Hindalco Industries Ltd Investor Presentation Q1, FY2011
Economic & Industry Backdrop Economic & Industry Backdrop 2
Global Recovery continues at a measured pace Global Recovery continues at a measured pace � Growth still continues; though China YOY % GDP growth rate from slowed down marginally in Q2, Q2 2009 to Q2 2010 2010 12 10.3 % 9.3 10 � Risk appetite affected by – 7.9 8 6.0 � Sovereign debt crisis in parts of 6 Europe 4 2.4 1.4 � Renewed fears of economy 2 weakening in China and US 0 -2 -0.7 -4 � Policy shifting gears gradually -6 -5.3 � Rate hikes in India, Australia US Europe China India � China’s measures to cool real estate prices Q2 2010 growth rates for Europe and India � Austerity focus in parts of Europe are estimates 3
India: Strong growth in end user industries India: Strong growth in end user industries Aluminium consumption (kt) Electrical & Electronics 435 390 Building & Construction Consumer Durable 11.5% Copper consumption (kt) Automobile & transport 166 160 Industrial Machinery 3.8% Packaging Source: Industry
Key Industry Drivers and impact Key Industry Drivers and impact Industry Driver Change ( %) Impact Aluminium LME 41 Average($/ton) Copper TC/RC (36) LT (Industry) Exchange (6) Rate (Rs/$) Energy & Crude >25 derivatives
Performance Highlights Performance Highlights 6
Performance Highlights – Performance Highlights – Q1 FY11 Q1 FY11 YoY… � Net profit up 11% � Aluminium: � All round increase in production � Conversion cost brought down despite inflationary pressures � Copper: � Highest ever own copper rod production in a quarter � Respectable output inspite of planned shut down � Greenfield projects on track 7
Financial Performance Financial Performance Cr Q1 FY10 Q1 FY11 Change (%) Net Sales 3,897 5,178 33 PBIDTA 833 901 8 PBT 600 673 12 PAT 481 534 11 EPS ( ) 2.83 2.79* (1) *EPS maintained despite 12.5% equity dilution post QIP Total number of shares increased from 170 Cr to 191 Cr 8
Business Conditions and Business Conditions and Performance Review - Performance Review - Aluminium Aluminium 9
World Aluminium Market : Consumption World Aluminium Market : Consumption Consumption growth in H1, 2010 has slowed down as China and rest of Asia took a breather (% change over the previous six-months) The global demand recovery continued; though at a relatively slower pace after a strong pull back in H2, 2009 � China: pace of growth tempered down with measures to cool down the credit growth � US and Europe: witnessed primarily a re-stocking led sequential growth after a tentative recovery in H2,2009 10 Source: Industry & Company estimates
World Aluminium Market : Production World Aluminium Market : Production Production too growing; though the growth has moderated o Sequential production growth (% change over the previous six-months) rate came down with concerns around demand recovery & setting in of risk aversion � Aluminium prices declined making a large proportion of Chinese smelters unviable � China: New surcharge on power resulting in higher tariffs & rise in smelting costs � Production increased in rest of Asia as new smelting capacities came on stream Source: Industry Research/Company 11 estimates
Al: Key Performance Drivers Al: Key Performance Drivers Macro Factors Our Response Production Q1 Q1 Impact � Higher across the board FY10 FY11 through asset sweating LME ($ / t) 1,488 2,092 Metal conversion cost � Reduced in an inflationary INRUSD 48.81 45.70 environment through efficiency measures Cost Pressures Pricing Crude & � Rising contribution from Value derivatives Added Products (VAP ) on the back of higher premiums 12
All-round improvement in production All-round improvement in production FRP (tonnes) 51,373 9% 4% 4% 49,304 FY10 Q1 FY11 Q1 Extrusions (tonnes) Foils (tonnes) � Production increased across the board on the 9617 33% 4781 9% back of asset sweating & 3600 8812 brownfield expansion � Robust growth in VAP production FY10 Q1 FY11 Q1 FY10 Q1 FY11 Q1 13
Alumina: Increased Dominance in Specials Alumina: Increased Dominance in Specials Domestic sales Export sales 21% 70% 17,725 12,498 14,658 7,357 38% 44% 5,015 3,860 3,623 2,685 Q1 FY'10 Q1 FY'11 Q1 FY'10 Q1 FY'11 Special Hydrate Special Alumina Special Hydrate Special Alumina Higher Sales across the categories Higher Sales across the categories Dominant market share Dominant market share 14
Aluminium Business: Financial Performance Aluminium Business: Financial Performance Q1 FY10 Q1 FY11 Change (Rs cr) (%) Net Sales & 1,419 1,867 32 Operating Revenue EBIT 455 552 21 15
Business Conditions and Business Conditions and Performance Review - Performance Review - Copper Copper 16
CU: TCRC continued downward trend in the wake of CU: TCRC continued downward trend in the wake of Global concentrate shortages Global concentrate shortages 13,104 12,414 (kt) � Mine supply continued to fall short of demand for concentrate � Spot TCRC moved closer to zero in the last quarter � Double-digit TCRC unlikely in 17.5 Spot TCRC (c/lb) 20 8.7 near future 15 4.1 10 2.0 2.3 � Cu-% in concentrates is also 1.0 5 0 declining FY09 FY10 FY10 FY10 FY10 FY11 Q4 Q1 Q2 Q3 Q4 Q1 Source: Industry Research/Company estimates By-product realization has become a critical factor and decides the By-product realization has become a critical factor and decides the viability of production due to low TCRC viability of production due to low TCRC
Cu: Key Performance Drivers Cu: Key Performance Drivers Macro Factors Our Response Production � Production maintained despite planned shutdown in Cu-III; DAP Q1 FY11 output up Over Q1 FY10 Conversion cost (w/o credits) � Maintained at last year’s level TCRC though energy input costs increased sharply Acid realization Sales mix Fertilizer subsidy � Leveraged export incentive for focus markets � Higher own CCR sales 18
Cu: Q1 FY 11 Energy cost pressures Cu: Q1 FY 11 Energy cost pressures % change Over Q1 Input FY10 Imported coal >10 Furnace oil >30 Naphtha >20 LNG >15 Across the board rise in energy prices Impact of rising energy prices countered through productivity improvement and efficiency optimisation measures
Cu: Production Performance: Q1 FY11 Cu: Production Performance: Q1 FY11 � Higher Anode production despite 4% 3% annual plant shut down � Gold production increased 27% � Ratio of VAP to 56,510 cathode production up 40,708 106% 38% from 37% to 53% 27,384 � DAP production doubled 20
Copper Business: Financial Performance Copper Business: Financial Performance Q1 FY10 Q1 FY11 Change (Rs cr) (%) Net Sales & 2,479 3,314 34 Operating Revenue EBIT 156 124 (21) In addition to largely adverse business drivers, the financial performance suffered on account of planned shutdown (~ 3 weeks) in one of the smelters The impact was offset by improving operational efficiencies 21
Projects – Projects – An Update n Update 22
Planned Growth Trajectory Planned Growth Trajectory KT Aluminium Smelting capacity 1,800 Jharkhand- Q1 FY14 1,600 1609 1638 1,400 1,200 1295 1,000 Mahan-Q2 FY12 Aditya-Q3 FY12 800 Hirakud brownfield 718 600 559 517 535 400 200 0 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 23
Greenfield Project – Greenfield Project – Utkal Alumina tkal Alumina Engineering Basic Engg-100 % Complete, Detailed Engg- 92% Completed, Statutory Obtained Clearances Commitment Over 82% project cost committed & Spent All major order placed. Financial closure achieved Site Progress: More than 5000 people working at site. Major Contractors like L & T, Simplex, GDC mobilized fully at site. 87% of Piling work completed. RCC , Structural fabrication – 33 % complete. Tankages erection- under progress. Power Plant : Erection of BTG units under progress. 24 The Project is geared up for Q2 FY 12 commissioning
Activity at Project Sites: Utkal Activity at Project Sites: Utkal Predisilication tank:TK 203-105,106: Erection of 3rd BTG Package:Boiler#1: APH erection in progress shell in progress Calcination Area: Stack #1: 4th shell completed BTG Package:Boiler#1: 4 Tier column erection. 25
Greenfield Project – Greenfield Project – Mahan Aluminium ahan Aluminium Engineering Basic Engg-94 % Complete, Detailed Engg- 60% Complete Statutory Major approvals in place. approvals Orders Orders for all major, long delivery equipment placed Commitment & ` Around 82% of project cost committed Spent Site Progress More than 10,000 people at site. Major Contractors like L&T, BHEL, Rohan Builders etc have been mobilized fully. Smelter: Site Grading – 55% complete, Boundary wall – under construction, structural work progressing Power Plant: Area grading – 63% completed, Concreting 48% completed. Foundation for 5 boiler units, 4 ESP units, 2 power units completed, First chimney 88 m completed, second chimney 40 m Power Plant completed and 2 more chimney rafts completed. Erection of engineering structure for boilers in progress. First Metal from Smelter – Q2 FY12 26
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