ACL Investor Presentation - PDF Free Download

ACL Investor Presentation Onne van der Weijde New Delhi, February 10 2011 1

Content Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited a. Vision, Mission and Philosophy b. Asset Footprint c. ACL Growth Story d. Long Term Strategy / Competitive Edge e. Financial Performance f. Cost Drivers g. Expansion Projects h. Shareholding Corporate Social Responsibility Conclusion 2

Indian Economy India is growing at about 8+% and Government targets a GDP growth of 9+%. High GDP growth would translate into double-digit cement demand growth annually. Favourable Demographics - India will contribute significantly to the world incremental Working Age Population between 2010 to 2020, leading to higher disposable income. Empowered Rural India - Rural masses, expanding Consumer class. The rural Indian economy is showing impressive growth in consumption, with a number of factors supporting this growth. These factors include increasing incomes due to good monsoons and Government initiatives and schemes like, (National Rural Employment Guarantee Scheme) employment opportunities in infrastructure and industry projects across the country and; emphasis on local employability. Rising Saving Rate - Bulk of India s savings come from households rather than corporate, makes it a stable source of funds for Infrastructure Creation. A Stable Government at the Centre with Strong focus on growth and infrastructure development - Infrastructure Investment will be doubled in 12 th Plan @ US$ 1 trillion (9.5% of GDP). India at the cusp of take-off into an exponential growth phase with GDP per capita crossing the ~$1000 threshold 3

GDP Growth likely to sustain at over 8% GDP: Growth Trend and Composition CY06 CY07 CY08 CY09 Primary 3.8 5.4 1.3 0.9 Share % 17.3 16.6 15.7 14.8 Industry 11.9 11.0 5.3 6.4 Share % 28.5 28.9 28.3 28.4 Mfg 13.5 12.2 5.2 6.8 Const 11.4 11.0 6.2 7.0 Services 10.8 10.1 10.4 8.5 Share % 54.3 54.5 56.0 56.8 GDP 9.8 9.5 7.4 6.7 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 120 100 80 60 40 20 0 Trend in growth CY06 CY07 CY08 CY09 Primary Industry Services GDP Composition of GDP 54 55 56 57 28 29 28 28 17 17 16 15 CY06 CY07 CY08 CY09 Primary Industry Services GDP growth is likely to be driven by Services and Industry Source: Ministry of Statistics and Programme Implementation (MOSPI) 4

Content Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited a. Vision, Mission and Philosophy b. Asset Footprints c. ACL Growth Story d. Long Term Strategy / Competitive Edge e. Financial Performance f. Cost Drivers g. Expansion Projects h. Shareholding Corporate Social Responsibility Conclusion 5

Indian Cement Industry At a Glance CY 2010 Y-o-Y Growth Cement Capacity 295 Mio tons 13.5% Clinker Production 159.26 Mio Tons 7.2% Cement Production 207.39 Mio Tons 5.8% Cement Dispatches 206.26 Mio Tons GDP at factor Cost over $1.2 trillion 5.7% *7.5-8% 6 *Estimate Source: CMA, Research Reports & Ministry of Statistics & Programme Implementation

Indian Cement Industry Capacity Growth - Transition from Control to Decontrol 12.0% 11.1% 10.3% 9.0% 7.4% 6.6% 7.2% 6.7% 6.0% 3.0% 0.0% * 1979-80 to 1984-85 1984-85 to 1989-90 1989-90 to 1994-95 1994-95 to 1999-00 1999-00 to 2004-05 2004-05 to 2009-10 Installed Capacity of the Industry has reached approximately 270 Mio tons by September 2010 Double digit capacity growth in 5 year cycle after 30 years * Growth based on Installed Capacity at the end of year 7 Source: CMA and Research Reports

Area Legend Color Reserves Tonnes/Km 2 lgdxarcol1 < 5,000 lgdxarcol2 5,001 to 25,000 lgdxarcol3 25,001 to 50,000 lgdxarcol4 50,001 to 100,000 lgdxarcol5 > 100,000 Limestone Density and Various Capacity Clusters Area Legend Color Reserves Tonnes/Km 2 lgdxarcol1 0to 5000 lgdxarcol2 5001 to 25000 lgdxarcol3 25001 to 50000 lgdxarcol4 50001 to 100000 lgdxarcol5 100001 to 2000000 Lim e Stone Reservese (m il.t.) C urrent C linker State Reserves % C apacity (m il.t.) Karnataka 51,886 30% 12.0 Andhra Pradesh 35,179 20% 33.0 Gujarat 20,012 11% 15.0 Rajasthan 19,486 11% 30.0 Meghalaya 16,054 9% 1.5 C hhattisgarh 9,038 5% 11.0 Madhya Pradesh 5,921 3% 20.0 Him achal Pradesh 4,762 3% 7.0 All India 175,345 100% 145.0 8 Source: Government of India

Indian Cement Industry A Local & Regional Industry Growth (%) 6 14 10 7 10 8 North Growth (%) -2 11 4 9 20 10 Central CAGR 9.5% 50 40 30 20 26 29 32 34 38 41 CAGR 10.5% 40 30 20 10 20 22 23 25 30 33 10 0 2005 2006 2007 2008 2009 2010 0 2005 2006 2007 2008 2009 2010 Growth (%) 15 15 11 11 4 7 Growth (%) South 5 10 13 8 7 14 West CAGR 9.6% 80 60 40 20 0 43 48 54 56 60 38 2005 2006 2007 2008 2009 2010 CAGR 10.4% 50 40 30 20 10 0 41 25 28 31 34 36 2005 2006 2007 2008 2009 2010 Growth (%) 15 5 5 9 19 13 East Growth (%) 8 11 9 9 11 10 All India CAGR 10.3% 40 30 20 10 0 36 32 22 24 25 27 2005 2006 2007 2008 2009 2010 CAGR 10.1% 250 200 150 100 50 0 193 212 131 146 160 174 2005 2006 2007 2008 2009 2010 *Figures are CY basis Source: CMA, Research Reports, ACL Market Study

Price Trends All India Price Map (Retail Prices*) Jun 10 Dec 10 10 * Price realization to cement producer is lower by Rs. 20~25/- per bag

Cement Growth Drivers Low per capita consumption at 176 kg reflects potential for future growth. Rising housing affordability due to Increasing income level. Individual Housing Builders (IHB) segment - the major contributor of demand. As per 11 th Five Year Plan (2008-12), 74 Million housing units required. Agricultural growth to boost rural demand. Infrastructure Investment for 11 th plan is pegged at US$500 bn (7.6% of projected GDP growth), while for the 12 th plan it projected to be US$1 trillion (9.5% of GDP). On the back of the above factors cement demand is expected to grow double digits for the next five years. Housing & Infrastructure Development are the major growth drivers for Cement Demand 11

Cement Sector Outlook India second largest cement market in the World. Low per capita consumption at 176 kg reflects potential for future growth. Healthy CAGR of 10% over the last 5 years (2005-2010) and a CAGR of 8% over the last 20 yrs (1990-2010) Domestic cement consumption grew by 10% in CY09 and continued in the same pace also in CY 10* despite a prolonged monsoon season. Cement demand expected to grow in double-digit in the next five years on the back of housing and infrastructure development. The top 5 groups are having a market share of 53%, the rest of the market is quite fragmented. Prices expected to remain under pressure in the short-term due to oversupply situation, but in the long-term expected to remain stable. Cost pressure would continue, on account of surging energy prices and inflationary pressures. Good cement demand, coupled with a potential over supply and increasing cost pressures, makes the industry outlook more challenging *including non-cma producers data 12

All India Capacity Utilization 500 400 300 200 100 0 75 72 72 74 79 83 295 322 345 358 375 259 195 212 233 256 283 312 2009 2010 2011 2012 2013 2014 100 80 60 40 20 Total Demand Installed Capacity Installed Capacity Utilization 500 400 300 200 100 0 86 81 80 80 83 87 262 291 320 342 358 227 195 212 233 256 283 312 2009 2010 2011 2012 2013 2014 100 80 60 40 20 Total Demand Supply Potential Utilization Increased capacity expansion in 2010-2011, utilization rate is expected to remain low in the near term, would gradually improve with the growth of the industry. Pressures are likely to be felt across all regions, the south and west could remain weaker as compared to the other regions. 2010 onwards demand is estimated to grow by 10% 13 Source: CMA and Research Reports

Ambuja Cements Limited (ACL) Vision & Mission / Philosophy GIVE A MAN ORDERS and he will do the task reasonably well. But let him set his own targets, give him freedom and authority and his task becomes a personal mission: 15

Content Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited a. Vision, Mission and Philosophy b. Asset Footprint c. ACL- Growth Story d. Long Term Strategy / Competitive Edge e. Financial Performance f. Cost Drivers g. Expansion Projects h. Shareholding Corporate Social Responsibility Conclusion 16

ACL Asset Footprint Rabriyawa s Nalagarh Ropar Bhatinda Darlaghat Roorkee New Delhi Dadri North: 10.4 Mio Tons Farakka Kodinar Magdalla Bhatapara Sankrail Kolkata Mumbai Panvel MC W East : 4.3 Mio Tons Grinding Unit 8 West : 10.3 Mio Tons Integrated Unit 5 Terminal 4 Captive Power Plant 9 Chennai Total Capacity = 25 Mio Tons Cochin 17

ACL Growth Story Capacity built up from 0.7 Mio Tons in 1986 to 25 Mio Tons - CAGR of 16.8% through organic and inorganic growth. 2006 Founder promoters sold part of their holding in ACL in favor of Holcim. ACL had many first to its credit Pioneers in sea transportation. Brand - Ambuja perceived as a Market Leader ACL is a Holcim Group company since May 2006 A Market Capitalization of over USD 4 Bn 19

ACL Long Term Strategy / Competitive Edge Premium Brand AMBUJA CEMENT Premium Value Delivery to Customers Extensive & loyal distribution network -Over 7000 dealers and 25,000 retailers Provides access to growing Individual Housing Builders Markets. Hub & Spoke Strategy Logistics advantage coupled catering fresh cement to the consumer Benefits of catering fresh cement to the markets Sea Transportation Cement Terminals Cost Efficient means of transportation and ability to cater to the vast coastal region, ~14% despatches via Sea mode thru 8 specially designed vessels Captive Power Plants (410 MW) Lower Cost, Consistent & Regular supply of Power, ~80% captive use High proportion of blended cement Lower production cost, reduction in CO2 emissions Strong presence in growing stable markets of North, West and East Reduce volatility in Earning Use of Alternative Fuel & Raw Materials (AFR) Conservation of non renewable resources, reduces pollution and cost 21

Financial Performance 2008 2009 2010 Rs Mn US $ Mn Rs Mn US $ Mn Rs Mn US $ Mn Sales 62350 1354 70770 1536 73902 1620 EBITDA 19540 424 21220 461 19510 428 PBT 16617 361 18030 391 16619 364 PAT 14020 304 12180 264 12636 277 Cash EPS (Rs.) 12.62 13.78 13.39 EPS (Rs.)* 7.41 7.99 8.26 *Excluding extraordinary income Source: Company s Annual Report Exchange Rate Rs. 45.63 from RBI 23

Recent Q4 Financial Performance Particulars Quarter ended Dec-09 Dec-10 change Sales Volume 4.8 5.01 4% Net Sales 17710 17885 1% Other Op. Income 400 389-3% Raw Materials 2130 1476-31% Employee Cost 780 775-1% Power & Fuel 3270 4461 36% Freight Outwards 379 4079 976% Others 3780 3770 0% Operating EBITDA 4500 3535-21% Other Income 408 379-7% Depreciation 860 1086 26% PBIT 3640 2449-33% Interest 67 209 210% PBT 3970 2684-32% Tax 156 102-34% PAT 2410 2581 7% EBITDA Margin (%) 25 20 - Qtr4 results derived Source: Company s Financials (standalone) Twelve Months 2009 2010 18.8 19.97 70769 73902 1046 1273 9640 5963 2730 3437 14230 16973 13470 16101 11530 13735 19720 19510 1512 1203 2970 3872 16745 15638 224 487 18033 16619 5849 3983 12184 12636 28 26 Rs. Mio change 6% 4% 22% -38% 26% 19% 20% 19% -1% -20% 30% -7% 117% -8% -32% 4% - 24

Financial Ratios Rs. Cr. 2008 2009 2010 Net Cash from Operating Activities 966 2129 1874 Gearing % 5 3 1 Dividend % 110 120 Dividend Payout Ratio% 24 30 EBITDA Margin (%) 31 30 ROACE (%) 34* 27 ROE (%) 27* 20 130 31 26 23 18 * : Includes extra ordinary income 25 Source: Company s Financials

Increasing Cost Pressures Major Portion of Cost linked to Energy Prices Increasing Cost of Imported Coal : The Cost of Imported Coal has increased over 40% y-o-y basis. The lack of logistics infrastructure at port, limits economical movement of imported coals to hinterland. Domestic Linkage Coal materialization is declining including the quality of coal, increasing the cost of purchasing coal through open market purchases. Distribution Cost a major cost for the Industry. Diesel prices have increased substantially in the past eight years and is now linked to the international crude prices. Lack of Logistics Infrastructure in form of Wagon / Rakes Availability, increase the cost of distribution. Inflationary pressure on Support Process Costs. Rising Costs a Concern 27

Capacity Expansion Completed expansions : Clinker line of 2.2 mio tons each at Rauri (HP) and Bhatapara (Chhattisgarh) commissioned in December 2009. Grinding facilities of 1.5 mio tons each at Dadri (UP) and Nalagarh (HP) commissioned in March 2010. The ramp up of the plants have been as per schedule. Additional Expansions : Grinding capacity of 1.0 mio tons at Bhatapara and 1.0 mio tons at Maratha, would be completed by Q1 2011. With these expansions ACL s installed capacity would be 27 mio tons by Q1 2011. The Company is evaluating projects for the next round of capacity expansion 29

Our Shareholders Insurance Co's, Mutual Funds & Financial Institions/Banks, 14.72 Public, 10.20 GDR, 1.13 Holcim, 45.45 Foreign Institutional Investors, 27.71 Founder family, 0.79 As on 31 st December 2010 31

Ambuja Cement Foundation (ACF) ACL is committed towards Sustainability, both on environment and social performance. The Corporate Social Responsibility is carried out through ACF. Livelihood Skill Based - ACF Sponsors vocational training to unemployed youth in trades like electric house wiring and motor winding, refrigeration and airconditioning, wielding and fabrication and radio and TV repairing. Young men who have completed their training have started their own enterprises. Women Development - Promoted over 700 Self Help Group (SHGs) with 9,000 members. Specific skills that the women felt the need for, are offered to them. The groups are engaged in a range of income generating activities based on agriculture produce, livestock rearing, tailoring and embroidery, food processing and handicrafts. 33

Ambuja Cement Foundation (ACF) Changing cropping pattern from high water intensive to less water intensive and short duration crops. Promotion of water efficient devices like drip and sprinkler irrigation (Over 1841 acre) Promotion of horticulture crops (14800 acre), animal husbandry, vegetable crops - Integrated farming. Conservation and Management of existing sources of water like Ponds and Baudies ( Over 1200 MCFT water harvested) Constructing Water Harvesting Structures like Check-dams (200), Ponds deepened (420), Tanks and Khadins (8) 34

Conclusion Solid market position built within a period of time through organic growth and acquisitions. Strong brand image and positioning built over a period of time in the minds of the consumers. Pin-pointed positioning tied to substantial captive infrastructure to cater to markets both domestic and overseas. High use of alternative raw materials in production of blended cements. Capex plan - Both greenfield and brownfield projects are being evaluated that would enhance company s market share and maintain its position in the industry. Industry would go through a challenging period due to over-supply situation - Ambuja is well poised and geared up to meet the challenges 36

Disclaimer Cautionary statement regarding forward-looking statements This presentation may contain certain forward-looking statements relating to the Group s future business, development and economic performance. Such statements may be subject to a number of risks, uncertainties and other important factors, such as but not limited to (1) competitive pressures; (2) legislative and regulatory developments; (3) global, macroeconomic and political trends; (4) fluctuations in currency exchange rates and general financial market conditions; (5) delay or inability in obtaining approvals from authorities; (6) technical developments; (7) litigation; (8) adverse publicity and news coverage, which could cause actual development and results to differ materially from the statements made in this presentation. Ambuja assumes no obligation to update or alter forward-looking statements whether as a result of new information, future events or otherwise. 37