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Ambuja Cement Limited
By
Manish Agarwal
November 14, 2007
Content
Brief History
Positioning in Indian Cement Industry
Financial Performance
Cost drivers
Expansion Project
Financing of expansion projects
Conclusion
3
04/11/23
Capacity built up from 0.7 Mio t in 1986 to 18.0 Mio t as of today at CAGR of 18%
Organic growth and growth through acquisitions 2001 - Private equity investors (American International
Group & Government of Singapore) invested in ACIL 2005 - ACIL restructured as a joint venture with
Holcim 2006 - Founder promoters sold part of their holding in
ACL in favour of Holcim ACL is a Holcim Group company since May 2006
Brief History -- a growth story
4
04/11/23
Content
Brief History
Positioning in Indian Cement Industry
Financial Performance
Cost drivers
Expansion Project
Financing of expansion projects
Conclusion
5
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Cement Plant
Grinding Station
Terminal
Port
North – Central Region
Cement Capacity 7.0 Mio t
Positioning - ACL
South-West Region
Cement Capacity 8.0 Mio t
Eastern Region
Cement Capacity 3.0 Mio t
Overseas: Cement receiving station at Galle (Sri lanka), which is not indicated in the map above Overseas: Cement receiving station at Galle (Sri lanka), which is not indicated in the map above
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Strategy
Strong presence in growing markets of North & West
Largest exporter of cement Grinding close to market Premium brand Extensive & primarily exclusive distribution network
Over 6,600 dealers and 20,500 retailers Captive Infrastructure
Port, Receiving Terminals and Power Plants (230 MW)
Sea Transportation Seven vessels
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Export
Cement and clinker export volumes
[Mio t] ACL exports
1.4 2.0 2.0 1.5 1.8
Gujarat provides around 80% of Indian cement exports. Exports markets are mainly in the Middle East but also in Sri Lanka (0.8 million t)
Export flows from Gujarat are expected to decline from 2008-2009, due to strong demand and better realization in the local market.
6.5
9.29.9 9.7 9.5
0
2
4
6
8
10
2002 2003 2004 2005 2006
Comments
8
04/11/23
Asset footprint South West
Optimised logistics costs through use of sea transportation to serve the key Mumbai market
Optimised logistics costs through use of sea transportation to serve the key Mumbai market
SuratAmbujanagar
Maratha
Panvel
AhmadabadAsset Cement
capacity [million t]
Add. cem capacity [million t]
Year
Ambujanagar 5.0
Maratha 3.0
Surat 1.0 2007
Ahmadabad 1.5 2009
Total 8.0 2.5
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Asset footprint North Central
Dadri
Nalagarh
Rauri
Roorkee
Ropar
Bathinda
Darlaghat
Rabriyawas
Asset Cement capacity [million t]
Add. cem capacity [million t]
Add. clk capacity [million t]
Year
Darlaghat 2.0
Rauri 2.2 2009
Rabriyawas 2.0 0.6 2007
Ropar 2.5
Bathinda 0.5
Roorkee 1.0 2007
Dadri 1.5 2009
Nalagarh 1.5 2009
Total 7.0 4.0 2.8
Pioneered the concept of split grinding units to optimise logistics costs.
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Asset footprint East
Farakka
Bhatapara
Sankrail
Asset Cement capacity
[mt]
Add. clk capacity
[mt]
Year
Bhatapara 1.0 2.2 2009
Sankrail 1.0
Farakka 1.0 2007
Total 3.0 2.2
Entry into the eastern market through acquisition of Bhatapara cement plant in 1997
Entry into the eastern market through acquisition of Bhatapara cement plant in 1997
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ACL sales evolution – all India
36 37 36 36 36
12 11 10 12 12
40 37 40 42 41
12 15 14 10 11
0
20
40
60
80
100
2002 2003 2004 2005 2006
In %In %ACL Market Share in %ACL Market Share in %
101010109
South West Region Eastern Region
North Central region Exports
By Region Comments
Sales up from 10.9 million t in 2002 to 16.3 million t in 2006
Consistent regional distribution
Sales up from 10.9 million t in 2002 to 16.3 million t in 2006
Consistent regional distribution
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Sales and market share: South West
Top three players represent around 52% of the market share*
Dominance of regional players in the southern market
Comments
* In 2005 and 2006, Top 3 are: ACL+ACC; Grasim + Ultratech, ICL
Sales developmentTop 3* [%]
39 37
ACLACC
Grasim
UltraTech
ICL
Madras Kesoram
Zuari Others
Market share
8.0 9.0 9.0 8.0 8.0
11.0 11.0 10.0 10.0 9.0
11.0 11.0 10.0 10.0 10.0
17 15 15 14 13
12.0 11.0 11.0 12.0 12.0
6.0 6.0 6.0 6.0 7.0
5.0 5.0 5.0 5.0 5.0
4.0 4.0 4.0 4.0 4.0
27.0 27.0 30.0 31.0 32.0
0
20
40
60
80
100
2002 2003 2004 2005 2006
5436 52
[Mio t]9 98 8 8
4.04.9 5.1 5.2
6.0
0
2
4
6
8
2002 2003 2004 2005 2006
ACL Market Share in %ACL Market Share in %
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Sales and market share: North Central
* In 2005 and 2006, Top 3 are: ACL+ACC; Grasim + Ultratech, Jaypee
ACLACCGrasim UltraTec
hCentury
JK
Jaypee
Shree
Others
Top 3* [%]
11.0 12.0 13.0 14.0 13.0
15.0 15.0 16.0 16.0 16.0
12.0 13.0 13.0 13.0 13.02 2
3 2 16.0 6.06.0 5.0 5.0
11.0 11.011.0 11.0
10.0
9.0 9.0 8.0 9.010.0
8.0 8.0 8.0 8.0 8.07.0 7.0 7.0 7.0 9.0
18.0 17.0 17.0 17.0 16.0
0
20
40
60
80
100
2002 2003 2004 2005 2006
5355414039
Birla Corp
Market share
[Mio t]12 1311 14 13
4.45.0 5.8 6.3
6.6
0
2
4
6
8
2002 2003 2004 2005 2006
Sales development
ACL Market Share in %ACL Market Share in %
Top three players now represent around 53% of the market* but still fragmented among 2nd and 3rd tier players
Jaypee and Shree are relatively aggressive competitors
Currently the region with the highest ACL presence
Comments
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Sales and market share: EastMarket share
* In 2005 and 2006, Top 3 are: ACL+ACC; Grasim + Ultratech, Lafarge. Their market share could reach close to 80% with the likely integration of Century into Grasim/Ultratech
Top 3* [%]
ACL ACC Grasim
UltraTech
Century Lafarge Orissa
Birla Corp Others
8.0 8.0 8.0 8.0 8.0
14.019.0 18.0 17.0 17.0
7.07.0 7.0 8.0 8.0
1313 13 12 14
11.012.0 12.0 14.0 11.0
20.018.0 19.0 17.0 18.0
6.07.0 7.0 7.0 8.05.06.0 5.0 5.0 4.0
15.010.0 12.0 12.0 11.0
0
20
40
60
80
100
2002 2003 2004 2005 2006
51 62 6647 50
[Mio t]8 88 8 8
1.31.4 1.5
1.8 2.0
0
2
4
6
8
2002 2003 2004 2005 2006
Sales development
ACL Market Share in %ACL Market Share in %
Most consolidated compared to all India
Top three players represent around 66% of the market*
Comments
15
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Content
Brief History
Positioning in Indian Cement Industry
Financial Performance
Cost drivers
Expansion Project
Financing of expansion projects
Conclusion
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Financial performance showing improving trajectory
2001-2002 2002-03 2003-04 2004-05 2006*
ROCE (%) 9 9 13 17 47
ROE (%) 12 14 17 22 43
5 5 68
22
14 17 2026
63
34
30 30
31
36
0
10
20
30
40
50
60
70
2001-02 2002-03 2003-04 2004-05 2006
Sal
es a
nd
EB
ITD
A (
INR
Bil
lio
n)
27
28
29
30
31
32
33
34
35
36
37
EB
ITD
A M
arg
in (
%)
Sales EBITA EBITA margin
ACL’s EBITDA in FY 2006 witnessed an impressive growth
* Figures for 2006 pertain to 18 months period July 05 – December 2006* Figures for 2006 pertain to 18 months period July 05 – December 2006
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Rs. In crores
Full Year Nine Months
2006 2006 2007 % (+/-)
Sales Volume 16.3 12.2 12.5 2.46
Sales 4847.86 3518.77 4198.13 19.31
EBITDA 1880.68 1321.66 1669.76 26.33
EBITDA margin 38.8% 37.56% 39.75%
Profit after tax** 1340.07 1,099.53 967.61 13.63
Key financial figures *
* IGAAP. Figures for FY 2006 have been restated to make it comparable, on account of change in accounting year and merger of ACEL** Excluding extraordinary income * IGAAP. Figures for FY 2006 have been restated to make it comparable, on account of change in accounting year and merger of ACEL** Excluding extraordinary income
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Content
Brief History
Positioning in Indian Cement Industry
Financial Performance
Cost drivers
Expansion Project
Financing of expansion projects
Conclusion
19
04/11/23
Power
Clinker content
Fuel (coal)
Transport
Captive Power Plants, AFR
AFR/process efficiency / international sourcing
Composite cement
Grinding facility close to end user, production close to raw materials
Terminal logistics
Cost drivers
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80
81
82
83
84
85
86
87
88
89
90
2001-02 2002-03 2003-04 2004-05 2006
700
705
710
715
720
725
730
735
740
745
Electricity (Kw h/T of Cmt) Coal/Other Fuel (Kcal/Kg of clinker)
Consumption per unit of Production
Increase Captive Generation
66
72 7276
80
50
550
1050
1550
2050
2001-02 2002-03 2003-04 2004-05 2006
50
60
70
80
90
Total Consumption Captive %
Measures Shift from liquid to solid
fuel to reduce cost of captive energy cost by approx. Rs.2 per unit.
Reduction dependence on grid power, with the construction of additional power plants aggregating to 178 MWs
Captive power ensures continuous and consistent supply of power
Energy
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Content
Brief History
Positioning in Indian Cement Industry
Financial Performance
Cost drivers
Expansion Project
Financing of expansion projects
Conclusion
22
04/11/23
2.2
-
-
-
0.6
2.2
-
5.0
Expansion projects
North
North
North
North
North
SW
SW
East
East
ClusterLocation 2007 2008 2009 2010 2011
Cement (million t)
-
1.5
1.5
1.0
-
1.0
1.5
-
1.0
7.5Grinding
Grinding
Grinding
Grinding
Clinkering
Clinkering
Clinkering
Greenfield Brownfield
Rauri
Dadri
Nalagarh
Roorkee*
Rabriyawas
Surat
Ahmedabad
Bhatapara
Farraka*
Total
Clinker (million t)
Grinding
Capital outlay (in USD million)
Clinker 388
Grinding 302
Captive power plant 203
* Already commissioned* Already commissioned
Grinding
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Content
Brief History
Positioning in Indian Cement Industry
Financial Performance
Cost drivers
Expansion Project
Financing of expansion projects
Conclusion
24
04/11/23
Million USD 2001-02 2002-03 2003-04 2004-05 2006*
Net Cash from 28 68 144 180 453
Operating Activities
Debt:Equity 1.10 1.09 0.63** 0.52 0.25
Debt:EBITDA 3.83 3.42 2.61 1.41 0.38
Improvements in operational efficiency
Favourable pricing environment
Net cash positive in 2007
Call option in ACIL to generate approx. USD 150 Mio
Financial position
Strong cash flows and low debt : equity ensures financial flexibility for new projects
* Figures for 2006 pertain to 18 months period July ’05 – December 2006** improvement on account of conversion of convertible bonds* Figures for 2006 pertain to 18 months period July ’05 – December 2006** improvement on account of conversion of convertible bonds
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Content
Brief History
Positioning in Indian Cement Industry
Financial Performance
Cost drivers
Expansion Project
Financing of expansion projects
Conclusion
26
04/11/23
Conclusions
Solid market position built up within short period of time through organic growth and acquisitions
Pin-pointed positioning tied to substantial captive infrastructure to serve markets including sea transportation, capability to export
High use of alternative raw materials in production of composite cements
Substantial greenfield and brownfield expansions plans to grow within the attractive markets and an internal financing capability to fund expansion projects
27
04/11/23
Cautionary statement regarding forward-looking statements
This presentation may contain certain forward-looking statements relating to the 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 orinability 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.
Disclaimer