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Ambuja Cement

Ambuja Cement. February 2005. Cement in India A Cyclical Business of Supply Not Demand. As Cement Growth Not a Challenge in India. Demand has been Growing At a CAGR of 8% over last decade. Cement Demand (Apr-Dec). Mn. Tonnes Growth (%)

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Ambuja Cement

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  1. Ambuja Cement February 2005

  2. Cement in IndiaA Cyclical Business of SupplyNot Demand

  3. AsCement Growth Not a Challenge in India Demand has been Growing At a CAGR of 8% over last decade

  4. Cement Demand(Apr-Dec) • Mn. Tonnes Growth (%) • 2004 91.3 8 2003 84.5 4 December 2004 - 10.84 Mn. tonnes “Decade’s second highest demand”

  5. Momentum of Growth to continue….

  6. Demand Drivers • Housing – New Start ups – Negligible housing inventory & rising property prices • Hedge against Inflation - Property • High Mortgage Penetration - Low Interest Rates • Increased investments in Infrastructure Increased Construction will lead to higher cement demand

  7. Expected Cement Demand mn tonnes • 2004-05 2005-06 2006-07 • Base Domestic Demand 114 122 132 • Growth - 7% 8 • - 8% 10 11 • Expected Domestic Demand 122 132 142 • Exports (Potential to be even higher) 4 4 4 • Expected Cement Demand 126 136 146

  8. Demand set to outstrip Supply

  9. As Last Plant was set up in March ’03 No new supply expected till June ‘06 It Never happened in past

  10. Cement Production Capability mn tonnes • 2004-05 2005-06 2006-07 • Base Clinker Production 103 107 111 • Increased Production due • to improvements 4 4 4 • 107 111 115 • Clinker Export 6 6 6 • Clinker for Cement Grinding 101 105 109 • Blending Ratio 1.26 1.29 1.32 • Cement Production 127 135 144

  11. Structural change in Pricing Scenario Result

  12. Local Prices Rs / per Bag • Jan 2005 Jan 2004 June 2004 • Bombay 171 153 168 • Delhi 131 112 137 • Kolkatta 178 155 175 • Ahmedabad 134 132 146 • Jaipur 136 108 147 • Hyderabad 117 122 130 • Chennai 155 159 160

  13. Global Prices • Cement Clinker • 2003-04 25 19 • 2004-05 40 28 US$ (FOB)

  14. But Cement Industry Not without challenges

  15. Challenges • Cement is energy intensive industry • Coal, Power & Oil constitute major costs • Increasing cost of fuel • Better realisation only in few markets

  16. Growth in Profits for only those who can meet these Challenges

  17. Our Strategy • Presence in the growing markets of North & West • Retail Focus – Premium pricing • Largest Exporter of cement – 15% of Production • 35% Cement transport by sea - Cheapest Mode • And ... Lowest Cost Cement Producer

  18. Lowest Cost ProducerManaging the Cost Increases well Rs./ tonne • FY 2004 FY 2003 Increase / (Decrease) (%) • Power 177 187 (5) • Fuel 244 227 7 • Raw material 143 136 5 • Consumables 46 48 (4) • Direct cost 610 598 2 • US $ 13.9 12.9 USD/INR = Rs. 44

  19. Gujarat Ambuja Cements Limited(Consolidated Income Statement) Rs. Mn. • 1H 2005 1H 2004 Growth(%) • Sales 14425 9764 48 • Operating Profit 4113 2262 82 • Interest 455 485 (6) • Depreciation 1204 1002 20 • Profit Before Tax 2454 1219 101 • Profit After Tax 2038 844 141 • Minority Interest 112 58 93 • Net Profit 1926 786 145 • Net Operating Margin (%) 28 23 -

  20. A Comparative Analysis(Oct - Dec 2004) Rs. Mn. • Ultra Tech Grasim# ACC GACL • Production • - Clinker 3.20 3.02 2.90 3.10 • - Cement 3.36 3.32 4.17 3.70 • Sales • - Qty (mn tonnes) 4.15*3.33 4.183.70 • - Value 6877 6885 9553 7353 • Operating Profit 577 1087 1526 1986 • Profit Before Tax (194) 504 741 1162 • Operating Margin(%) 8 16 16 27 • O/P per tonne (Rs.) 139 329 365 537 # Cement Results * Includes Clinker Sale – 0.8 mn tonnes

  21. Our Score Card 1987-2004 • Parameters CAGR (%) • Capacity 20 • Sales 29 • Net Profit 35 • Networth 30 • Return to Shareholders 25 • Wtd. Avg. EBIDTA Margin 33

  22. New Initiatives

  23. ACIL • A Joint Venture between GACL, AIG , GIC formed in February 2000. Current Ownership Structure GACL AIG, GIC 40% 60%

  24. Rs. Mn. ACIL Investments Shares of ACC (13.80%) 9280 Shares of ACEL (94.08%) 4250 13780

  25. Rs. Mn. Proposed Investments By Holcim Purchase of AIG/GIC Investments in ACIL 8970 Fresh Investments in ACIL : Equity Capital 18340 Preference Capital 8100 26440 Total 35410 “The Largest FDI in the Cement Sector in India”

  26. ProposedUtilisation Rs. Mn. • Purchase of AIG/GIC Investments in ACIL 8970 • Open Offer : • ACC Shares (36.20%) 25640 • ACEL Shares (5.92%) 800 26440 • Total 35410 Result : ACIL Shareholding in - ACC up to 50.01 % - ACEL up to 100 %

  27. Structure after Equity Infusion GACL HOLCIM 33% 67% ACIL ACC 50.01% ACEL 100% Due to this Structure GACL’s effective shareholding in ACC goes up to 16.5 % from 8.3 % without any fresh investments by GACL.

  28. Benefits 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

  29. Ambuja Growth Plans Plan to grow to 20 mn. tonnes in next 3 years By way of Productivity enhancement and Acquisitions Growth to be funded from free cash flows

  30. Ambuja Cement Most Profitable Cement Company With Growth and Value

  31. Thank You

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