SVIPS Steel Limited 2007 1
Forw ard Looking and Cautionary Statem ent Certain statements in this report concerning our future growth prospects are forward looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward looking statements. The risk and uncertainties relating to these statements include, but are not limited to risks and uncertainties regarding fluctuations in earnings, out ability to manager growth, intense competition within Steel industry including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our internal operations, reduced demand for steel, our ability to successfully completes and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which the Company has made strategic investments, withdrawal of fiscal government incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, unauthorised use of our intellectual property and general economic conditions affecting our industry. 2
Agenda � JSW Steel today � Key strategic initiatives � Industry dynamics � Corporate social responsibility � Benchmarks 3
JSW Steel - Today Crude steel production 3.00 2.70 2.25 2.50 1.88 million ton 2.00 1.61 1.43 1.50 0.78 1.00 0.50 - FY' 02 FY' 03 FY' 04 FY' 05 FY' 06 FY' 07E 80 & 120kms CAGR – 28% Mumbai port Vasind and Tarapur Goa port 416kms Vijayanagar 540kms Chennai port � Well located with proximity to source of raw material & growing domestic market � Blend of Technology - optimising synergies � Well integrated production facilities � Diversified product profile – presence across value chain 4
JSW Steel – Today (Cont .) Raw materials Steelmaking & rolling Logistics / Utilities / Sales VMPL -Mining (Iron ore) Production facility at SWPL (Port) Vijayanagar � Iron ore production: 1.5 - 2 mt � Cargo Handling Capacity – � Pellets : 5 mtpa 5 mtpa � Meeting 25% - 30% requirements � Crude steel: 3.8 mtpa � Max. vessel size : 90,000 DWT SWML – Mining ( Dolomite , � Slabs: 3.8 mtpa JPOCL – Industrial Gases Limestone ) � Limestone production : 0.2 mtpa � HR Coils : 2.5 mtpa � Capacity : 5000 tpd � Meeting 85% of requirement Meeting 60% - 75% of requirement Production facility at BOC - Industrial Gases � Dolomite production : 0.5 mtpa Vasind � Capacity : 750 tpd Meeting 85% - 100% of requirement � HR Plate : 0.28 mtpa � Meeting 15% of requirement Power � CR : 0.43 mtpa Branches � Galvanised : 0.4 mtpa Captive Power � Overseas offices at China, � Capacity: 230 MW Australia, USA & UK Production facility at � Production: 190 MW � Wide domestic presence with Tarapur branches and strong dealer � Meeting 80% of requirement � CR : 0.57 mtpa networks JSW Energy Limited � Galvanised : 0.5 mtpa � Capacity: 260 MW � Pre-painted : 0.1 mtpa � Generation: 240 MW � Longterm PPA � Meeting 20% of requirement 5
Leading position in World market * * Geographical Sales distribution - 9M FY 2007 Product mix - 9M FY 2007 Africa Colour Coated Asia 2% 2% 9% Slabs Central America 15% 1% GPGC 26% Europe 17% Domestic Market 56% CR Coils 3% Middle East 8% HR Coils HR Plates 48% 6% South America * Tonnage basis 3% USA 4% Consolidated Revenue Share - 9M FY 2007 Others Slabs 8% Colour Coated 10% � Largest exporter of Galvanised 2% products from India Galva � Largest market share of flat products H.R. Coils products in South India 32% 41% HR Plate CR products 5% 2% 6
Rich experience in project execution Integrated project commissioning delayed due to delay in financial closure & start-up issues 1.6 mtpa greenfield of Corex plant project � Setting up of blast furnace � State-of-art non recovery coke oven plant 0.9 mtpa brownfield � Captive power plant utilising waste gases expansion � Units set up in record time & at a low cost � Implementation of integrated plant with 1.3 mtpa integrated Blast Furnace, Coke Ovens & Sinter facility expansion � Individual units set up in good time & with low investment � Experienced team for setting up integrated steel plants � Implement projects within time � Leverage existing infrastructure to set up projects at low investments 7
Low specific investment cost * Expansion - Low investment cost 8 1,000 923 6.8 900 7 800 6 682 700 551 550 million ton 5 US$ / ton 600 3.8 4 500 400 3 2.5 300 1.6 2 200 1 100 0 - Stage 1 Stage 2 Stage 3 Stage 4 E Investment/ton * Capacity * Specific investment cost considered upto HR Coil stage only � Specific investment cost comparable with best in industry � Efficient cost structure due to low fixed cost 8
Stringent operating cost management HR Coil production cost trend Consolidated cash cost breakdown - 9M FY 2007 Overheads Iron ore Labour 3% 16% 400 5% 353 350 316 285 Other raw 300 material 232 250 206 $/ton 20% 200 150 100 Utility 50 7% - Coal 9M FY07 FY 03 FY 04 FY 05 FY 06 Power 45% 4% Low cost of production despite partial backward linkage to key raw materials 9
Low conversion cost � High plant utilisation factor � Refractory relining life comparable with best in the world � Higher yields � Caster yield at 98.8% amongst best in the world � Zero utilisation of petro fuels � Corex gas used for in-house heating � High degree of plant integration � Low specific energy consumption � Over 85% solid waste utilisation � Lower water consumption per ton � High labour productivity An efficient & low cost steel producer 10
Financials highlights Turnover Historical performance FY 2003 – FY 2006 70.4 80 67.7 � Turnover CAGR – 34% 60.91 70 60 46.8 � EBIDTA CAGR – 44% 50 Rs. bn � Average net cash accurals – Rs.11.54 bn 40 27.9 30 20 � Average ROCE – 18.73% 10 0 FY 03 * 9M FY 07 FY 04 FY 05 FY 06 Financial highlights – 9M FY 2007 EBIDTA � Sales revenue of Rs. 60.91 bn 23.7 � EBIDTA OF Rs. 20.22 bn , margin of 33% 25 21.3 20.22 � Net cash accruals – Rs.15.14 bn 20 15 � Net income of Rs. 8.79 bn 15 Rs. bn � ROCE – 22.31% 10 7.1 5 •Figures for FY03 are on standalone basis and for all other years figures adjusted, wherever necessary, to reflect merger. 0 9M FY 07 FY 03 * FY 04 FY 05 FY 06 11
JSW steel : Leading player in Indian steel Industry Leading steel producer � One of the most modern plant with state- 50% NLMK Tata Steel Tenaris of-art technology EBITDA margin 40% Evraz Usinimas JSW Steel 30% � Amongst companies with best EBITDA Severstal 20% Carpenter margins in the world Nucor Mechel Steel Dynamics Blue scope Angang US Steel 10% Worthington Smorgon Commercial Metals AK Steel Ryerson Maanshan 0% Robust business model 0% 10% 20% 30% 40% 50% � Efficient operating cost structure ROIC � Varied product basket Source: JP Morgan, company Consistent performer � Fast implementation of projects Sound corporate governance practice � 13 member board with 8 independent directors 12
Agenda � JSW Steel today � Key strategic initiatives � Industry dynamics � Corporate social responsibility � Benchmarks 13
Sustainable Growth Strategy Strategic Objectives : � Consolidate position in domestic steel industry with focus on enhancing basic steel making capacity � Expand global presence with value addition closer to markets CREATE WORLD CLASS STEEL COMPANY Key elements � Grow market share � Improve vertical integration � Diversify product profile � Maintain robust financial profile 14
Grow market share Increase in Crude Steel production : Current market Targeted market � Total investments: Rs. 54.50 bn Share Share 8% 12% � Growth of production: 3.0 mtpa Competitive advantages: � Leverage existing infrastructure � Low specific investment cost � Enhance capacity to 6.8 mtpa by March 2009 15
Grow market share (Key Projects ) 2.8 mtpa expansion � Integrated steel production through BF- BOF route BF – 1 Upgradation � Upgradation of blast to increase production from 0.9 mtpa to 1.2 mtpa � Improve fuel efficiency with lower coke consumption 16
Increase vertical integration Existing Target Target RAW PRODUCTS MATERIAL Iron ore: 50%– 60% Longs : 22% Backward Iron ore : 25%-30% Slabs : 26% Downstream Coal : 50% – 70% HR : 50% Integration Coal : 0% HR : 48% Fluxes : 85%-100% Value added: 28% Fluxes : 60%-85% Value added : 26% Striving for end – to – end integration 17
Diversify market share � Total investments: Rs. 31.09 bn � Enhance rolled product output � Establish presence in long products Objective – Build presence across flat products and long products to improve realisation & de-risk business model Crude steel – 6.8 mtpa Crude steel – 6.8 mtpa HR products CR products Coated products Long products 3.4 mtpa 0.9 mtpa 0.9 mtpa 1.5 mtpa 18
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