Ambuja Cement A Concrete Story

1
Ambuja CementAConcrete Story
February 4, 2002
2

• India - a growing economy
• Cement to play a major role

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MAJOR CEMENT DRIVERS

• Housing
• Road Development

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HOUSING CONSTRUCTION

• Huge potential
• Large Unfulfilled demand
• Increasing disposable income
• Low real estate prices
• Easy availability of Housing Finance
• Extremely low interest rates

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ROADS

• Road Development
• Golden Quadrilateral
• North-South East-West Corridors
• Rural Roads Network

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STATUSON ROAD CONSTRUCTION

• Total Completed
  Under Incremental Expected
• 
  Implementation Demand date of
  Kms Kms Kms
  mn tonnes completion
• Golden
• Quadrilateral 5851 1063
  4788 3 - 4 2003
• North-South
• East-West Corridors 7300 675
  639 5 - 6
  2007

on the basis of 25 concretisation
Source NHAI
7

• Cement Demand To Grow
• Much faster then in past

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• Cement supply
• Other side of the equation

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CEMENT CAPACITY

• No new cement capacity under construction
• Lenders not willing to fund new cement plants
• Industry getting consolidated
• (Top 5 players hold approx.60 of capacity vs.
  25 )

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FRAGMENTATION TO CONSOLIDATION
Capacity 71.25 mn tonnes
Capacity 117.0 mn tonnes
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CEMENT DESPATCHES ( April - December)
(mn tonnes)

• 2001 2000 Growth
• Industry 74.53 69.42 7.4

Source CMA
12
DEMAND SUPPLY EQUATION Favourable
(mn tonnes)

• Year Operative Supply at Capacity
  Domestic Cement/ Surplus/
• Capacity Peak Utilisation
  Demand Clinker (Deficit)
  
• Production
  at 8 growth Export
• 00-01 (A) 112 103 92
  90 5 8
• 01-02 (E) 117 108 92
  98 5 5
  
• 02-03 (E) 120 110 92
  105 5
  -
• 03-04 (E) 125 115 92
  114 5 (4)

Excluding plants not in operation, A -
Actual, E - GAC Estimates
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EMERGING SCENARIO

• Good demand growth
• No new capacities for the next few years
• Fragmented Industry getting Consolidated
• Cement prices expected - stable to
  firm

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INDIAN CEMENT PRICESLowest Among Developing
Economies

• Indian cement prices are very low as compared to
• other developing economies despite higher
• domestic consumption high capacity utilisation

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CEMENT PRICES - A COMPARISON

• Cement Capacity Domestic
  Capacity
• Prices Consumption
  Utilisation
• US mn tonnes mn tonnes
  ()
• Mexico 120 40 29 73
• Philippines 55 17 12 71
• Thailand 55 53 18 34
• Malaysia 50 26 11 42
• Indonesia 45 43 22 51
• India 40 112 90 80

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ALook at Ambuja Cement
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AMBUJA CEMENT
Started production in 1986 1986
2002 Capacity 0.7 13.0
mn tons
Cement factories
Sea terminals
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GREENFIELD CEMENT PLANT (Construction just
completed)

• Location Chandrapur, Maharashtra
• Capacity 2.5 mn tonnes
• 100 Captive Power 46 MW
• Cost Rs.675 Crores

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GROWTHWith A Sound Business Model

• Presence in prime markets
• Best quality cement
• Market leadership - Brand Value
• Logistics Management
• Lowest cost cement producer

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STRONG BRAND

• India - A bagged market
• Individual home builder - key driver of demand

• Our focus
• Highest quality cement
• Good packaging
• Logistic management - strong distribution network
  
• Customer service

• Ambuja Cement - Most preferred brand
• - Fetching higher
  realisation

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LOWEST COST PRODUCER(2000 - 2001)
Rs./tonne

• Ambuja Madras India ACC
• Cement Cement Cements
• Power 226 282 329 328
• Fuel 258 259 335 253
• Raw materials 129 227 169 277
• Consumables 88 85 68 104
• Direct Cost 701 853 901 962
• US 14 18
  19 20

1 US Rs. 48.50
Source Annual Reports
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HIGHEST OPERATING MARGINS(Last 5 years)

• FY1997 FY1998
  FY1999 FY2000 FY 2001
• ACC 14 11 7
  9 16
• Grasim N.A. N.A. 14
  13 17
• Larsen Toubro N.A. N.A. 11
  15 17
• India Cement 25 24 25
  23 24
• Madras Cement 35 33 31
  31 31
• Ambuja Cement 36 36 36 36
  37

N.A. - Not Available
Source Annual Reports
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OUR 1ST HALF ( July - December)
Rs. Million

• I H -FY02 I H - FY01 Growth
• Sales - Volume (mt.) 3.26 2.81
  16
• - Value 7393 6315
  17
• Operating Profit 2362 1928 23
• Interest 508 713 (29)
• Depreciation 673 639 5
• Profit after tax 1104 576 92
• OP Margin 36 35

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A COMPARISON WITH INDIAN CEMENT MAJORS
(Quarter ended December 2001)
Rs. Million

• ACC LT Grasim Ambuja
  India Madras Cement Cement Cement
• Sales
• - Volume (mt.) 3.15 2.93 2.40
  1.80 1.02 0.67
• - Value 7326 5632 4570 3992
  2578 1515
• PBIT 703 382 559 880
  244 207
• PBIT Margin 10 7 11 22
  9 14
• Interest 371 338 210
  261 507 195
• PBT 332 44 349 619
  (263) 12
• PBT Margin 5 0.79 7
  16 (10) 0.81

Interest allocation on the ratio of capital
employed
Source Published Information
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WITH GLOBAL CEMENT MAJORS(FY 2000)

• Lafarge Holcim Cemex Ambuja
• Cement
• O/P Margin 21 24 36
  37
• ROE 9.2 12.5 18.5 12.7
• ROCE 11.7 13.8 13.7 12.9
• Gearing 1.06 0.79 1.11
  0.78
• Debt/EBITDA 2.80 1.98 2.76
  2.52
• Interest Coverage 3.5 4.8 4.1
  3.5
• EV/Ton US 140 169 182
  77

GAC year ending June 2001
Source MSDW Research Annual Report
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AMBUJA CEMENT

• Engaged in fundamental business
• Sustainable business model
• Positive free cash flow
• Poised for growth