Hindalco Industries Ltd Investor Presentation Investor Presentation November 2010 Q2 FY11
Industry Backdrop Results Highlights Aluminium: Business Conditions & performance Review Copper: Business Conditions & performance Review pp p Projects Projects – An Update An Update
Industry Backdrop Industry Backdrop 3
Robust growth in global metals consumption … … though supported by re-stocking / base effect / stimuli Aluminium Consumption Copper Consumption World (Mn ton annualized) (Mn ton, annualized) (Mn ton annualized) (Mn ton, annualized) 18% 8% 17.5 19.3 41.9 41.6 18.5 17.9 17.9 37.4 37.8 17.0 RoW o 34.3 34 3 11.1 6.0 16% 9% 7.2 10.0 China 17.5 12.6 5.1 20% 11% 7.3 14.8 North America + Europe 6.9 12.9 4.1 18% 5% 2008 2009 2010 Q1 2010 Q2 2010 Q3 2008 2009 2010 Q1 2010 Q2 2010 Q3 4 Growth (2010 est) Source: Industry
Indian Growth Momentum to Continue Aluminium consumption (kt) Electrical & Electronics 966 � Large scope for metal Building & Construction 910 consumption to rise from current levels H1 FY10 H1 FY11 Consumer Durable End user � 6% segments have a strong/positive outlook – i e outlook i.e. Automobile & Transport A t bil & T t Copper consumption (kt) C ti (kt) Power, Transport, Construction, 307 Industrial etc Rising per capita Industrial Machinery � 296 296 consumption of in India H1FY10 H1FY11 Packaging 4% H1 growth affected by temporary slowdown in electrical 5 demand, which is primarily dependent on Govt. allocation
Result Highlights Result Highlights 6
Robust Performance amidst challenging conditions Q2 FY 11: Highlights 7
Proactive Steps Highest Ever production Higher Aluminium VAP Sales of CCR Improved Mix � Hirakud Smelter outage � Hirakud Smelter outage � Lower Cu Premium Efficiencies Highest Ever Production at Highest Ever Production at i improvement Muri in Aluminium � Coal Price Surge Efficiencies improved Reduced Inventory levels to � Kalwa VRS � Kalwa VRS Copper pp increase the metal sales increase the metal sales. Higher EBIT despite adverse impact 8
Financial Performance ` Cr ` Q2 FY10 Q2 FY11 Change (%) Net Sales 4,915 5,860 19 PBITDA PBITDA 666 666 780 780 17 17 PBT 434 556 28 PAT 344 434 26 EPS ( ` ) 2.02 2.27 12 ` Cr ` H1 FY10 H1 FY11 Change (%) Net Sales 8,812 11,038 25 PBITDA 1,500 1682 12 PBT PBT 1,034 1 034 1 229 1,229 19 19 PAT 825 968 17 EPS ( ` ) 4.85 5.06 4 Q2 profit would have been significantly higher, but for Hirakud 9 production loss and Kalwa VRS settlement
Aluminium: Business Conditions & Performance Review Performance Review 10
Al: External Drivers Driver Current Assessment Impact LME • Support from global liquidity and cost pressures, but downside risks related to rewind of financing deals INR USD • USD weakness and continued FII flows to India may lead to rupee appreciation Input • Upward pressure related to coal and carbon costs prices Demand in • Outlook positive for most aluminium-consuming p g India sectors 11
Aluminium Industry : Cost push to continue World average hot metal cost Composition Others 10% Alumina - Resource companies Resource companies Carbon cost Carbon cost insisting on short-term - Correlated with contracts 13% commodity price cycle 38% - De coupling of alumina & aluminium alumina & aluminium Labour cost 7% - Hardening of emerging market currencies, including currencies, including RMB 32% Power Power - Electricity price hikes in China - Power cuts in certain Chinese provinces leading to cutbacks in production (~1.5 mt capacity) Cost Push to continue – Support for prices? Source: Industry & 12 company estimates
Strong Production performance despite Hirakud production loss Alumina (kt) Metal (kt) Growth in Output 12% 11% 140 (H1 FY11 vs H1 FY10) 123 H’kud H’kud Alumina 10% 347 H’kud Metal -4% 103 100 312 FRP 3% R’koot R’koot Extrusions 3% Q2 FY10 Q2 FY11 Q2 FY10 Q2 FY11 FRP (ton) Extrusions (ton) Adverse impact 2% 2% contained through 54,042 , 53 150 53,150 9,815 9 815 • efficiency 9,637 improvement • Higher alumina & wire rod production Q2 FY10 Q2 FY11 Q2 FY10 Q2 FY11 13
Steps taken to minimise impact of Hirakud production loss Increased third-party sale of Improved sales mix specials and standard 138 kt 138 kt 128 kt Primary-Exp 84 kt 100.0 90.0 48% 48% 49% 49% 80 0 80.0 Primary- 54 kt Dom ▼ 6% 70.0 34.2 60.0 50.0 40.0 VAP 33.5 44% 50% 30.0 ▲ 6% 20.0 10.0 0.0 Q2 FY10 Q2 FY11 Q2 FY10 Q2 FY11 Sacrificed volumes mainly in Primary Specials Standard Exports 14
Q2 FY 11: Strong Aluminium numbers 15
Aluminium Business: Financial Performance Q2 FY10 Q2 FY11 Change (%) ( ` cr) Net Sales & Operating 1,649 1,911 16 Revenue EBIT 259 424 64 H1 FY10 H1 FY10 H1 FY11 H1 FY11 Change (%) Change (%) ( ` cr) Net Sales & Operating 3 067 3,067 3 778 3,778 23 23 Revenue EBIT 714 976 37 16
Copper: Business Conditions & Performance Review Performance Review 17
Copper: External Drivers Driver Current Assessment Impact TCRC • Long term TCRC lower than last year LME/INR • LME being supported by liquidity INR • Appreciating rupee Acid prices • Recently on an improving trend Energy Energy • Correlated with commodity cycle; likely to be Correlated with commodity cycle; likely to be prices firm Ch ll Challenging times i ti 18
Custom Smelters : Low TCRC, Rising energy costs … Structural shortages likely to … Rising energy costs continue ( (Mn Ton) ) Mine Supply Smelter Demand 13.7 13.2 13.1 % change H1FY11 % change H1FY11 13.0 13.0 13.0 13 0 Input 12.8 Vs HiFY10 12.5 12.4 Imported 12.3 12.2 >10 coal Furnace oil >20 Propane Propane >25 >25 2007 2008 2009 2010 2011 (E) (P) LNG >5 •TCRC to continue to remain under pressure •FY 10 bench mark TCRC were significantly FY 10 bench mark TCRC were significantly higher than FY11 benchmark 19
Cu: Production Performance Q2: Record cathode production and sharp jump in Own CCR production C th d Cathode (kt) (kt) O Own CCR(kt) CCR(kt) 41% 5% 43 94 90 90 31 Q2 FY10 Q2 FY11 Q2 FY10 Q2 FY11 St Strong operational performance ti l f 20
Copper Business: Financial Performance Q2 FY10 Q2 FY10 Q2 FY11 Q2 FY11 Change (%) Change (%) ( ` cr) Net Sales & Operating 3,268 3 268 3 951 3,951 21 21 Revenue EBIT 217 129 (41) H1 FY10 H1 FY11 Change (%) ( ` cr) Net Sales & Operating Net Sales & Operating 5,748 7,265 26 Revenue EBIT 374 253 (32) 21
Mining : ABML Highlights Nifty Sulfide Production (tons) Nifty EBIDTA (A$ mn) 29491 18% 11% 89.7 26488 75 7 75.7 FY10 H1 FY11 H1 FY10 H1 FY11 H1 Strong Performance 22
III Copper business – Strategic initiatives paying off Key focus areas Drivers � Cost effective brown field expansion � Strategic advantage through technology � Strategic advantage through technology 1 1 Capital Efficiency Capital Efficiency � Asset sweating Leadership in domestic � Service level differentiation 2 market offering better � Quality edge realisation � Jetty /port infrastructure to overcome locational disadvantage Supply Chain 3 � Sourcing Mix optimisation Reengineering � Regional redistribution points � Global Scale � Global Scale 4 4 Gl b l C Global Cost t � Top Quartile Cost Curve Competitiveness � By-Products value extraction 5 Value Chain � Value added downstreaming Enhancement g � A cost effective “Upstreaming” strategy 6 Long Term feedstock � Mining acquisition securitisation � Strategic alliances/partnership Transforming the copper business into a globally competitive smelting value chain 23
Projects – An Update Projects – An Update 24
Utkal Alumina Engineering Basic Engg-100 % Complete, Detailed Engg- 95% Completed, not on critical path critical path Statutory Obtained Clearances Commitment Over 82% Site Progress g More than 7,000 people working at site. p p g Major Contractors like L & T, Simplex, GDC mobilized fully at site. 94% of Piling work completed. RCC, structural, fabrication and erection has been ramped up and is on track for timely completion. Power Plant Power Plant Erection of BTG units under progress Erection of BTG units under progress Expected completion -Q2 FY12 25
Activity at Site: Utkal Evaporation area: Erection of equipment Mud Washing: erection of DCW under progress under progress BTG Package: ESP#1: Hooper erection under progress g p p g BTG Package: Boiler#1: Insulator erection BTG Package: Boiler#1: Insulator erection 26
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