Hindalco Industries Limited · NSE:HINDALCO
Hindalco Industries — Non-Deal Roadshow (February 2011)
63 slides from Hindalco Industries's roadshow presentation, February 2011
Slide 1: Non Deal Road Show Presentation
Hindalco Industries Limited Non Deal Road Show Presentation February 2011
Slide 2: Disclaimer
Disclaimer This presentation may not be copied, published, distributed or transmitted. The information in this presentation is being provided by Hindalco Industries Limited (the “Company”). Any reference in this presentation to “Hindalco Industries Limited” shall mean, collectively, the Company and
Slide 3: Hindalco's Value Proposition
Hindalco’s Value Proposition Lien over resources: üCaptive high quality Bauxite mines for all Alumina refineries üOwn Coal Mines for Hirakud Smelter and also for all new greenfield smelter. üCopper Mines in Australia (Meets 20% concentrate requirement of our custom smelter) Low cost producer : üAmon
Slide 4: Companywide Perspective
Hindalco Industries Limited Companywide Perspective 4
Slide 5: Vision
StrategyVision üBuild Upstream Exploit India advantage in high grade Bauxite and abundant coal by üBuy Downstream building upstream “To be a premium metals major, global in size and reach, excelling in everything we do, and creating value for our stakeholders” ABGABG GoalGoal was was to secure to se
Slide 6: Hindalco - Forbes Asia's Fab 50 Companies
Hindalco -Forbes Asia's Fab 50 Companies Market Sales Company Country Value ($bil) ($bil) Industry Wesfarmers Australia 34.4 43.3 Conglomerate Rio Tinto Australia 122.4 41.8 Materials Noble Group Hong Kong 7.2 31.2 Conglomerate SAIC Motor China 20.1 20.3 Consumer Durables Acer Taiwan 6.4 17.9 Techno
Slide 7: Broad Aluminium Strategy ~ Integrated Play
Broad Aluminium Strategy ~ Integrated Play Play optimally in the Aluminium value chain While Balancing between Volatile high margins and Steady but relatively low margins Upstream Downstream Organic growth Acquisition Lowest cost producer Product Differentiator Lien on key resources Product Developm
Slide 8: Strong Parentage: The Aditya Birla Group
Strong Parentage: The Aditya Birla Group · Over 50 years of excellence · Operations across 25 countries and presence in 30 countries · Over 130,000 strong workforce employed in 123 locations globally. 32,000 employed outside India, 30 nationalities · Presence in diverse businesses spanning manufactu
Slide 9: Key investment themes
Hindalco : A Value Proposition Key investment themes 9
Slide 10: Key investment themes
Key investment themes Strong outlook for Aluminium sector 1 Stronger focus and value Low cost integrated 6 2 accretion from copper sector operations Successfully implementing high visibility capex Significant growth expected programmes in both 5 3 from Alumina and value upstream and downstream added
Slide 11: Strong growth outlook across region and industry segments
Strong growth outlook across region and industry segments Strong recovery in global GDP growth rates… …leading to increased aluminium demand across sectors FY ’09-14 2009 2010 2011 2012 -2.6% United States 2.8% 3.0% 2.7% -2.5% 2.9% Canada 2.3% 2.7% -4.1% European Union 1.8% 1.7% 2.0% -1.8% 5.9% Lati
Slide 12: Sustainable advantages leading to structural shift towards Al
Sustainable advantages leading to structural shift towards Al Key Decision Factors: Weight Cost Ability to Manufacturing Heat recycle compatibility exchange Automotive Aluminium ++ - + + + Steel - ++ - + - H.S. Steel + + - + - Composites ++ - - - - Magnesium ++ - + - - Can Aluminium ++ + ++ Steel -
Slide 13: Aluminium Price movement
Aluminium Price movement Historical correlation Price & Inventory… …but broke down in 2009 as inventory was locked up …however producer stock on a decline …resulting in rising premiums 1700 1600 Producer Stock(IAI) 1500 1400 1300 1200 1100 1000 Sept'08 Sept'09 Dec'09 Mar'09 May'09 June'10 Sep'10 Nov
Slide 14: India Story: Per Capita Aluminium Consumption
India Story: Panning Out … Significant scope for metal All key user industries of aluminium consumption to rise from current levels have a bullish outlook in India Aluminium usage in India (%) 25 Others Per Capita Aluminium Consumption (kg) Korea 17% Industrial Power 20 Canada 7% 48% Construction 13
Slide 15: Domestic Aluminium Market
Domestic Aluminium Market Expect near double-digit growth in the next decade through growth in the following sectors: •Electrical – Overhead transmission lines, & cables. Massive electrification drive will ensure 50% base load •Transport – 2/3 wheelers, Trucks & Buses, Passenger Cars, Wagons •Buildi
Slide 16: Key investment themes
Key investment themes Strong outlook for Aluminium sector 1 Stronger focus and value Low cost integrated 6 2 accretion from copper sector operations Significant growth expected Successfully implementing 5 3 from Alumina and value high visibility capex program added products 4 Novelis – The largest a
Slide 17: Integrated players enjoy significant competitive advantage
Integrated players enjoy significant competitive advantage over other Aluminium producers Asian Aluminium Middle East Aluminium Global Aluminium Majors Processing Players Players Players n Captive reserve n Low availability of Raw allocation bauxite reserves in n Integrated with n Downstream materi
Slide 18: Key investment themes
Key investment themes Strong outlook for Aluminium sector 1 Stronger focus and value Low cost integrated 6 2 accretion from copper sector operations Significant growth expected Successfully implementing 5 3 from Alumina and value high visibility capex program added products 4 Novelis – The largest a
Slide 19: Novelis is the largest downstream Aluminium player globally
Novelis is the largest downstream Aluminium player globally q Global Industry Leader q Leading Recycler of Aluminium Beverage Cans q Global Operations Spanning 31 Facilities in 11 Countries with ~11,600 Employees q Portfolio Focused on Premium Products Not Commodities 19
Slide 20: Novelis: Shipments by market
Novelis: Shipments by market Premium Products ~70% Industrial & Other Electronics 14% 10% Foil & Packaging 15% Transportation 7% Beverage Cans 54% Portfolio Focused on Premium Products NOT Commodities 20
Slide 21: Sustainable advantages leading to structural shift towards Al
Sustainable advantages leading to structural shift towards Al Key Decision Factors: Weight Cost Ability to Manufacturing Heat recycle compatibility exchange Automotive Aluminium ++ - + + + Steel - ++ - + - H.S. Steel + + - + - Composites ++ - - - - Magnesium ++ - + - - Can Aluminium ++ + ++ Steel -
Slide 22: Novelis: Adjusted EBITDA and shipments
Novelis: Adjusted EBITDA and shipments Adjusted EBITDA Shipments $300 $290 900 $263 $250 $231 $238 $229 $218 800 $200 $199 $200 $183 $152 $150 $131 700 $124 $100 $89 600 $51 $50 $28 $0 500 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2008 2009 2010 2011 Driving Operational Improvements on the back o
Slide 23: Incremental Capacity Through Pinda Expansion and Debottlenecking
Incremental Capacity Through Pinda Expansion and Debottlenecking Shipments (Kt) Total Expected Capacity Increase of ~600 Kt (FY11 Capacity) Increase Capacity 18% by FY14 23
Slide 24: Global Debottlenecking Initiatives
Global Debottlenecking Initiatives (Kilotonnes) Capacity Release Goal of 3-4% per year Through FY14 Upgauging on Finishing Hot Mills 90+ 60+ Process 70+ Optimization to Increase Coil Cleaning Throughput and Tension 30+ Leveling in Asia Reduction in Passes for LG Product Total Capex for All Debottlen
Slide 25: Strong Outlook for FRP Products
Strong Outlook for FRP Products FRP growth worldwide from 2010 to 2015 (kt) 24,000 Areas of focus 967 22,090 22,000 343 222 639 3,088 338 20,000 18,000 16,493 16,000 14,000 12,000 10,000 2010 Asia MENA West. Europe East. Europe S. America N. America 2015 Source: CRU, Company Estimates Focusing capex
Slide 26: Global Trends in Aluminum Demand
Global Trends in Aluminum Demand Transportation Electronics Beverage Can Short-term Short- (CY10 (CY10--11 11)) 20% 20% >25% 25% 3-5% Long-term Long- (CY10 (CY10--14 14)) 15% 15% 10% 10% 3-4% Strong Short and Long-term Outlook 26 Source: Novelis Estimates, November CRU
Slide 27: Continuing to Implement Novelis Strategy
Continuing to Implement Novelis Strategy Strong Market Growth Successful Refinancing § Footprint Optimization & Cost Reduction • Rogerstone assets moving to Hirakud to service high growth geography. • Bridgnorth & Aratu Closures Improve Annual EBITDA by ~$30M • Allows Management to Focus on Core Ope
Slide 28: Key investment themes
Key investment themes Strong outlook for Aluminium sector 1 Stronger focus and value Low cost integrated 6 2 accretion from copper sector operations Significant growth expected Successfully implementing 5 3 from Alumina and value high visibility capex program added products 4 Novelis – The largest a
Slide 29: Value accretive greenfield projects under execution and in pipeline
Value accretive greenfield projects under Execution (USD 5 Bn) and in Pipeline 2015 & Beyond •Doubling of Utkal •Cameroon Alumina • Doubling of Smelting Capacity 2015 Aditya Alumina 2012 Jharkhand Smelter Utkal Alumina Aditya Smelter Oct’11 Mahan Smelter Hindalco - Premium metals major, global in si
Slide 30: Hindalco has the allround cost advantage for its projects
Hindalco has the allround cost advantage for its projects when compared to global projects Refinery Alumina expansion (KTPA) n Greenfield and Brownfield expansion significantly lower 1,500 4,500 than global benchmark – economies of scale 1,500 3,000 4,500KTPA n Quality and proximity of Bauxite depos
Slide 31: Significant capacity expansion to be delivered in 2012
Significant capacity expansion to be delivered in 2012 Mahan Aluminium Aditya Aluminium Utkal Alumina Insert pic 359 ktpa smelter 359 ktpa smelter Capacity 1,500 ktpa refinery 900MW power plant 900MW power plant Target COD October’ 11 End 2012 Early 2012 Project cost $2,000mm $2,000mm $1,217mm qEqui
Slide 32: Activity at Project Sites: Mahan Smelter
Mahan Smelter Activity at Project Sites Cathode sealing shop Pot room GTC1 ID Fan foundations & Stack : Carbon area Overview- Smelter site 32 32
Slide 33: Activity at Project Sites: Mahan CPP
Mahan CPP Activity at Project Sites CPP Overview DM Plant Cooling tower Boiler 2 33 33
Slide 34: Activity at Project Sites: Utkal Refinery
Activity at Project Sites Utkal Refinery 34
Slide 35: ADITYA Smelter & CPP
ADITYA Smelter & CPP Pot room foundation 220 KV Rectifier substation 35 ID fan foundation GTC Power house unit 4
Slide 36: Update on Project Financing
Update on Project Financing UTKAL Financing § Signed the loan agreement in July-10 for Rs.4906 Crores at 11% p.a. Very good response in syndication, received bids for Rs.10500 Crs (more than double the loan amount). Response was good as market had abundant liquidity at that time. Interest rate l
Slide 37: Key investment themes
Key investment themes Strong outlook for Aluminium sector 1 Stronger focus and value Low cost integrated 6 2 accretion from copper sector operations Significant growth expected Successfully implementing 5 3 from Alumina and value high visibility capex program added products 4 Novelis – The largest a
Slide 38: Copper Operations - Good performance despite tough market conditions
Copper Operations - Good performance despite tough market conditions Smelting operations Mining Smelting – 500 ktpa Copper Cathodes – 500 ktpa Cast Copper Rods – 142 ktpa Sulphuric Acid – 1670 ktpa Phosphoric Acid – 180 ktpa DAP & Complexes – 400 ktpa Gold - 15 tpa Silver - 150 tpa Cathode (kt) Perf
Slide 39: Steps taken by Hindalco to strengthen copper business
Steps taken by Hindalco to strengthen copper business Key focus areas Drivers Copper business revenue ü Cost effective brownfield expansion (US$ mm) 2,786 Capital Efficiency ü Strategic advantage through technology ü Asset sweating Leadership in domestic ü Service level differentiation 2,360 market
Slide 40: Financials
NUIT Financials
Slide 41: Hindalco Consolidated Results - FY10
Hindalco Consolidated Results – FY10 41
Slide 42: Sales and Operating Profit Growth
Sales and Operating Profit Growth Sales (Rs. Crore) 65,963 60,722 60,013 19,316 10,105 12,120 8,223 6,401 3,565 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10
Slide 43: Market Capitalisation & Networth
Market Capitalisation & Networth Partly paid call Rs. 547 crore Global Meltdown Partly paid call Novelis Acquistion & Pref Issue Rs.2412 crore Strong Balance sheet CAGR : 19% 4 3 43
Slide 44: Updates
ADITYA BIRLA HINDALCO UPDATES sD
Slide 45: Q3 Results: Hindalco - Standalone
Q3 Results Hindalco - Standalone 45 45
Slide 46: Highlights
Highlights Net profit up 8%(YoY) and 6% (QoQ) amidst cost pressures and certain operational setbacks Hirakud operations had lingering effect of July fire, almost stabilized by January Cooling tower problem in Cu-III; operations re-started in just 17 days Highest ever alumina production at Mu
Slide 47: Financial Performance
Financial Performance ` Cr Q3 FY10 Q3 FY11 Change (%) Net Sales 5,314 5,975 12.4 PBITDA 798 801 0.4 PBT 557 578 3.9 PAT 427 460 7.8 EPS (`) 2.41 2.41 … •EPS maintained as growth in net profit compensated for increase in outstanding shares from 177 crs to 191 crs ` Cr 9M FY10 9M FY11 Change (%) Net S
Slide 48: Key Business Drivers and Impact
Key Business Drivers and Impact Change ( %) Driver Impact YOY Aluminium LME 17 Average Copper TC/RC (26) Exchange (4) Rate (`/$) Crude derivative > 25% costs 48
Slide 49: Aluminium Business: Financial Performance
Aluminium Business: Financial Performance Q3 FY10 Q3 FY11 Change (%) (` cr) Net Sales & Operating 1,884 1,977 4.9 Revenue EBIT 438 465 6.2 9M FY10 9M FY11 Change (%) (` cr) Net Sales & Operating 4,951 5,754 16.2 Revenue EBIT 1,152 1,441 25.1 Cost pressures and volume losses have impacted Q3 result,
Slide 50: Copper Business: Financial Performance
Copper Business: Financial Performance Q3 FY10 Q3 FY11 Change (%) (` cr) Net Sales & Operating 3,432 4,000 16.6 Revenue EBIT 159 143 (10.3) 9M FY10 9M FY11 Change (%) Net Sales & Operating 9,180 11,265 22.7 Revenue EBIT 533 396 (25.7) Q3: Adverse impact due to cooling tower problem 50
Slide 51: Novelis Update
Novelis Update ‘ADITYA BIRLA
Slide 52: Novelis: Third Quarter Financial Highlights
Novelis: Third Quarter Financial Highlights (Q3FY11 vs. Q3FY10) § Shipments Up 10% to 715 Kilotonnes § Net Sales Up 21% to $2.6 Billion § Adjusted EBITDA Up 20% to $238 Million § Free Cash Flow of $45 Million § Liquidity of $848 Million § Net Loss of $46 Million driven by refinancing & restructuring
Slide 53: Adjusted EBITDA
Adjusted EBITDA (Millions) Adjusted EBITDA Trend TTM Adjusted EBITDA TTM Ended TTM Ended Q3FY10 Q3FY11 Trailing Twelve Months Adjusted EBITDA has Exceeded $1B 53
Slide 54: Capital Expenditures and Free Cash Flow
Capital Expenditures and Free Cash Flow (Millions) Capex Free Cash Flow FY10 FY11 Working Capital Financing ~$216 Activities in Asia and South America YTD Focused on Strategic Investments 54
Slide 55: Strong Liquidity, Projected Cash Flows & Credit Metrics
Strong Liquidity, Projected Cash Flows & Credit Metrics (Millions) Free Cash Flow Liquidity $848 Target Liquidity of ~$750 Million $634 FY10 FY11 E FY12 E Credit Metrics Credit Statistics ($M) Q3FY11 Adjusted LTM EBITDA $1,022 Net Debt $3,950 Total Debt/Adjusted LTM EBITDA 4.2x Net Debt/Adjusted LTM
Slide 56: ABML Update
ABML Update ‘ADITYA BIRLA
Slide 57: ABML: H1FY11 Financial Highlights
ABML: H1FY11 Financial Highlights ü Sales revenue at $262.09Mn up by 54% over corresponding period last year. This has been contributed by increases of 32% in volumes sold and balance due to improvement in realization. ü Gross Profit at $69.11Mn jumped up by 95% over corresponding period last year w
Slide 58: Novelis Financing
‘ADITYA BIRLA rll Novelis Financing ‘e y
Slide 59: Novelis - Refinancing
Novelis – Refinancing Objective Ensure strategic flexibility for Deleverage Hindalco balance both Novelis and Hindalco sheet and align leverage to debt 6 1 capacities Retain flexibility to finance growth aspirations of Novelis Improve Maturity profile of and Hindalco and maintain 5 2 Novelis thus av
Slide 60: Deal Contours
Deal Contours Novelis proforma capital structure US$ Mn Use of proceeds Asset Based Revolving 800 n Refinance approx. US$ 2.5 Bn of Credit Facility existing indebtedness Term Loan 1,500 n ABL due 2012 and Term Loan facility due 2014 Senior Notes (Dec 1,100 2017) n 7.25% Senior Notes due 2015 Senior
Slide 61: Implication of Refinance
Implication of Refinance Original Post Refinance Novelis Inc Equity Equity US$3.5 billion US$1.8 billion AV Metals Inc Equity Equity US$3.5 billion US$1.8 billion AV Minerals Loan USD 1 Bn (Netherlands) BV 1. Equity US$2.5 Bn Equity 2. Guarantee for Loan US$1.8 billion USD $ 1 Bn 61 Hindalco Industr
Slide 62: Deal Highlights
Deal Highlights q USD 4.8 Bn refinance accessed multiple debt capital market simultaneously i.e. Asset Based Revolver of USD 0.80 Bn, Term Loan of USD 1.5 Bn and Bonds of USD 2.5 Bn. q The bond tranche was amongst the largest in terms of size of transaction in US market for 2010 for its category. q
Slide 63: The Crux: Towards Sustainable Leadership
The Crux: Towards Sustainable Leadership 63
Hindalco Industries — Non-Deal Roadshow (February 2011) on 6ix