/ Barrel 900 50 $/ tonne 800 45 700 40 600 35 500 30 400 25 3 4 5 05 03 3 4 5 04 03 04 05 M 6 -06 l-0 l-0 l-0 r-0 r-0 r-0 0 ct- ct- ct- n- n- n- n- ar Ju Ju Ju Ap Ap Ap Ja Ja Ja Ja O O O PTA ($/
Slide 18: With greater availability, PTA & MEG prices to soften
Gap in Demand-Supply of PTA / MEG to impact their prices With greater availability PTA & MEG, prices to soften……. Resulting in favorable impact on Polyester Industry 18 18
Slide 19: Re-iterating the Indian polyester story
Re-iterating the Indian polyester story Particular 2005 2010 Exports USD 17 bn USD 50 bn Domestic USD 23 bn USD 40 bn Total USD 40 bn USD 90 bn Cotton output 4.5 mn tonnes 5.2 mn tonnes* Polyester output 1.8 mn tonnes ?? * Yield @ 575 Kg/hectare Is there an alternative to Polyester for capitalising
Slide 20: In Short…
In Short… (1) PTA / MEG prices are softening (2) Tariff (3) Cotton rationalisation Polyester prices are happened Industry steady Performance Favourable business environment to drive growth… 20 20
Slide 21: Financial performance update
Financial performance update
Slide 22: Financial Highlights - Quarterly
Financial Highlights - Quarterly (Rs. Crores) Particulars Q4 Q4 2005-06 2004-05 Gross Sales 563.69 624.45 Sales (Net of Excise) 516.59 538.72 Other Income 11.44 18.21 Total Income 528.03 556.93 (Inc) / Dec in stock-in-trade 95.17 162.28 Raw Material 315.93 285.05 Staff Cost 11.17 8.21 Other Expendit
Slide 23: Financial Highlights – Quarterly
Financial Highlights – Quarterly (Rs. Crores) Particulars Q4 Q4 2005-06 2004-05 EBDITA 36.62 42.29 Interest Cost 5.60 7.75 EBDT 31.02 34.54 Depreciation 24.25 23.68 Profit Before Tax 6.77 10.86 Provision for Taxation - MAT -- 1.36 - FTB 0.12 -- - Deferred Tax 3.15 (6.61) Profit After Tax 3.50 16.11
Slide 24: Financial Highlights - Yearly
Financial Highlights - Yearly (Rs. Crores) Particulars FY FY 2005-06 2004-05 Gross Sales 2101.90 2,198.71 Sales (Net of Excise) 1870.91 1,874.79 Other Income 62.76 29.63 Total Income 1933.67 1904.42 (Inc) / Dec in stock-in-trade 191.76 27.59 Raw Material 1,271.70 1,367.57 Staff Cost 35.68 32.79 Othe
Slide 25: Financial Highlights – Yearly
Financial Highlights – Yearly (Rs. Crores) Particulars FY FY 2005-06 2004-05 EBDITA 191.19 239.12 Interest Cost 25.95 34.85 EBDT 165.24 204.27 Depreciation 98.06 97.78 Profit Before Tax 67.18 106.49 Provision for Taxation - MAT -- 5.85 - FBT 0.72 -- - Deferred Tax 14.63 30.43 Profit After Tax 51.83
Slide 26: Loan Level Maintained – Despite project
Loan Level Maintained – Despite project • Total secured loan funds as on 31 March, 06 is Rs. 560.94 cr. against Rs. 556.00 cr. previous year • Term loan repayment during FY06 is Rs. 171.73 cr. • Fresh project loan disbursal of Rs. 198.93 cr. • Interest cost in FY06 is lower by 25% at Rs. 25.95 cr. a
Slide 27: Analysis of Sales Mix
Analysis of Sales Mix FY 2005 FY 2006 13.5% 19.2% 5.1% PSF 2.4% POY 45.0% Chips 5.1% 42.7% FDY 1.9% Yarn 33.9% 31.0% 318,915 MT 308,200 MT Increasing focus on value added products… 27 27
Slide 28: Strict discipline maintained in Inventory Management
Strict discipline maintained in Inventory Management MT 40,000 35,880 35,000 30,000 25,000 18,571 20,000 16,507 15,000 12,000 10,000 5,054 5,000 0 March,05 June, 05 Sep, 05 Dec, 05 March, 06 FG inventory at all time low in IRSL history 28 28
Slide 29: Debt Equity ratio close to ONE despite project loans
Debt Equity ratio close to ONE despite availing project loans 1,400 1255 1,200 1102 992 1,000 Rs. Cr. 800 789 577 561 600 521 532 540 400 416 410 328 200 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Net Worth * Loan Funds * Net worth is net of revaluation reserves Debt equity ratio is at 1.04 29
Slide 30: Interest Cost as % of Sales
Interest Cost as % of Sales 12.0% 11.6% 10.0% 8.0% 7.4% 6.0% 3.6% 2.8% 4.0% 1.9% 1.4% 2.0% 0.0% 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 30 30
Slide 31: Maintaining Valuations: Book Value per Share
Maintaining Valuations….. Book Value per Share 48 43 39.8 40.4 40.9 38 Rs. 33 30.8 28 25.0 23 19.7 18 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 31 31
Slide 32: IRSL Performance Perspective
IRSL Performance Perspective • Thrust on value added products • Inventory reduction • Continuous quality improvement • Cost reduction across processes – Cost of production from the new plant will be lower than the cost of production from the existing unit • Increasing customer base 32 32
Slide 33: Indo Rama's Expansion Project
Indo Rama’s Expansion Project
Slide 34: Polyester Capacity Expansion – Existing v/s Planned
Polyester Capacity Expansion – Existing V/s Planned 600 600 35 15 500 260 400 300 300 (in '000 tpa) 300 15 20 15 0 120 140 200 100 290 150 140 0 Existing Cap. Expansion Cap. Total Cap. PSF POY FDY CHIPS Total capacity after expansion will be 600,000 tpa 34 34
Slide 35: Project Update
Project Update….. • 100% of project cost towards plant & machine, fixed block and services firmed-up § Equipment arrival schedule - CP from Zimmer : Oct, 2005 onwards - POY from Barmag : Feb, 2006 onwards - PSF from Zimmer : End April, 2006 onwards § Engineering work is ~93% completed § Civil contra
Slide 36: Project Update
Project Update….. • IRSL has already committed Rs. 432.94 cr. towards the project till 31 March,06 • IRSL has drawn an amount of Rs. 255.6 cr. from the lenders till 31 March, 06 Commercial production of PSF & POY to commence in phased manner from July 2006 onwards 36 36
Slide 37: PSF Building
PSF Building 37 37
Slide 38: POY Building
POY Building ee Dater0g2 0422006)
Slide 39: POY Machine Spinning Floor
39 POY Machine Spinning Floor 39
Slide 40: POY Machine Take-up Floor
40 POY Machine Take-up Floor 40
Slide 41: Project on track on costs and time lines
The project continues to be on track both on costs as well as on time lines 41 41
Slide 42: Declared dividend of 30%
Declared dividend of 30% Consistency in dividend payout ratio YOY 42 42
Slide 43: The Road Ahead
The Road Ahead….. • PTA & MEG prices softening • Cotton prices stablising • Inter-fibre bias reduced due to changes in fiscal policies • Consumption growth in both domestic & export markets • IRSL expanded capacities getting operational at the right time • Large, cost efficient players to witness ma
Slide 44: House Open for Questions
House Open for Questions 44 44
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