Tata Steel Limited · NSE:TATASTEEL
Tata Steel — FY2009 Earnings Presentation
46 slides from Tata Steel's earnings presentation, Jun 26, 2009
Slide 1: Tata Steel Group Consolidated Financial Performance, Year Ended March 31, 2009
Tata Steel Group C Consolidated lid t d Financial Fi i l Performance P f Year Ended March 31, 2009 Analyst Meet – Mumbai June 26 , 2009 1
Slide 2: Agenda
Agenda Environment & Consolidated Highlights Performance of European Operations Performance of Asian Operations Tata Steel S Group G Financial Performance f 2
Slide 3: Environment & Consolidated Highlights
E i Environment t & Consolidated Highlights 3
Slide 4: Global Steel Industry
Global Steel Industry Unprecedented economic crisis globally Severe contraction in demand since October 2008 Significant production cuts especially in developed economies Continued de-stocking phenomenon across all geographies Raw material prices are coming down compared to 2008 China an
Slide 5: Consolidated Highlights
Consolidated Highlights Deliveries ((Mt)) Turnover US$ Mn 31.7 28,962 25,857 28.5 FY'09 FY'08 FY'09 FY'08 EBITDA PAT * 3,636 3,595 2,428 973 FY'09 FY'08 FY'09 FY'08 Conversion Rate USDINR - 50.87 uniformly applied for all comparable periods ; * PAT after Minority Interest and Share of Associates 5
Slide 6: Managing the Crisis – Key Highlights
Managing the Crisis – Key Highlights India & S.E. Asia Higher sales volume in India – Increase of 18% in H2FY’09 over H1 FY’09 Manufacturing costs – Decline by US$ 47/t in H2FY’09 vs. H1 FY’09 Focus on Performance Improvement in India yields US$ 167 Mn in FY’09 P d ti cuts Production t iin T
Slide 7: Recent Developments
Recent Developments Mozambique Project of Riversdale Resources declared 4 Bn Mt – one of the largest resources of coal globally TS enhances its shareholding to ~15% in the listed entity, effective holding 44.75% IJmuiden Power Plant MOU with Tata Power signed for a 51:49 JV p Will create
Slide 8: Performance of European Operations
Performance of European Operations 8
Slide 9: Environment
Environment Credit crisis leading to Economic crisis in Europe Contraction in auto, yellow goods and construction sectors resulting in demand collapse in Europe for steel Industry responded by significant production cuts to avoid over stocking Continued de-stocking in progress . Absolute lev
Slide 10: Operating Highlights - TS Europe
Operating Highlights - TS Europe FY 2009 FY 2008 Liquid steel production (mt) 16 2 16.2 20 3 20.3 Steel deliveries (mt) 19.7 22.8 On time in full deliveries (OTIF %) 85 84 E Energy consumption ti (GJ/t) 18 8 18.8 17 6 17.6 Environment CO2 emissions (t/tls) 1.9 1.8 Safety – Lost time injuries (LTIF –
Slide 11: Key Highlights - TS Europe
Key Highlights - TS Europe EBITDA (US$ Mn) EBITDA Margin (% ) 1,751 1,788 9.1% 8.1% FY'09 FY'08 FY'09 FY'08 Conversion Rate USDINR - 50.87 uniformly applied for all comparable periods 11
Slide 12: Response to the Crisis
Response to the Crisis Fl Flagship hi Initiatives: I iti ti Weathering the Storm Cash savings through cost avoidance Optimizing production capacity in a cost effective manner Unlocking value through favorable hedging contracts and surplus carbon credits Fit for Future To create a more ro
Slide 13: 'Weathering the Storm' – Cash Savings
‘Weathering the Storm’ – Cash Savings Annualized temporary fixed cost reduction US$ Mn y Fixed Cost Reduction Break down Temporary 1,234 in FY’10 Other , 10% One off Items, 13% Manufacturing 625 , 38% Logistics , 4% 393 Employment , 35% Q3 FY'09 Q4 FY'09 FY'10 E Conversion Rate : GBPUSD - 1.4300 13
Slide 14: Operating Performance - TS Europe
Operating Performance - TS Europe Mn T FY’09 Q4 FY’09 22.8 20.3 5.7 19.7 5.2 16.2 3.5 2.7 Production Deliveries Production Deliveries FY’09 FY’08 Q4 FY’09 Q4 FY’08 Key Highlights in FY’09 FY 09 Cost reduction of US$ 167/t of liquid steel output in H2 FY’09 achieved through ‘Weathering the Storm’
Slide 15: Operating bridge – TS Europe
Operating bridge – TS Europe US$ Mn Working Capital Release of US$1022 Mn in Q.E March’09 £270m £270m Conversion Rate : USDINR - 50.87 15
Slide 16: Teeside Cast Products - Update
Teeside Cast Products - Update On 7th April, consortium members served notice of termination of the off take agreement Arbitration process initiated 90 days consultation process with the unions initiated, to end on 6th August’09 TCP has been EBITDA neutral to the Company 16
Slide 17: Proposed Power Plant at IJmuiden
Proposed Power Plant at IJmuiden MOU signed with Tata Power for setting up 525 MW power plant at IJmuiden on Build, Own and Operate (BOO) basis Th new plant The l t will ill provide id IjIjmuiden id with ith a secure, llong- term t source off energy, thereby th b strengthening its competitive po
Slide 18: 'Fit For Future' II
‘Fit For Future’ II Restructuring of Corus Tubes Business Focus on Precision and Automotive activities in the Oosterhout and Zwijndrecht sites; resulting in closure of the Arnhem site and strech mill in Oosterhout Closure of cold drawn tube operation in Corby Reduction of shift activity leve
Slide 19: Performance of Asian Operations
Performance of Asian Operations 19
Slide 20: Environment
Environment S Sustained monetary easing by Central C Bank in India to boost private consumption and corporate investment Two Stimulus packages introduced by Govt. to boost infrastructure spending Landed cost of imported materials from CIS at a discount to domestic prices Construction & Auto
Slide 21: Operating Highlights - TS India
Operating Highlights - TS India FY 2009 FY 2008 Crude steel production (mt) 57 5.7 50 5.0 Steel deliveries (mt) 5.2 4.8 On time in full deliveries (OTIF %) 80 77 S Specific ifi EEnergy consumption ti (G(Gcal/tss) l/t ) 66 6.6 67 6.7 Environment CO2 emissions (t/tcs) 2.1 2.1 Safety – Lost time injuri
Slide 22: Key Highlights - TS India
Key Highlights - TS India EBITDA (US$ Mn) EBITDA Margin (% ) 1,856 43% 1,623 39% FY'09 FY'08 FY'09 FY'08 Conversion Rate : USDINR - 50.87; FY’08 figures are based on Proforma numbers 22
Slide 23: Response to the Crisis – India & S.E. Asia
Response to the Crisis– India & S.E. Asia Tata Steel India Cost reduction of US$ 47/t through performance improvement measures undertaken to maximize margins Increase in turnover (US$ 1,402 Mn) of branded products to gain premium and market share Nat Steel Asia Maximize plant capacity with
Slide 24: Operating Performance - TS India
Operating Performance - TS India Mn Tonnes FY’09 Q4 FY’09 6 5.4 5.2 1.8 4.9 4.8 1.6 5 1.3 1.3 4 3 2 1 0 Production Deliveries Production Deliveries FY’09 FY’08 Q4 FY’09 Q4 FY’08 Best ever Hot metal (6.3 million tonnes), Crude steel (5.7 million tonnes) and Saleable steel (5.4 million tonnes) produ
Slide 25: Operating Performance - S.E Asia
Operating Performance - S.E Asia Mn Tonnes Nat Steel Asia 0.7 2.4 2.5 0.6 0.4 0.4 1.5 1.6 Production Deliveries Production Deliveries FY’09 FY’08 Q4 FY’09 Q4 FY’08 Tata Steel Thailand 0.45 0.38 0.4 0.40 0.36 1.4 1.4 0.35 0.30 1.1 1.1 0.2 0.25 0.20 0.15 0.10 0.05 0.00 Production Deliveries Production
Slide 26: Operating Profit Bridge – TS India
Operating Profit Bridge – TS India US $ M Mn 678 ( 600) (30) (13) 136 1,665 34 1,459 FY'08 NR Cost Vol / Mix Impr Savings Other Inc / Exch Loss FY'09 Exps Conversion Rate : USDINR - 50.87 26
Slide 27: Savings Through Improvement Initiatives - India
Savings Through Improvement Initiatives - India US$ Mn Break up p of Savings g achieved in FY’09 through g improvement initiatives: Cost reduction of US$ 47/t 167.09 of Saleable Steel achieved in 31.1 H2FY’09 against g a target g of 31 09 31.09 US$ 39/t 77.6 40.4 101.63 17 9 17.9 87.08 8.65 Aspire P
Slide 28: Performance Improvement Plan FY'10 - India
Performance Improvement Plan FY’10 - India Key Initiatives New Product Development Increase output from larger efficient Blast HS 600 HR for cold formed applications Furnaces (Wheels) Reduction in coke rate and increase in coal Coated skin panels for Nissan and Toyota injection rate. IFHS
Slide 29: Recent Developments
Recent Developments Mozambique Project Tata Ryerson 90% increase in inferred reserves to 4.0 Bn Tata Steel set to acquire entire equity stake tonnes in Benga Coal Project (50%) of Tata Ryerson Ltd held by Ryerson Govt of Mozambique has approved the mining Plans for gradual development of the
Slide 30: Tata Steel Group Financial Performance
Tata Steel Group Financial Performance 30
Slide 31: Consolidated Financial Performance – Apr-Mar FY'09
Consolidated Financial Performance –Apr- Mar FY’09 US $ Mn Tata T t TS NSA TSTH Tata T t Steel St l Steel Europe Group(*) Deliveries ((mt ) 5.23 19.7 2.4 1.1 28.5 Turnover 4,780 21,539 2,648 780 28,962 EBITDA – Reported 1,856 1,751 55 29 3,636 – Underlying 1 856 1,856 2 228 2,228 58 89 4 212 4,212 E
Slide 32: Balance Sheet
Balance Sheet US$ Mn As at 31st As at 31st Reflects lower sales in TS Europe in the Mar'09 Mar'08 fourth quarter Assets NRV Provisions in TS Europe Cash 1,209 832 Receivables 2,562 3,676 I Inventory t 4 260 4,260 4 534 4,534 Reflects reduction in pension fund assets of TS Europe . Revaluation of Oth
Slide 33: Reconciliation between Underlying & Reported Earnings
Reconciliation between Underlying & Reported Earnings US$ Mn Apr – Mar FY’09 FY 09 EBITDA PBT PAT FY FY FY FY FY FY 2009 2008 2009 2008 2009 2008 Numbers as Reported 3,636 3,595 1,326 3,218 973 2,428 Add: Exchange (Gains)/Loss , Actuarial Gains & Others - - - (1,245) - (1,245) Inventory Write Down 5
Slide 34: Consolidated Inventory Write Downs
Consolidated Inventory Write Downs US$ M Mn 477 Total Inventory Write Downs in FY’09 – US$ 576 Mn 60 34 3 2 TS Europe TS Thailand Tata Metaliks NatSteel Holdings Others Steel prices have corrected across the globe, whereas certain markets have additionally been impacted because of the sharp fall in
Slide 35: Balance Sheet – Net Worth Analysis
Balance Sheet – Net Worth Analysis US$ Mn Conversion Rate : USDINR - 50.87 35
Slide 36: Consolidated Financial Ratios
Consolidated Financial Ratios Net Debt / EBITDA Interest Cover 2.72 2.64 4.32 3.46 Mar '09 Mar '08 Mar '09 Mar '08 ROIC (%) – Pre Tax – (Annualised) Diluted EPS ( $ ) 3.20 20 19 1.16 Mar '09 09 Mar '08 08 Mar a '09 09 Mar a '08 08 Conversion Rate : USDINR - 50.87 uniformly applied for all comparable
Slide 37: Consolidated Free Cash Flow
Consolidated Free Cash Flow US$ Mn Conversion Rate : USDINR - 50.87 37
Slide 38: Working Capital Management
Working Capital Management US$ Mn Tata Steel India Tata Steel Europe 1,086 6,000 8.00 1.00 5,345 4,705 7.00 1,000 0.82 4,545 835 5,000 766 0.80 4,025 6.00 800 4,000 4,881 3,457 649 4,463 , 5.00 573 0.60 600 3,730 0.47 0.50 3,000 3.44 2,991 4.00 0.41 2.99 3.17 0.38 0.40 2.98 2,526 3.00 400 2,000 2.58
Slide 39: Pensions – TS Europe
Pensions – TS Europe Combined Surplus of all TS Europe Pension Funds BSPS Asset Mix US$ $ Mn 2% 5% 1% US$ Mn 51% 68% 65% 6% 1,908 5% 5% 42% 26% 25% March'09 March'08 March'07 Equities Property Bonds Cash 879 Tri-ennial valuation completed 531 Shift made from investment in volatile market assets
Slide 40: Capital Initiatives
Capital Initiatives Consortium bankers of TS Europe’s non recourse debt voted Covenant Reset unanimously to relax the earnings related covenants Rupee Bond – US$ 423 Mn; Tenure 10 years Rupee bank loans – US$ 560 Mn; Tenure 6-10 years Raising of Finances Bank syndication for financing of Brownfield
Slide 41: Covenant Reset - Senior Facilities Agreement - TSUK
Covenant Reset - Senior Facilities Agreement - TSUK Lenders under the SFA to TSUK Banks Loan Outstanding Voting% (£ Bn) Mandated Lead Arrangers 1.01 30.5% Indian Banks 0.93 28.2% Other Banks 1.08 32.6% Non Banks / Funds 0.28 8.7% TOTAL 3.31 Total No. of Lenders - 70 U Unanimous i consentt ffor propo
Slide 42: Covenant Reset - Senior Facilities Agreement - TSUK
Covenant Reset - Senior Facilities Agreement - TSUK Net Leverage (Indexed to 200) Interest Cover (Indexed to 400) 42
Slide 43: Gross Debt Movement & Net Debt Position
Gross Debt Movement & Net Debt Position * Cash and cash equivalents includes current investments 43
Slide 44: Gross Term Debt Repayment Obligation
Gross Term Debt Repayment Obligation US$ M Mn Company will prepay debt 1 153 1,153 of ~ GBP 200 Mn in TS Europe 589 No scheduled repayment of 284 non recourse debt in FY’10 564 284 due to p prepayment p y FY'10 FY'11 Debt in TSL India of US$ 216 Tata Steel Europe Tata Steel India Mn p prepaid
Slide 45: Liquidity Position
Liquidity Position US $ Mn 3,509 2,712 1,331 1 917 1,917 933 1,704 746 548 2,178 1,779 1,171 1,156 Sep'08 Dec'08 Mar'09 20th Jun'09 Cash & Cash Equivalents Undrawn lines (*) Excludes other JVs, Subsidiaries & share of profit of Associates of the Tata Steel Group Conversion Rate : USDINR - 50.87 45
Slide 46: Thank You
qp TATA TATA STEEL Thank You 46