Phillips Carbon Black Limited Power(ful) Growth www.pcblltd.com October 2012 1
Safe Harbour The materials contained herein (the Materials ) are for use at this presentation only and not for further distribution by you or any other person. Neither the Materials, nor anything contained herein, shall form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of any of the companies described herein, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. None of the companies described herein or any of their respective affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of the Materials or their contents or otherwise arising in connection with the Materials. The Materials are confidential and must not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. The Materials do not constitute an offer or recommendation regarding the securities of the companies described herein. Except for the historical information contained herein, statements in this release which contain words or phrases such as will, aim, will likely result, would, believe, may, expect, will continue, anticipate, estimate, intend, plan, contemplate, seek to, future, objective, goal, strategy, philosophy, project, should, will pursue and similar expressions or variations of such expressions may constitute "forward-looking statements". These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to our ability to successfully implement our strategy, future levels of non-performing loans, our growth and expansion, the adequacy of our allowance for credit losses, our provisioning policies, technological changes, investment income, cash flow projections, our exposure to market risks as well as other risks. PCBL undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. 2
RP- Sanjiv Goenka Group Power & Natural Resources Carbon Black Retail Media & Entertainment Infrastructure 3
RP- Sanjiv Goenka Group Business Sectors Business Sectors Companies Power & Natural Resources Retail Media & Entertainm ent 2% Retail 13% CESC - 4 th largest Private Power Utility Noida Power *- Private Discom in Noida Integrated Coal Mining * - Pioneer in private sector Coal Mining Carbon Black Infratructure Media & Entertainment Carbon Black 24% Revenue Rs. 90 billion Power & Natural Resources 61% Spencer`s Retail *- Pioneer in organized retailing in India Phillips Carbon Black - Largest in India & 8 th largest in world CESC Properties*- Developing the 1 st Luxary mall in eastern India Saregama India - Biggest collection of Indian Music Open* Weekly current affairs magazine * unlisted 4
Financials of RP- Sanjiv Goenka Group companies (Rs. bn ) Gross Revenues (FY`12) EBIDTA (FY`12) Net Profit (FY`12) Current Market cap* Promoter Holding Institutional Holding CESC* 46.80 12.72 5.54 41.00 52% 35% Phillips Carbon Black* 21.90 1.23 0.87 3.35 52% 21% Saregama India* 1.50 0.22 0.01 1.64 55% 24% Spencer`s Retail 12.10 (1.40) (2.55) - 100% - Noida Power Company 5.10 1.16 0.25-73% - Integrated Coal Mining 3.50 0.30 0.17-100% - Crescent Power 1.05 0.56 0.21-100% - *market cap as on 30 th Sept 12 5
Phillips Carbon Black - at a Glance Business Capacity Customers Exports Expansion Plans Ratings Awards Stock Listed on Largest producer of Carbon Black in India and 8th largest in the World Second fastest growing CB company in the world Largest CB Capacity of 4,22,000 MT p.a. across four locations in India Co Generation Green Power Plant at each location Leading tyre companies around the globe Exports to 20 countries CB India (Expansion at Cochin), Overseas (Ba Ria Vung Tau Province in Vietnam) CPP 8MW in Mundra Carbo Chemicals Plant in Orissa CRISIL Equities has assigned a valuation grade of 5/5 & fundamental grade of 4/5 as on Feb 12 Cochin unit has been awarded i. Best Environmental Practices in large corporate category in 2004 ii. Best Environment Management Co. by Kerala state Government in 2011 BSE (Code 506590); NSE (PHILIPCARB) Market Cap As on 30 th Sept 12 ` 3.35 bn 6
Contents Business overview Carbon Black Industry Key Investment highlights Financial Summary Growth Plans & Investments 7
Business Overview 8
Market Leadership Largest producer of CB in India for many years - Ranks 7 th globally Business Profile Domestic Market Share in FY11 Others 16% Hi-Tech 40% PCBL 44% High quality of R&D setup - Manufactures all grades for tyre industry, all four soft grades for plastic industry Value creating business model Power plants based on tail gas - Now going for backward integration and extension to Carbo Chemical business Being a market leader, PCBL enjoys economies of scale Current installed capacity for CB & CPP Sl.No Location CB (MT) CPP (MW) 1 Durgapur, W.Bengal 1,52,000 30.00 2 Palej, Gujarat 90,000 12.00 3 Mundra, Gujarat 140,000 24.00 4 Kochi, Kerala 40,000 10.00 Total 4,22,000 76.00 9
Business Profile..contd High quality investors in the Company Shareholding Pattern as on June 12 Leading institutional investors include: ACACIA Domestic Institutions, 19% Public, 12% Promoter, 52% The Royal Bank of Scotland Plc The GMO Emerging Illiquid (Mauritius) Fund FII, 16% Reliance Capital Trustee Co. Ltd Max New York Life Insurance Co. Ltd Commonwealth Equity Fund Limited Regular tie-up with high quality suppliers ICICI Prudential Emerging Star Birla Sun Life Trustee Company Pvt Ltd Jupiter South Asia Investment Company Ltd 10
Business Profile..contd Power, 4% Revenue Split : FY12 Carbon Black, 96% PBIT Split : FY12 Power, 23% Carbon Black, 77% CB Revenue Split : FY12 Exports 31% Domestic 69% Increasing Power revenues improving PCBL s business model 11
Strategic plant locations nearer to customers JV for CB Plant in Vietnam Vietnam Mundra 140,000 MT +24 MW Birla Under Execution Phase 1-60,000 MT +12MW Phase 2-55,000 MT + 6MW Ceat Durgapur 1,52,000 MT + 30 MW Palej 90,000 MT +12 MW Kochi 40,000 MT + 10 MW Under Execution 50,000MT Bridgestone JK MRF Chennai Apollo, JK, Michelin, MRF Head Office, Kolkata Orissa ( Carbo Chemicals) Under Execution 210,000 MT Our CB Plants Our Carbo Chemical Plants MRF Apollo JK Ceat New Tyre Capacities 12
Exports to 20 Countries USA SPAIN TURKEY ISRAEL IRAN UAE KENYA CHINA S. KOREA JAPAN TAIWAN BANGLADESH VIETNAM MALAYSIA PHILIPPINES SRI INDONESIA LANKA SINGAPORE AUSTRALIA NEW ZEALAND 13
Forward Integration - Green Power Generation Waste gases from plants being used to produce electricity, Surplus power sold to grid CPP at Palej is registered as a CDM Project with UNFCCC and other plants are at various stages of registration Sl.No Location CPP (MW) Year of Commission 1 Palej, Gujarat 12.00 Mar 05 2 Durgapur, W.Bengal 30.00 Apr 08 3 Mundra, Gujarat 16.00 Dec 09 4 Kochi, Kerala 10.00 Apr 11 5 Mundra, Gujarat 08.00 Jun 12 Total 76.00 Incineration earlier Waste Gas Waste Gas generated at the CB Plant now Waste Gas Cogeneration plant Electricity Internal plant requirement Surplus power sold to grid 76 MW green power capacity by Q4FY12 14
Key Milestones Aggressive Growth : Total CB Capacity is 4,22,000 MT and 76 MW CPP 12 MW CPP at Palej 30 MW CPP at Durgapur Golden Jubilee Year Capacity increase: Mundra : 50,000 MT and 8MW CPP Durgapur : 12,000 MT 2005 2007 2008 2009 2010 2011 2012 MOU for Plant in Vietnam 90,000 MT at Mundra 16 MW CPP at Mundra 10 MW CPP at Kochi 1960-2004 Started with Phillips Petroleum Co, USA at Durgapur with 14,000 MT. Collaboration with Columbian Chemical; Total Capacity was 78,000 MT Acquisition of CB division of Gujarat Carbon Ltd, 25,000 MT; Total Capacity was 1,03,000 MT Amalgamation with Carbon & Chemicals, Ltd, Kochi, 40,000 MT; Total Capacity increased to 143,000 MT Total Capacity by 2004 was 270,000 MT PCBL s strength lies in both Greenfield & Brownfield expansion 15
Growth Drivers & Risks Growth Drivers Tyre capacities coming up in Asia incl. India High earnings stability due to Backward & Forward integration, different geographies & customers Cost advantages in Asia CB capacities shifting to emerging markets Capacity Consolidation Smaller players shutting down plants Key Risks Highly dependent on the fortunes of tyre industry Delay in project execution could affect earnings Fluctuation in power prices Anti-Dumping Duty on Imports Exchange Fluctuations Entrepreneurial management team with 50 years experience 16
Carbon Black Industry Scenario 17
Tyre Capacity Expansion Company Location Investment [` bn] Completion by Tamilnadu and Gujarat Mar-12 Apollo Tyres Limited Chennai, Tamil Nadu Vadodara, Gujarat 21 Bhuj, Gujarat 12 Jun-12 Balkrishna Industries Limited Rajasthan & Maharashtra 2 Sep-11 Chakan, Pune 26 Jan-13 Bridgestone India P Limited 3 Aug-13 Pithampur 1 3 Sep-11 Ceat Limited Halol 7 Jun-11 Ambarnath, Maharashtra 3 Dec-12 Dunlop India Limited Guwahati, Assam 5 Dec-11 Falcon Tyres Limited Haridwar, Uttarakhand 6 Mar-12 Mysore, Karnataka 3 Aug-11 JK Tyre & Industries Limited Sriperumbudur, Tamil Nadu 15 Oct-12 Haridwar, Uttarakhand 10 Dec-12 Kesoram Industries Limited Haridwar, Uttarakhand 4 Sep-11 Balasore, Orissa 5 Sep-11 Ankampaly, Andhra Pradesh Sep-11 MRF Limited Trichy 38 Sep-11 Pondicherry Dec-12 Michelin 40 Mar-12 Total 202 Source: CMIE, Company 18
Global Carbon Black Demand Break-Up 10,000 Non Tires 8,000 6,000 4,000 2,000-2010 Forecast ( 000 tonnes) Tires 14,000 12,000 10,000 8,000 6,000 4,000 2,000-2015 Forecast ( 000 tonnes) 19
Carbon Black-Grades & Uses Utilization of carbon black (Sector-wise) Belts & Hoses, 10% Rubber, 15% Printing Ink & Other Speciality, 10% Tyre, 65% The hard grades are used in the tyre surface, which comes in contact with the road and are subject to higher friction. The soft grades are used for the side wall of tyres & also for plastic industry 20
Key Investment Highlights 21
Key Investment Highlights 1 Forward integration with Green Power generation - improving value chain for investors 2 Backward integration with Carbo Chemicals Project 3 Efficient cost management and rationalization process in place 4 Global leadership in Technological Innovation 5 Strong customer relationship 22
`mn Power Generation mitigates commodity risk 24000 894 21000 18000 760 15000 12000 106 149 155 545 22675 9000 46 16141 6000 3000 7204 9881 10182 11478 11780 0 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Carbon Black Power Power revenues increased by 1.2 times to ` 894 mn in FY12 and is expected to grow in FY12 23
Efficient Cost Management & Rationalization EBITDA & PAT Margin Trend 20% 15% 10% 5% 0% -5% -10% FY07 FY08 FY09 FY10 FY11 FY12 EBITDA (%) PAT(%) Contribution Trend (` Bln) FY07 FY08 FY09 FY10 FY11 FY12 Sales Volume (MT) 2,46,508 2,49,476 2,10,553 2,55,777 3,08,605 3,14,348 Revenue - CB 9.30 9.21 10.60 11.78 16.14 22.68 Revenue - Power 0.11 0.15 0.16 0.54 0.76 0.89 Contribution 2.10 2.48 1.00 2.69 2.94 3.87 Contribution (` /MT) 8,528 9,941 4,751 10,531 9,541 9,633 24
Strong Customer Relationship Domestic Customers International Customers 25
Financial Summary 26
Financial Overview `mn FY08 FY09 FY10 FY11 FY12 Profit & Loss Statement Net Sales 10,360 11,633 12,350 16,901 21,806 EBITDA 1,500 245 1,907 2,345 2259 Depreciation 201 196 312 386 486 Interest 194 294 289 316 522 PBT 1,128-973 1,310 1,643 1034 Tax 235-325 79 481 160 PAT 893-648 1,230 1,163 874 Balance Sheet Sources of Funds Net Worth 2,428 2,182 3,244 5223 5223 Debt 2,904 4,256 5,555 5014 5081 Deferred Tax 353 17 96 569 520 Capital Employed 5,685 6,455 8,895 10806 10824 Application of Funds Net Block 2,449 2,280 5,932 5783 5783 CWIP 1,305 3,828 923 2058 2059 Investments 281 378 378 576 582 Net Working Capital 1,642-38 1,662 2389 2400 Miscellaneous Expenditure 9 7 0 0 0 Total Assets 5,685 6,455 8,895 10806 10824 Debt/Equity 1.20 1.95 1.71 0.96 1.16 27
Return to the Shareholders EPS (Rs) ROCE (%) 70 50 30 35.37 43.43 35.43 25.82 25% 15% 16% 26% 21% 20% 22% 10 11.75 5% -10 FY07 FY08 FY09 FY10 FY11 FY12-5% FY07 FY08 FY09 FY10 FY11 FY12-30 -24.12-15% -12% Debt Equity Ratio Debt EBITDA Ratio 2.00 1.50 1.51 1.20 1.95 1.70 1.16 3.00 0.00-3.00 2.56 1.91 2.14 2.39 2.91 FY07 FY08 FY09 FY10 FY11 FY12 1.00 0.96-6.00 0.50 FY07 FY08 FY09 FY10 FY11 FY12-9.00-8.40 28
Performance Summary Particulars Q1FY13 Q4FY12 %Change (QoQ) Q1FY12 %Change (YoY) Production (MT) 83,369 73,542 13% 86,480-3% Total Sales Volume (MT) 80,311 74,768 7% 87,317-8% Domestic (MT) 58,293 57,602 1% 60,948-4% Export (MT) 22,018 17,166 28% 26,369-17% ` Crs ` Crs ` Crs Net Sales 621 540 15% 568 9% EBIDTA (before forex) 51 53-4% 76-33% EBITDA% 8.2% 9.8% 13.4% PBT 8 6 33% 55-85% PAT 7 5 40% 42-83% EPS (Fully Diluted) ` 1.91 1.47 12.53 29
Performance Summary: YTD Particulars FY12 FY11 %Change Production (MT) 3,16,508 3,05,950 4% Capacity Utilization (%) 77% Total Sales Volume (MT) 3,14,348 3,08,605 2% Domestic (MT) 2,14,319 2,40,026 11% Export (MT) 1,00,029 68,579 46% Rs Crs Rs Crs Gross Sales 2267 1879 21% Net Sales 2187 1696 29% EBIDTA (before forex) 234 221 6% PBDIT (%) 10.7% 13% PBT 103 164 (37%) PAT 87 116 (25%) EPS (Fully Diluted) ` 25.82 35.43 30
Power Sales Power Sales (KwH in lacs) Net Sales (Rs. Crs) Net Realization Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 FY12 712 22.53 3.16 598 18.06 3.02 671 20.33 3.03 715 20.92 2.93 2696 81.84 3.04
Growth Plans & Investments 32
Expansion Plans Existing Expansion of 50,000 MT CB in Kochi by Q2FY13 New - India Greenfield CB plant of 140,000 MT in Chennai 25MW CPP at Chennai Carbo Chemical Plant in Orissa by Q2FY14 New - Overseas CB plant of 110,000 MT at Vietnam 18MW CPP at Vietnam 33
Vietnam - Investment Rationale 4th Largest producer of rubber JV for CB Plant in Vietnam No Carbon Black Plant PCBL s market share in Vietnam - 40% Savings in Ocean Freight Cost, compared to export from India Current Demand 65,000 MT, which is expected to be 100,000 MT by 2012 Entry of global tyre majors viz., Kumho and Yokhama and expansion by Vietnamese tyre companies MoU signed by Indian tyre manufacturers with Vietnamese tyre companies for importing OTR tyres into India 34
Vietnam - Project Profile Product Location Technology provider Shareholding Debt - Equity Engineering Consultant Carbon Black My Xuan A Industrial Zone, Tan Thanh district, Ba Ria- Vung Tau province. Phillips Carbon Black Ltd (PCBL) PCBL - 80%, Sao Vang Rubber Co. - 8%, Southern Rubber Co. - 7% and Danang Rubber Co. - 5% 2:1 Mott McDonald Capacity - CB (MT) - CPP(MW) Investment ($mn) Phase -I 60,000 12 Phase II (incremental) 55,000 6 63 21 Expected Commissioning FY13 FY14 Revenue at 90% capacity utilization ($ mn) IRR High Technology Approval Certificate 60 53 20% September 2010 35
Carbo Chemical Segment Investment Rationale PCBL s Strengths : Leveraging carbon sector expertise in coal tar Strong management team Expertise in setting up plants in shortest time period Value Enhancement of Business Model via: Freight saving Energy Saving / Revenue Increase competitiveness Mitigation of risk raw material & forex Backward Integration with Coal Tar Project further strengthens PCBL s business model 36
Carbo Chemical - Project Profile Product Coal tar pitch, Creosote oil and Naphthalene Location Orissa Capacity 210,000 MT Investment (` Crs) 180 IRR 19.6% Commission Q2FY14 37
Coal Tar Business Model Coal tar is a by-product generated through the processing of coal into coke for use in steel and iron manufacturing. Coal tar is then distilled to derive a variety of intermediate chemical products : Coal tar pitch ( CTP ) c.52% Creosote oil c.30% Naphthalene c.8% Other oils c.8% Process loss 2% Production Process 38
Distillation Products & End-Use Industries 1 2 3 4 5 39
End-use Industry Dynamics Coal Tar Pitch Consumption pattern Aluminum industry is the main consumer of CTP accounting for 78% of CTP consumption Global Aluminium Sector Outlook Global Steel Sector Outlook Aluminium capacity being added in China (2.4 MMTPA), India (2 MMTPA), CIS (1.5 MMTPA) and Middle East (1.4 MMTPA) The near term outlook for steel is uncertain, however demand revival is expected by FY10 onwards 40
End-user Industry: Capacity Addition in India Proposed Additional Capacities Current Capacity FY10 FY11 FY12 FY13 Cumulative Capacity FY13 NALCO 345,000 115,000 125,000 - - 585,000 HINDALCO 311,000 (Renukoot) 43,000 - - 650,000 1,004,000 150,000 (Hirakud, Anode only) Vedanta 250,000 425,000 350,000-350,000 1,375,000 BALCO 200,000 - - 350,000-550,000 Total 1,106,000 583,000 475,000 350,000 1,000,000 3,514,000 Coal Tar Pitch requirement in the year from Aluminium 121,660 64,130 52,250 38,500 110,000 386,540 Coal Tar Pitch requirement in the year from Graphite Miscellaneous consumption 55,000 25,000 Total CP Requirement 466,540 Distillation capacity required 897,192 41
Green Drive & CSR Green Initiatives: First Carbon Black company in the world to receive carbon credits from the United Nations - 12 MW CPP at Baroda is registered with UNFCCC Planting new trees CSR initiatives: Charity - Smile Foundation Computer Education & Literacy for housewives and children Health & Eye Camps 42
Thank You 43