Q3 results

Hindalco Industries Ltd
Investor Presentation
Q3 FY11
FEBRUARY 2011
Contents
RESULT HIGHLIGHTS
ALUMINIUM BUSINESS REVIEW
COPPER BUSINESS REVIEW
PROJECTS UPDATE
NOVELIS UPDATE
Result Highlights
3
Financial Performance
` Cr
Q3 FY10
Q3 FY11
Change (%)
5,314
5,975
12.4
PBITDA
798
801
04
0.4
PBT
557
578
3.9
PAT
427
460
7.8
EPS (`)
2.41
2.41
…
Net Sales
•EPS maintained as growth in net profit compensated for increase in outstanding
shares from 177 crs to 191 crs
` Cr
4
9M FY10
9M FY11
Change (%)
Net Sales
14,125
17,013
20.4
PBITDA
2,296
2,483
8.1
PBT
1,590
1,807
13.6
PAT
1 252
1,252
1 429
1,429
14 1
14.1
EPS (`)
7.26
7.47
2.8
Focus Areas
Maintaining
Profitability in
the wake of cost
pressures
Improving
Capital
structure
FY11
Objectives
Fast track
organic
i
growth
projects
Improving
Free cash
flow
Highlights
y Net profit up 8%(YoY) and 6% (QoQ) amidst cost pressures and
certain operational
p
setbacks
y Hirakud operations had lingering effect of July fire, almost
stabilized by January
y Cooling tower problem in Cu-III; operations re-started in just 17
days
y Highest ever alumina production at Muri
y Improved financial strength to maintain growth momentum
Delivered growth despite the challenges faced
6
Hindalco: Confluence of one-off disturbances
Hirakud
Dahej
Downstream
plants
l t
• July fire incident continued to affect production
• Q3 output higher by 11kt vs. Q2, but 9 kt lower on YOY basis
9 Operations normalized now and Q4 volumes expected to
reach pre-accident level
• Breakdown of cooling
g tower of SAP-3
• Cathode production down by about 10 kt in Q3
9 Innovatively resumed production within 17 days
•Metal movement affected by lower availability from H’kud
9 Downstream operations almost back to normal now
P bl
Problems
llargely
l b
behind
hi d us now …
7
Key Business Drivers and Impact
8
Driver
Change ( %)
YOY
Aluminium LME
Average
17
C
Copper
TC/RC
(26)
Exchange
Rate (`/$)
(4)
Crude derivative
costs
> 25%
Impact
Moderation of India market growth hampering
mix
Moderation in Indian market growth
20
India – Industrial growth (%)
18
17.7
Aluminium Consumption (kt)
14
10
8
6
4
16
1.6
0
Jan-09
Concerns stemming from –
ƒ High inflation with possible effect on
consumption
ƒ Hardening
g of interest rates
ƒ Delays in project approvals
9
Dec-10
11%
488
Q3 ▲4%
910
1035
H1
9M FY10
9M FY11
469
12
2
1,524
1,378
16
▲14%
Copper Consumption*
Consumption (kt)
334
96
320
81
238
240
9M FY10
9M FY11
4%
Q3
▼16%
H1
▲1%
* Other than
deemed exports
~ Refined Cu demand affected by high LME
Industry reeling under Strong Cost Push
CP Coke
Furnace
oil/LNG
Coal
All energy prices up sharply
International coal > 20%
CP coke > 45%
Furnace oil, natural gas > 15%
Aluminium: Performance Review
11
Production Performance
Metal (kt)
Alumina (kt)
450
400
350
300
250
200
150
100
00
50
0
1100
1000
900
964
1,009
800
700
600
500
9M FY10
9M FY11
417
117
399
H’kud 90
308
300
R’k t
R’kut
9M FY10
Wire Rods (kt)
9M FY11
FRP (kt)
80
165
70
69
12
71
150
60
135
50
120
9M FY10
9M FY11
157
9M FY10
152
9M FY11
Optimised Sales Mix
Hydrate / Alumina sales jumped with
proportionate increase in specials
24%
Improved Geographic mix
87 9 kt
87.9
15%
70.6 kt
13%
43.8
Specials
35.5
Exports
85%
87%
Standard
35.1
Q3 FY10
13
Domestic
44.1
Q3 FY11
Q3 FY10
Q3 FY11
Aluminium Business: Financial Performance
Q3 FY10
Q3 FY11
Change (%)
1,884
1,977
4.9
438
465
6.2
9M FY10
9M FY11
Change
g (%)
( )
Net Sales & Operating
R
Revenue
4,951
5,754
16.2
EBIT
1,152
1,441
25.1
(` cr)
Net Sales & Operating
Revenue
EBIT
(` cr)
14
Cost pressures and volume losses have impacted Q3 result, diluting
the impact of H1 performance on YTD financials
Copper: Performance Review
15
Copper: External Drivers
Driver
Current Assessment
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
prices
• Correlated with commodity cycle; likely to be
firm
Ch ll
Challenging
i titimes
16
Impact
Cu: Production Performance
Cathode (kt)
259
3%
Own CCR(kt)
251
19%
111
93
9M FY10
Sulphuric Acid (kt)
9M FY11
1%
9M FY10
9M FY11
DAP(kt)
23%
161
17
809
817
9M FY10
9M FY11
131
9M FY10
9M FY11
Cooling tower problem affected cathode output, but fertilizer stream
was optimised
Copper Business: Financial Performance
(` cr)
Net Sales & Operating
Revenue
EBIT
Net Sales & Operating
Revenue
EBIT
Q3 FY10
Q3 FY11
Change (%)
3,432
4,000
16.6
159
143
(
(10.3)
)
9M FY10
9M FY11
Change (%)
9,180
11,265
22.7
533
396
(25.7)
Q3: Adverse impact due to cooling tower problem
18
Projects Update
19
Greenfield Projects Update
20
Project
Progress
Expected completion
Mahan
Aluminium,
u
u , MP
Major approvals in place, orders placed, 17000
people
peop
e at ssite,
te, major
ajo co
contractors
t acto s mobilized
ob ed fully,
u y,
90% of project cost committed, syndication for
rupee term loan launched
Utkal Alumina,
Orissa
>7,000 people at site, erection of major
equipments started,
started 87% of project cost
committed. Financial closure achieved, Rs
1,500 Cr. drawn
Early 2012
Aditya
Aluminium,
Oi
Orissa
All approvals in place, Orders placed, Site
activities in progress, 77% project cost
committed.
itt d Around
A
d 3,000
3 000 people
l working
ki att site
it
End 2012
Aditya Refinery,
Orissa
Majority land acquired, water drawl agreement
in place, Construction power line energized,
Railway siding clearance obtained
End 2014
Jharkhand
Aluminium
Land acquisition started, DFR ready, process
begun for clearances
Hirakud Canstock
Plant
Progressing well .Around
Around 1,800
1 800 people working
on site
October 2011
Octobe
0
Mid 2015
Oct 2011
Mahan Smelter
Pot room
C b area
Carbon
Cathode sealing shop
GTC1
G
C ID Fan
a foundations
ou dat o s & Stac
Stack :
Overview- Smelter site
21
Utkal Refinery
Site Overview
Boilers ESP
Boilers,
ESP, Chimney and STG
22
Precipitation tanks
BTG Package
P k
Aditya Smelter & CPP
Pot Room foundation
ID Fan Foundation GTC
23
220 KV Rectifier Substation
P
Power
House
H
U
Unitit 4
Novelis Update
24
Novelis: Third Quarter Financial Highlights
(Q3FY11 vs. Q3FY10)
ƒ
Shipments Up 10% to 715 Kilotonnes
ƒ
Net Sales Up 21% to $2.6 Billion
ƒ
Adjusted EBITDA Up 20% to $238 Million
ƒ
Free Cash Flow of $45 Million
ƒ
Liquidity of $848 Million
ƒ
Net Loss of $46 Million driven by refinancing & restructuring
Will Exceed $1B in Adjusted EBITDA in FY11
Adjusted EBITDA
(Millions)
Adjusted EBITDA Trend
TTM Adjusted EBITDA
$1,200
290
$300
1,022
263
231
$1,000
238
199
$800
$200
$600
576
$400
$100
$200
$0
$0
Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11
TTM Ended TTM Ended
Q3FY10
Q3FY11
Trailing Twelve Months Adjusted EBITDA has Exceeded $1B
Novelis – Refinancing
Objective
Ensure strategic flexibility
for both Novelis and
Hindalco
Retain flexibility to
finance growth
aspirations of Novelis and
Hindalco and maintain
sufficient liquidity
Put in place a debt
structure which
diversifies sources of
capital and provides
tenor at competitive
pricing
i i with
ith less
l
onerous covenants
27
6
Deleverage Hindalco
b l
balance
sheet
h t and
d align
li
leverage to debt capacities
1
2
5
4
3
Improve Maturity profile of
Novelis thus avoiding
refinancing risk
Make cash fungible
between Hindalco and
Novelis.
Deal Contours
Use of proceeds
Novelis proforma capital structure US$ Mn
Asset Based Revolving
Credit Facility
Term Loan
800
„ Refinance approx. US$ 2.5 Bn of
existing indebtedness
1,500
„ ABL due 2012 and Term Loan
facility due 2014
Senior Notes (Dec
2017)
1,100
Senior Notes ((Dec 2020))
1,400
,
„ 7.25% Senior Notes due 2015
„ 11.50% Senior Notes due 2015
„ Return of capital to Hindalco – US$ 1.7 Bn
Total borrowings
4,800
„ Tansaction related expenses
LTM EBITDA (Sep 2010)
28
983
Implication of Refinance
Original
Post Refinance
Novelis Inc
Equity
US$3.5 billion
Equity
US$1.8 billion
AV Metals
M t l IInc
Equity
US$1.8
$
billion
Equity
US$3 5 billion
US$3.5
AV Minerals
(Netherlands) BV
1. Equity US$2.5 Bn
2. Guarantee for Loan
USD $ 1 Bn
29
Hindalco Industries Ltd
Loan USD 1 Bn
Equity
US$1.8 billion
Key External Drivers - Outlook
Driver
30
Current Assessment
LME
• Investor
In estor appetite is ssupportive,
pporti e b
butt ffurther
rther upside
pside
seems limited
INR USD
• Uncertainty over FII flows may hold rupee
appreciation, despite general USD
S weakness
Energy,
Input prices
• Upward pressure related to coal and carbon costs
TCRC
• 2011 terms likely to be favourable to smelters visà-vis last year
By products
• Acid prices have firmed up, but DAP subsidy
announced for next year is lower
Impact
Forward Looking & Cautionary Statement
Certain statements in this report may be “forward looking statements” within
the meaning of applicable securities laws and regulations. Actual results could
differ materially from those expressed or implied.
implied Important factors that could
make a difference to the company’s operations include global and Indian
demand supply conditions, finished goods prices, feed stock availability and
prices, cyclical demand and pricing in the company
company’ss principal
markets, changes in Government regulations, tax regimes, economic
developments within India and the countries within which the company
conducts business and other ffactors such as litigation
g
and labour negotiations.
g
The company assume no responsibility to publicly amend, modify or revise any
forward looking statement, on the basis of any subsequent
development, information or events, or otherwise.
31
Th k you
Thank
32
Sales Revenue
Aluminium
Sales Chemicals Primary metal Flat Rolled Products
Extruded products
Extruded products Others
Copper
33
Units Rs Crs
Rs Crs
Rs Crs
Rs Crs
Rs Crs
Rs Crs
9M FY10 418
2,105
1,913
391
124
9M FY11
561
2,373
2,141
426
252
% chg 34%
13%
12%
9%
103%