Grasim Industries Limited BIG IN YOUR LIFE Earnings Presentation Q2FY20
BIG IN YOUR LIFE # 1 In Viscose # 1 In Caustic Soda # 1 In Premium Fabric Staple Fibre # & Specialty Chemicals* 57% 57% Market Cap (Sep 30, 2019): INR 48,000 Crore (USD 6.8 Billion) Total Market Cap Total Market Cap (Sep 30, 2019): (Sep 30, 2019): INR 1.20 Lakh Crore INR 18,688 Crore (USD 16.9 Billion) (USD 2.7 Billion) Cement Producer Asset Management # 1 Top 3 in India Companies** Global Producer Private Diversified # 3 Top 5 (Ex- China) NBFC # Presence In India in Viscose, Modal and 3rd generation visose *Global leadership in Chlorine derivatives namely Stable Bleaching Powder and Aluminum Chloride and India leadership in Chloro Paraffin wax, PolyAluminium Chloride and Phosphoric Acid ** Excluding ETF 2 Grasim Industries Limited | Earnings Presentation Q2 FY20
Table of Content 01 Key Highlights 02 Financial Overview 03 Business Performance 04 Appendix
Key Highlights
Key Highlights Financial Overview Business Performance Appendix Q2FY20: KEY HIGHLIGHTS Consolidated Revenue and EBITDA up by 3% & 7% on YoY basis respectively Global prices of VSF softened further on account of capacity overhang and continuing U.S- China Trade war Global Caustic Soda prices remained sluggish on account of weak demand in China and Asia Chlorine realization in India turned negative for two consecutive quarters led by excess supply from new domestic capacities Grasim participated in Corporate Sustainability Assessment by Dow Jones Sustainability Index (DJSI) and scored higher than the global Industry average Joint Venture with Maschinenfabrik Reinhausen GmbH (“MR”), Germany for the manufacture and sale of Composite Hollow Core Insulators Infused equity capital of Rs. 770 Crore in Aditya Birla Capital Limited through preferential allotment in October 2019 5 Grasim Industries Limited | Earnings Presentation Q2 FY20
Financial Overview
Key Highlights Financial Overview Business Performance Appendix FINANCIAL OVERVIEW: QUARTERLY Consolidated Net Revenue (Rs. Cr.) EBITDA (Rs. Cr.) 16% 22% 17% 20,088 18,430 17,892 4,461 3,180 2,972 Q2FY19 Q1FY20 Q2FY20 Q2FY19 Q1FY20 Q2FY20 Standalone EBITDA (Rs. Cr.) Net Revenue (Rs. Cr.) 25% 18% 19% 5,118 5,001 4,797 1,352 946 928 Q2FY19 Q1FY20 Q2FY20 Q2FY19 Q1FY20 Q2FY20 EBITDA Margin (revenue adjusted to include other income) 7 Grasim Industries Limited | Earnings Presentation Q2 FY20
Key Highlights Financial Overview Business Performance Appendix STRONG BALANCE SHEET Standalone (Rs. Cr.) Consolidated (Rs. Cr.) Net Debt/ Net Debt/ EBITDA EBITDA 1.48x 0.51x (H1FY20 (H1 FY20 Annualized) Annualized) 4,492 31,559 23,092 2,652 1,840 8,467 Sep-19 Sep-19 Liquid investments Net Debt Debt 8 Grasim Industries Limited | Earnings Presentation Q2 FY20
Key Highlights Financial Overview Business Performance Appendix CAPEX PLAN VSF Capacity (KTPA) Caustic Soda Capacity (KTPA) 43% 27% 1,457 788 BB’Puram (146 KTPA) Vilayat expansion H2 FY21 146 (219 KTPA) H2 FY21 Vilayat expansion 438 (2 phases of 1,147 (73 KTPA) 300 TPD each) H2 FY21 365 365 383 549 Rehla expansion 164 164 (91 KTPA) 201 H1 FY21 BC Kharach 110 110 VSF and Ganjam 91 91 91 Specialty Fibre 158 162 142 Karwar 91 91 91 Veraval 91 91 91 Harihar 88 88 88 Renukoot 129 129 129 155 155 155 Nagda Nagda 270 270 270 FY19 FY20 FY21+ FY19 FY20 FY21+ Excludes Century Rayon Caustic capacity of 24 KTPA 9 Grasim Industries Limited | Earnings Presentation Q2 FY20
Key Highlights Financial Overview Business Performance Appendix CAPEX PLAN Capex Capex Cash Outflow spent (Net of CWIP Particulars (Rs. Cr.) as on YTD H2 FY21 1/4/2019) Sep'19 FY20 Onwards Capital expenditure for Capacity Expansion Viscose Staple Fibre 3,279 624 1,300 1,355 Viscose Filament Yarn 182 10 79 93 Chemical 1,562 107 539 916 Total 5,023 741 1,918 2,364 Normal Modernisation and Maintenance Capex Viscose Staple Fibre 1,108 149 288 671 Viscose Filament Yarn 252 35 115 102 Chemical 1,018 145 255 618 Total 2,378 329 658 1,391 Capex related to other businesses Epoxy, Textiles, Fertiliser and Insulator 374 66 102 206 Total 7,775 1,136 2,678 3,961 10 Grasim Industries Limited | Earnings Presentation Q2 FY20
Key Highlights Financial Overview Business Performance Appendix THE TAXATION LAW AMENDMENT ORDINANCE – 2019: IMPACT ANALYSIS Revised New Comments Old Rates Rate • Tax Saving of 9.77% 34.94% 25.17% • Profit Existing incentives will be withdrawn Book • 17.47%* NA No MAT Credit available Profit * Earlier 21.55% Key considerations for exercise of option Existing incentives Weighted Deduction for R&D Expenditure Saving of tax due to reduction in tax rate of 9.77% v/s 80IA deduction allowable • 6 approved inhouse R&D Centers Accelerated Additional Depreciation In process of comprehensive review of incentives • Additional Depreciation @ 20% is allowable in first year of acquisition of machinery Final decision to be taken by Q4-FY20, hence Tax holiday units current tax has been charged at old rates • Over 10 units eligible for deduction u/s. 80IA (Captive power plants, Water treatment plants) 11 Grasim Industries Limited | Earnings Presentation Q2 FY20
Business Performance
Key Highlights Financial Overview Business Performance Appendix VISCOSE INDUSTRY Global Prices Trend ($/Kg) Price YoY QoQ Sep Exit Price ( D over Q2FY20) Movement (%) (%) 2.30 2.10 1.90 Grey 1.33 $/Kg 1.70 -23% -8% 1.50 VSF (-4%) 1.30 1.10 1.57 $/Kg 0.90 Cotton -23% -11% (-2%) 0.70 Q1 Q2 Q3 Q4 A P R MA Y JUN JUL A UG S E P F Y 1 9 F Y 1 9 F Y 1 9 F Y 1 9 1 9 1 9 1 9 1 9 1 9 1 9 0.92 $/Kg PSF -26% -9% Source: CCF and other (-5%) Grey VSF - CCF PSF Cotton (Cotlook) industry sources Global prices of VSF softened further on account of capacity overhang and continuing U.S- China Trade war Global VSF prices touched their historic low impacting the performance of all global players Sharp dip in the fabric consumption in China and high inventory level in the value chain is a key concern The domestic VSF demand getting impacted by rising yarn imports 13 Grasim Industries Limited | Earnings Presentation Q2 FY20
Key Highlights Financial Overview Business Performance Appendix VISCOSE – KEY OPERATIONAL METRICS VSF Sales (KT) Sales Volume Mix Export Sales Grey VSF 142 138 136 80% 12% 20% 88% Q2FY19 Q1FY20 Q2FY20 Domestic Sales Specialty Fibre Pulp CCF prices vs Consumption Prices Share of domestic sales in total sales increased to 88% (Up 4% YoY) 1,000 68,000 66,000 950 Pulp consumption rates Increase share of grey VSF to meet the demand in 64,000 900 CCF Spot Prices 62,000 domestic market 850 60,000 800 58,000 750 Pulp price down 22% YTD, eased below $650 in 56,000 700 54,000 October 650 52,000 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Average consumption rate for Q2FY20 stood at Rs. 62,620/ton and average CCF Spot Prices stood at 727 $/ton CCF Spot (US$/MT) Pulp Consumption (INR/MT) Source: CCF and company data 14 Grasim Industries Limited | Earnings Presentation Q2 FY20
Key Highlights Financial Overview Business Performance Appendix FINANCIAL PERFORMANCE - VISCOSE Net Revenue (Rs. Cr.) EBITDA (Rs. Cr.) 576 2,605 2,509 2,431 442 381 VFY VFY VFY VFY VFY VFY VFY VFY VFY Q2FY19 Q1FY20 Q2FY20 Q2FY19 Q1FY20 Q2FY20 VSF reported a strong operating performance with production and sales up 8% and 5% YoY basis to 148 KT and 142 KT VSF profitability impacted YoY basis due to fall in the domestic realization The impact of weakening input costs (pulp prices) to get reflected in the subsequent quarters VFY profitability impacted due to increase in imports from China 15 Grasim Industries Limited | Earnings Presentation Q2 FY20
Key Highlights Financial Overview Business Performance Appendix VISCOSE – KEY SUSTAINABILITY INITIATIVES 2 1 4 Birla Cellulose is Grasim carbon neutral in participated in Encouraging scope 1 and 2 2019 CSA response from emissions, 3 (Corporate global ahead of Sustainability leading brands as competition in Plans going Assessment) they have placed the Industry beyond regulatory by Dow Jones orders for Liva Eco norms to the most Sustainability as they are stringent EU Index (DJSI) converting to norms at all the and attained a “sustainable plant sites by score above the material” 2023 under global Industry implementation average towards close looping the viscose production 16 Grasim Industries Limited | Earnings Presentation Q2 FY20
Key Highlights Financial Overview Business Performance Appendix CHLOR ALKALI INDUSTRY Caustic Soda Prices 39,631 40,276 37,070 38,287 37,845 37,198 34,522 31,310 28,660 30,357 Caustic Realization - Grasim (Rs./MT) Caustic Realization - IHS SEA in Rs./MT ECU - Grasim (Rs./MT) Source: Company data and Crisil Global Caustic Soda prices remained sluggish on account of weak demand in China and Asia Caustic soda prices in India witnessed a steep decline due to demand slowdown and ramp up of new domestic capacities Chlorine realization in India turned negative for two consecutive quarters led by excess supply from new capacities 17 Grasim Industries Limited | Earnings Presentation Q2 FY20
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