Hindalco Industries Limited Hindalco Industries Limited Q2 FY10 Q2 - PowerPoint PPT Presentation

Hindalco Industries Limited Hindalco Industries Limited Q2 FY10 Q2 FY10 Q2 FY10 Q2 FY10 I nvestor Presentation I nvestor Presentation st October’09 31 st 31 October’09 1

Highlights Highlights Highlights Highlights Backdrop Backdrop Backdrop Backdrop Business Conditions & Performance Review Business Conditions & Performance Review Business Conditions & Performance Review Business Conditions & Performance Review Industry & Business Outlook Industry & Business Outlook Project Highlights Project Highlights 2

Highlights: Best Ever Q2 & H1 Production Performance Q2 FY10 H1 FY 10 Highest ever Production Highest ever Production 139,894 7% 275,333 Aluminium 8% 623,623 311,706 Alumina 4% 5% C Copper Cathode C th d 89 692 89,692 169 474 169,474 23% 16% Copper Anode 169,629 93,297 19% 15% � Aluminium: � Highest ever quarterly production. � Improved product mix. � Copper � Highest ever quarterly production � Sustained cost focus enabled single digit cash cost of production

Economy: Nascent Signs of recovery India Growth GDP growth- Major economies 7% IIP 5.80% 6% 4.80% 5% USA UK 10.0% China 4% 9% 8.0% 7.90% 3% 6.10% 6.0% 2% 6.80% 1% 4.0% 0% YTD Aug FY09 YTD Aug FY10 2.0% Sector Growth Sector Growth 9% 8.40% YTD Aug FY09 0.0% 8% YTD Aug FY10 2008 Q3 2008 Q4 2009 Q1 2009 Q2 -0.60% 6.60% -0.60% 7% -1% -1.80% -2.0% 6% 5.50% -2.70% 2 70% -2.70% 2 70% 5.10% 5 10% 5% -4.0% 4% 3.50% -5.40% 3% 2.30% -6.0% -6.40% 2% 1% -8.0% 0% Mining Manufacturing Electrical 4 Source: GOI website

Commodity price trend: Only partial revival, yet prices much below the last year levels much below the last year levels Indexed: Base=100 Aluminium Copper Zinc Zi L Lead d 110 Nickel Crude 80 50 20 June'08 June'09 April'08 Aug'08 Oct'08 Dec'08 Feb'09 April'09 Aug'09 Oct'09 De Ap O Ap O Ju Ju F A A • Though the commodity prices have rebounded from the lows of Q4 FY09, they are still much below the levels witnessed during Q1 FY09. • Aluminium Continues to be laggard due to very high inventory levels. 5

Key Industry Drivers Key Industry Drivers Q2 FY10 vs Q2 FY09 Driver I Impact t Aluminium LME C Copper LME LME Exchange Rate(Rs/$) Copper Spot Tc/Rc C Copper By-Products Realisation B P d t R li ti Most Macro economic factors unfavourable

The adverse macro economic factors adversely affected the businesses. the businesses. Copper Aluminium Ingot realisation Fall in DAP Subsidy & SA realisation Indexed: Base=100 Indexed: Base=100 120 120 100 DAP Subsidy 100 100 100 Sulphuric acid 100 80 72 80 60 60 40 40 40 29 20 20 5 0 0 0 Q2 FY09 Q2 FY10 Q2 FY09 Q2 FY10 Aluminium LME Impact-Rs 550 Cr Aluminium LME Impact Rs 550 Cr CU Total Impact Rs 350 Cr CU Total Impact-Rs 350 Cr Net Adverse impact for Hindalco of Rs 900 Cr during Q2 FY10. 7

Business Conditions-Aluminium Aluminium consumption slowly …Inventories still a concern improving but still well below Previous year levels 120 109.6 104.2 Aluminium Stock (Mn T) 7 3500 96 100 92.9 LME CSP US$/Mt 90.9 6 3000 83.4 2940 ay 5 5 2500 2500 sumption Kt/da 80 80 1812 4 2000 60 3 1500 Con 2 1000 40 1 500 20 0 0 Q1 FY09 Q2 FY09 Q3 FY09 Q4 FY09 Q1 FY10 Q2 FY10 0 Q2 Q3 Q4 Q1 Q2 Q3 CY09 CY09 CY09 CY10 CY10 CY10 � Early signs of recovery � Large inventory of ~6.5 Mn tonnes still persists 8

Aluminium Business Performance Performance 9

All round improvement in Production (Mt) (Mt) 317500 150,000 70,000 Q2 FY09 310000 Q2 FY10 311706 296408 131,314 +5% 140,000 60,000 51,819 302500 39,894 +7% +12% 787 295000 57,7 13 130,000 50,000 287500 280000 120,000 40,000 272500 265000 110,000 30,000 257500 257500 250000 100,000 20,000 Alumina Primary Metal Sheet+Foil 10

Improved downstream Sales volumes Downstream Primary Value added Primary 150 140 140 130 12% 120 110 110 53.8 53.8 100 48.2 90 43% 80 70 70 23.4 23 4 16.4 Kt 9% 60 50 40 40 30 60.2 55.1 20 10 0 Q2 FY 09 Q2 FY 10 11

Business Conditions: Copper � Precipitous fall in spot Copper TCRC’s � Sulphuric Acid realisations continue to remain depressed � DAP subsidy has fallen sharply from its peak by 79%. � Improved availability of Scrap led to revival of unorganised sector rod production in North-Significant impact on duty paid Cathode sales Extremely Challenging Business environment for Custom Smelters 12

C Copper Business Performance B i P f 13

Significantly lower cost of production…… Total Cash cost of Production without by-product credits (Indexed) 100 105 85 67 65 45 25 5 9 0 , 0 , 1 -15 2 2 Q Q Q 33% reduction ~ Single digit Cash Smelting cost achieved in Q2 FY10.

Domestic Market share improved � Market share enhanced by 1 percentage point. � Significant improvement in Market and product mix � Lucrative Duty paid sales up by 18 % � Value added CCR sales up by 10% in Dom market � Improvement in export premiums . 13% growth in Overall Sales Volume

In a nutshell : Outstanding Operational performance by both Aluminium & Copper businesses. � We produced more….. � Highest ever Al & Cu production g & p � We Sold More….. � 15% higher Aluminium sales � 13% higher copper sales � We improved the product mix and sold at the most lucrative markets lucrative markets. However, the adverse macro-economic impact of ~ Rs 900 Cr p lled do n the profitabilit pulled down the profitability of Hindalco for the Quarter of Hindalco for the Q arter 16

Hindalco Financials –YOY (Q2) Rs Crores Rs Crores Q2 FY09 Q2 FY09 Q2 FY10 Q2 FY10 Change (%) Change (%) Net Sales 5683 4917 -13% PBDIT 1170 666 -43% PBT 926 434 -53% PAT PAT 720 720 344 344 -52% 52% 17

Aluminium: Y-O-Y Performance at a glance Change Rs Crores Q2 FY09 Q2 FY10 (%) Net Sales & Operating 2121 1650 -22% Revenue EBIT EBIT 715 715 259 259 -64% 64% Q2 FY 10 numbers Post AS 30 Adoption 18

Copper: Y-O-Y Performance at a glance Change Rs Crores Q2 FY09 Q2 FY10 (%) Net Sales & 3565 3269 -8% Operating Revenue EBIT 138 217 57% Q2 FY 10 numbers Post AS 30 Adoption 19

Outlook - Aluminium

Aluminium prices expected to remain range-bound Aluminium prices expected to remain range bound in the Short term Commerz Bank AG National Australia Bank Ltd 2300 Duetshe Bank Westpak Banking Corpn 2200 Barclays Plc CRU 2100 2000 1900 1800 1700 1700 1600 1500 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Median 1823 1839 1823 1825 1992 Mean M 1856 1856 1804 1804 1833 1833 1820 1820 1964 1964 Minimum 1791 1580 1764 1653 1971 Maximum 1984 1900 1950 2000 2050 21

Outlook - Copper

Copper Market Outlook � LME likely to remain strong on optimism and risk appetite Global Refining Capacity Utilization (%) Capacity Utilization (%) � But Refined Cu market surplus may cap further 83.8 83.0 gains 81.8 � Cathode premia lower than last year, but holding 80.8 ground at current level 77.0 � Project delays caused tighter concentrate market • Far-East spot TCRCs at historic low F E t t TCRC t hi t i l 2005 2006 2007 2008 Jan ‐ • Unlikely to rebound quickly Jul 09 Source: ICSG � Indian refined copper market growth could be Indian refined copper market growth could be restricted by improved scrap availability, despite improving economy Concentrate sourcing at remunerative TCRCs would be a challenge going forward

Projects :Aluminium Capacity Growth 1,800 Jharkhand Q1 FY13 Jharkhand- Q1 FY13 1,600 1609 1638 1,400 Mahan July FY12 Mahan-July FY12 1 200 1,200 1295 1295 Aditya-Oct FY12 1,000 Hirakud (80 addl pots) 800 800 O t FY12 Oct FY12 718 600 559 517 535 535 400 400 200 0 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 24

To Sum Up… Challenging Environment Our focus Areas ► Depressed Prices ► Improve Asset productivity ► Increasing input costs g p ► Contain Input costs p H1 FY 10 ► Low Tc/Rc ► Low Tc/Rc ► Maintain Growth Momentum ► Maintain Growth Momentum In the face of severe challenges,the company is unwavering in its commitment to deliver shareholder value.

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