Transcript Ambuja Cement A Growth Story

Ambuja Cement
November 2005
1
Ambuja
Cement
Indian Economy
 On a Consistent growth path
 Impetus on Service Sector
 Changing Demography - A Growth Driver
 Moved from being an Agrarian Economy to
Services & Manufacturing Economy
2
Ambuja
Cement
Agrarian to a Service Economy
(%)
GDP Constituent 1997 - 98 2005 - 06
Agriculture
40
22
Manufacturing
35
27
Services
25
51
3
Ambuja
Cement
Infrastructure & Housing
New Drivers of Economic Growth
4
Ambuja
Cement
Cement - Proxy to Growth
5
Ambuja
Cement
Future Cement Scenario

Indian economy expected to grow at - 7 to 8%

Infrastructure development at an inflection point

Housing to be the main driver of cement growth

Cement Growth expected to be over 9%

After a long gap demand would exceed supply
6
Ambuja
Cement
Cement Demand
(Apr - Nov)
Mn. Tonnes Growth (%)
2005 - 06*
89.7
10
2004 - 05
81.8
8
* Estimated for November 2005
7
Ambuja
Cement
Expected Cement Demand
Mn. Tonnes
2005-06 2006-07 2007-08
Base Domestic Demand
123
133
143
Growth - 8%
10
10
-
- 9%
-
-
13
133
143
156
4
4
4
147
160
Expected Domestic Demand
Exports
Expected Total Cement Demand
8
137
Ambuja
Cement
Cement Production Capability
Mn. Tonnes
2005-06 2006-07 2007-08
109
113
118
Base Clinker Production
Increased Production due
to improvements/Expansions
Clinker Export
Clinker for Cement Grinding
4
113
6
107
5
118
6
112
6
124
6
118
Blending Ratio
1.28
1.28
1.28
Cement Production
137
143
151
9
Ambuja
Cement
Demand set to outstrip Supply
10
Ambuja
Cement
Result
A Structural change in Pricing Scenario….
11
Ambuja
Cement
…. As
 No Major Cement Capacity expected in near future
 Reasonably Consolidated Industry
12
Ambuja
Cement
Fragmentation To Consolidation
Top 5 Groups
26%
Others
74%
Top 5 Groups
65%
Others
35%
2005
1995
13
Ambuja
Cement
Average Cement Prices
- Domestic -
US $/ Per Tonne
US $
% Change
2005 - 06
45
13
2004 - 05
40
8
Cement Prices Net of Duties, Taxes and Freight
14
Ambuja
Cement
- International -
US $/ Per Tonne (FOB)
2005 - 06
2004 - 05
Cement
45
37
Clinker
35
28
(FOB) - Free on Board
15
Ambuja
Cement
Ambuja Cement
Punjab
1986 - 0.7 Mn. Tonnes
Today - 14 Mn. Tonnes
HP
Predominant Player in
West & North India
Rajasthan
Gujarat
Cement factories
Sea terminals
Maharashtra
Mn. tonnes
16
Western India
8.0
Northern India
6.0
Total Capacity
14.0
Ambuja
Cement
Growth
With
A Sustainable Business Model
17
Ambuja
Cement
Our Business Model
 Owned Infrastructure
 Logistic Management
 Premium Brand - Only selling in Retail Markets
 Environment Friendly operations
 Social Corporate Citizen
 Low Cost Cement Producer
18
Ambuja
Cement
Infrastructure & Logistic Management
 200 MW of Captive Power Plants
 100% captive power - Reliable & cheap generation
 Large port handling Export of Cement & Import of Coal
 3 Cement receiving terminals
 7 Owned Ships for transporting Cement by Sea
 35% Cement transport by sea - Cheapest Mode
 Largest Exporter of Cement - 15% of Production
19
Ambuja
Cement
Premium Brand
India - A bagged market
Individual home builder - Key driver of demand
Our focus :
 Best quality cement
 Good packaging
 Strong distribution network
 Customer service
Ambuja Cement - Most preferred brand
- Fetching higher realisation
20
Ambuja
Cement
Environment Friendly Operations
 Use of surface miners - Blast free mining
 Restoration of mines - green spots & water reservoirs
 Use of bio-gas, agro waste as alternate fuels
 Rose Garden & Cement Plants - Co-exist
 Many International Awards in Environment Management
 Global Standards for Environmental Measures
 ISO 14001 for Environment Management System
21
Ambuja
Cement
Corporate Social Responsibility
 Raising Environment Awareness
 Building up of check dams, salinity ingress checks
 Water Harvesting & Ecology Pits - Visit of Siberian Cranes
 Programs for rural healthcare and women development
 Asian CSR Awards 2005 for Environmental Excellence
among 94 companies participating from 16 countries
22
Ambuja
Cement
Direct Cost
Rs./ tonne
FY 2005
Power
202
Fuel
298
Raw material
172
Consumables
49
Direct cost
721
US $
16.0
USD/INR = Rs. 45
23
Ambuja
Cement
Operating Margin
F.Y
Operating Margin (%)
2005
30
2004
29
2003
29
Highest Operating Margins in the Indian Cement Industry
24
Ambuja
Cement
Gujarat Ambuja Cements Limited
(Consolidated Income Statement)
Rs. Mn.
Sales
Operating Profit
Interest
Depreciation
Profit Before Tax
Prior Period Adjs (credit)
Tax
Profit After Tax
Minority Interest
Net Profit
Operating Margin
FY2005
30855
9278
902
2195
6181
831
5350
169
5181
30 %
25
FY 2004 Growth (%)
24150
28
7098
31
900
2082
6
4116
50
425
688
20
3853
39
229
(26)
3624
43
29 %
-Ambuja
Cement
Gujarat Ambuja Cements Limited
(Consolidated Balance Sheet)
Rs. Mn.
Sources of Funds
Shareholders’ Funds
Minority Interest
Deferred Tax
Net Debt
Total
Application of Funds
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Investments
Net Current Assets
Total
26
FY2005
FY2004
24873
79
3811
8447
37210
17314
6375
3209
11845
38743
39210
14792
24418
10835
1957
37210
44434
16005
28429
9637
677
38743
Ambuja
Cement
Ratios
FY 2005
FY 2004
Interest Cover
9.4
7.5
Operating Margin
30 %
29 %
Net Debt / EBIDTA
1.1
2.2
Net Debt / Networth
0.37
0.61
ROCE
17 %
12 %
RONW
21 %
18 %
27
Ambuja
Cement
Our Score Card
(1987 - 2005)
Parameters
CAGR (%)
Capacity
18
Sales
29
Net Profit
36
Networth
30
Return to Shareholders
29
Wtd. Avg. EBIDTA Margin
33
28
Ambuja
Cement
Our First Quarter Financials
(June - Sept 2005)
Rs. Mn.
1Q 2006 1Q 2005
Sales
6774
7066
Operating Profit
1714
1894
Other Income
8
234
Interest
220
229
Depreciation
495
607
Share Profit of Associates
339
Profit Before Tax
1346
1292
Tax
265
204
Minority Interest
79
Profit After Tax
1081
1009
The Results are not comparable as ACEL during the current quarter has been
considered as an associate as compared to a subsidiary company in the previous
quarter.
29
Ambuja
Cement
Our Shareholders
Current Market Capitalization - Over US$ 2 Bln.
Others
17%
Management
24%
Domestic Pension &
Mutual Funds
18%
FII's (Incl. GDR)
41%
One of the most traded shares in India
30
Ambuja
Cement
Payout Ratio
Rs. Mln.
Year
Equity
PAT
Capital
Dividend
Payout
(%)
Ratio (%)
2005
27038
46829
90
46 *
2004
17940
33679
80
47
2003
15530
22209
70
55
* On Expanded Capital
A Policy of 40 - 60% Payout
31
Ambuja
Cement
Partnership with Holcim
32
Ambuja
Cement
Structure
Before
Current
GACL
AIG/GIC
GACL
HOLCIM
60%
40%
33%
67%
ACIL
ACIL
ACC
ACEL
ACC
ACEL
13.8%
94.6%
34.7%
97.0%
Due to this Structure GACL’s effective shareholding in ACC goes
up to 11.5% from 8.3 % without any fresh investments by GACL.
33
Ambuja
Cement
Salient Features of the Partnership
 Holcim Investments in India through ACIL only
 Access to Holcim’s best practices in areas such
as waste heat recovery, use of alternative fuels,
human resources and Information technology
 Opening of new cement trading opportunities in
Middle East and Indian Ocean
34
Ambuja
Cement
Ambuja Growth Plans
 Plan to increase capacity by 3 to 4 mn. tonnes in
next 2 - 3 years by way of acquisition, upgradation
& brown field expansion.
 Growth to be funded from free cash flows
35
Ambuja
Cement
Thank You
36
Ambuja
Cement