Presentation By Ambuja Cement

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Presentation ByAmbuja Cement
February 12,2003
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Indian Economy ( 2002 - 2003)

• GDP is expected to grow at about 5
• Despite negative growth of Agriculture

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• As .. ...
• Services Industry doing very well
• Construction Sector growing at about 7
• Leading to a multiplier effect on GDP

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Growth Rates ( April - September)
Percent

• 2002 2001
• Service 7.5 5.5
• Construction 6.8 1.2
• GDP 5.9 4.4

Source CSO
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Construction Industry to continue its growth at
much faster pace for next few years
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• Due to ..
• Good Liquidity in the economy
• Lower Interest Rates
• Efforts undertaken for Infrastructure growth

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Construction growth reflectsCement growth
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Cement In India

• A paradigm shift from supply
• driven to demand driven

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Cement Supply - The Dynamics

• Cement Production 2002 110
  mn tonnes
• Maximum Clinker Capacity
• (Including Sanghi)
  103 mn tonnes
• Current Clinker to Cement
• Conversion Ratio (the best in
• last 5 years)
  1.21times
• Maximum Cement Production 125 mn
  tonnes

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Cement Production Capability ( Various Scenario)

• Clinker Capacity available -
  103 mn tonnes
• Clinker to Cement Maximum Cement
  Production
• Conversion Ratio ( mn
  tonnes)
• 1.21 125
• 1.22 126
• 1.23 127
• 1.24 128
• 1.25 129

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Cement Supply - A Reality Check

• No new cement capacity under construction
• Lenders unwilling to fund new cement plants
• Maximum Cement production capability even at a
  conversion ratio of 1.25 - 129 mn tonnes

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• Cement Demand
• Other side of the equation

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Cement Demand (January - December)

• Calendar Sales
  Growth
• Year (mn tonnes) (
  )
• 2002 109 11
• 2001 98 3

Source CMA
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• Cement Demand To Grow
• Much faster then in past
• on account of Housing and
• Road Development

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Housing Construction

• Huge potential
• Unfulfilled demand - 33 mn units
• Increasing disposable income
• Younger generation aspiring to have Own
  House
• Low real estate prices
• Easy availability of Housing Finance -
  Growing over 30
• Interest Rates have come down by 700 bps in
  last 3 years
• Monthly instalment on mortgage is now
  equivalent to rentals

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Roads

• Road Development
• Golden Quadrilateral- 5846 Sq.. Km
• (Already Completed 1202 km)(Expected
  completion - Dec 2003)
• North-South East-West Corridors - 7300 Sq..
  Km
• ( Already Completed 832 km) (Expected
  completion - 2007)
• Expected consumption - 4 mn tonnes per annum

Source NHAI
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Indian Cement IndustryNext 3 Years
mn tonnes

• Calendar Clinker Cement Cement Demand
  Surplus/
• Year Capacity Conversion Production
  (Deficit)
• Ratio 10 11 10 11
• (At Maximum Level) (Maximum)
• 2002(A) 103 - 109 109 109 - -
• 2003(E) 103 1.25 129 120 121
  9 8
• 2004(E) 103 1.25 129 132
  134 (3) (5)
• 2005(E) 103 1.25 129 145
  149 (16) (20)

A- Actual E- Estimated
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Cement Industry Outlook -(2003-04)Distinctively
Firm

• Cement demand growth expected to be over 10
• No new capacity this year, also no new capacity
  for next couple of year
• Cement Demand to exceed Supply after a gap of
  several years
• All these point to good demand Higher Cement
  Prices

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Ambuja Cement
Growth of about 20 times in 15 years
Started production in 1986 1986
2002 Capacity 0.7 13.0
mn tonnes
Cement Plants
Sea terminals
Markets
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Cement Despatches (January - December)
mn tonnes

• 2002
  2001 Growth
• 
  ( )
• Industry 109 98 11
• Ambuja 9 7 34

Source CMA
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Our 2nd Quarter Performance
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Production (October-December)
Lac Tonnes

• Category 2002 2001 Increase
• Clinker 22.92 14.48
  58
• Cement 23.66 17.94 32

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A Comparison( October - December 2002)
mn tonnes

• Clinker Cement
• ACC 2.73 3.31
• LT 3.24 2.92
• Grasim 2.77 2.87
• Ambuja Group 2.96 3.05

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Cement - Sales (October-December)
Lac Tonnes

• Category 2002 2001 Increase
• Domestic 19.06 14.97 29
• Export 3.96 3.05
  30
• Total 23.02 18.02
  28

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Quarterly Results (October-December)
Rs. Crores

• 2002 2001 Growth
• Sales -Volume (mn tonnes) 2.30 1.80
  28
• - Value 487 399 22
• Operating Profit 136 121 12
• Interest 26 26 -
• Cash Profit 110 95 16
• Depreciation 44 34 29
• Profit Before Tax 66 61
  8
• Current Tax 5 4 25
• Profit after Current Tax 61 57
  7
• Deferred Tax 4 7 (43)
  
• Profit After Tax 57 50
  12
• Net Operating Margin 32.3 34.6

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Sequential Growth ( FY 2003)
Rs. Crores

• 2Q2003 1Q 2003 Growth
• Sales -Volume (mn tonnes) 2.30 2.14
  7
• - Value 487 434 12
• Operating Profit 136 89
  53
• Interest 26 22 18
• Cash Profit 110 67 64
• Depreciation 44 43 -
• Profit Before Tax 66 24
  275
• Current Tax 5 2 250
• Profit after Current Tax 61 22
  277
• Deferred Tax 4 4 -
  
• Profit After Tax 57 18
  317
• Net Operating Margin 32.3 24

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O/P Margin - A Comparison ( October - December
2002)

• O/P Margin
• 
  ( )
• ACC 13
• LT 15
• Grasim 20
• ACEL 24
• ACRL 24
• GACL 32

Source Published Information
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Performance of OurSubsidiary Associate Company
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Ambuja Cement Eastern Limited (October-December)

Rs. Crores

• 2002 2001 Growth
• Sales - Volume-Lac tonnes 3.07 3.91
  21
• - Value 86.8 89.5 3
• Operating Profit 18.3 0.9
• Interest 4.6 5.5 (16)
• Depreciation 6.2 6.7 (7)
• Profit after tax 7.5 (11.3)
• Net Operating Margin 24.1 1.1

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Ambuja Cement Rajasthan Limited
(October-December)
Rs. Crores

• 2002 2001 Growth
• Sales - Volume Lac tonnes 3.35 3.17
  6
• - Value 77.1 72.7 6
• Operating Profit 15.2 7.6 100
• Interest 9.9 11.7 (15)
• Depreciation 6.3 6.3 -
• Loss
  1.0 10.4 (90)
• Net Operating Margin 23.8 12.4

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Group Debt Profile( Estimated - June 2003)
Rs. Crores

• GACL
• Debt 1250
• FCCB
• (Convertible Bonds) 461
• 1711
• ACEL 150
• ACRL 50
• Total Debt 1911
• Group Debt/ Equity Ratio
• - Including FCCB as Debt 1.0
• - Including FCCB as Equity 0.6

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Valuation

• EV/Ton US 62
• EV/EBIDTA 6 times
• Operating Margin 33
• Price to Cash Earning 6 times
• Historically most attractive valuation - A
  Growth Stock

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Economic Value Added (EVA)A Study by Stern
Stewart

• Their findings .. ...
• Positive EVA implies Stakeholders Wealth
  Creation
• Globally 3 Cement Companies have positive EVA
• GAC - The only Indian Cement Company having
  positive EVA

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A recent survey carried out by Financial Times
adjudged Gujarat Ambuja as one of the worlds
Most Respected Companies in the Property and
Construction Sector
Financial Times - London January, 20 ,
2003
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THANK YOU