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Profit before Tax. 1241.05. PBT & Extraordinary Items

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Title: Profit before Tax. 1241.05. PBT & Extraordinary Items


1
TRIVENI ENGINEERING INDUSTRIES LTD.CORPORATE
PRESENTATION
2
Index
  • History, Vision and Strategy
  • Financial Results 2004-05
  • Management Discussions Analysis
  • World Sugar Scenario
  • Domestic Sugar Scenario Future Outlook
  • Triveni Sugar Business performance
  • Turbine Business Unit performance
  • High-Speed Gears Business Unit performance
  • Water Waste-water Business performance
  • Human Resources

3
1. History, Vision and Strategy
4
Vision and Strategy
  • Sustainable leadership and growth
  • Maximise stakeholder value
  • Excellence in farmer and customer relations

5
2. Financial Performance
6
Triveni has achieved record turnover and profits
in 2004-05
7
Earnings per share has increased 477
  • Including surplus brought forward, the total
    amount available for appropriation has increased
    from Rs.282.45 million in 2003-04 to Rs.1039.75
    in 2004-05
  • Earnings per share (of Rs.1) has increased from
    2.07 in 2003-04 to Rs.11.94 in 2004-05

8
Various financial ratios also indicatethe
improvement in performance
9
Select Highlights 2004-05
  • Turnover increased by 60 to Rs.10.21billion
  • Sugar sales increased by 69, turbine sales by
    33 and gear sales by 27
  • The co-generation plant at Deoband contributed
    Rs.183million to turnover
  • Operating profits in sugar increased by 194
  • Differential cane price has been absorbed
  • The company was provided a short term rating of
    A1 by ICRA, representing highest security

10
3. Management Discussion Analysis
11
i. World Sugar Scenario 2004-05
  • World sugar output1 increased by 2.4 million
    tonnes to 146.1 million tonnes
  • World consumption increased by 2.1 to 148
    million tonnes leading to a shortfall of 1.9
    million tonnes
  • EDF Man sees global deficit widening to 4 mt
  • China is expected to become a significant
    importer of sugar after 2008

1 For the sugar year October 2004 to September
2005 Source F O Licht 2005
12
Per Capita Consumption
  • According to FO Licht, growth is expected to
    remain fairly stable with the exception of China

Data Source International Sugar Report 2004-05
13
Global Consumption is expected to increase at
1.5 per annum

Source FO Licht, 2005
14
Global Corporate Startegies
  • According to F O Licht, three determinants will
    influence the growth of sugar companies in the
    coming years
  • Technological Technological economies will help
    determining the economic size of individual
    plants
  • Organisational Organisational economies will
    help organisations reduce costs by centralising
    certain functions and optimising certain
    competencies
  • Regulatory Regulatory environments for sugar
    companies are fairly complex and as such it will
    take skill, experience and political clout to
    master the challenges which accompany it

15
WTO Policy and the DOHA round
  • There are no commitments on duty reduction
    commitments
  • The length of the implementation period for
    making these reduction was discussed at the Doha
    round
  • On April 28th, 2005, the WTOs highest court
    ordered the EU to stop dumping subsidized sugar
    on global markets
  • The implementation of WTO policy on sugar
    manufacturing countries will have enormous
    benefits for Indian sugar manufacturers

16
ii. Domestic Sugar Scenario Future Outlook
  • The sugar industry in India is highly fragmented,
    with 566 sugar units spread over 16 states
  • The total capital employed by the sugar industry
    is Rs.500bn, the annual turnover is Rs.250bn
  • Sugarcane payments per annum are Rs.180bn
  • Direct employment is 500,000 and there are 45mn
    farmer/families that grow sugarcane
  • The average size of each unit is approximately
    3300 TCD, which is substantially below the new
    international economic size of 7500TCD

Source Triveni analysis and ISO
17
Competitiveness can be determined by a few
factors
  • Sugarcane availability Within the reserved
    area of any factory the percentage area under
    sugarcane and yield are critical factors
  • Economic Size Without a minimum economic size of
    5,000TCD it is difficult for any sugar unit to
    command pricing power. This dynamic in sugarcane
    intensive areas such as Western Uttar Pradesh is
    even more important, where the minimum economic
    size can be assumed as 7,000TCD

18
Competitiveness can be determined by a few
factors (continued)
  • Technology The ability to minimize sugar
    processing losses depends on internal plant
    efficiencies which are directly related to
    process technology
  • Demand-pull The ability to draw a higher
    percentage of sugarcane from reserved area
    reduces diversion to other sweeteners. The only
    caveat here is that it needs to be coupled with
    timely payment

19
Competitiveness can be determined by a few
factors (continued)
  • Sucrose content This is directly related to the
    soil and the efforts from sugarcane development
    programs initiated by the more progressive
    manufacturers. Higher sugar content in sugarcane
    leads to more sugar manufactured, while the
    payment is still based on weight
  • Operating Efficiency The ability to run a sugar
    unit continuously assists in minimizing sucrose
    evaporation after harvesting

20
Sugar Balance
  • We at Triveni have been very accurate in
    forecasting sugar production in our past annual
    reports

Triveni estimates and Actual Sugar Production
21
An analysis of sugar balance for the future
reveals a very low stock position
Production, Consumption and Stock Past, Present
and Future

1 Source ISMA and Ministry of Food, Government
of India (April 2005) 2 Source Financial
Express (April 2005) 3 White sugar export
obligation under Advance License Scheme (ALS)
22
In 2004-05 both poor planting and a lower yield
resulted in a lower sugar balance

1 Source National Federation of Co-operative
Sugar Factories and Energy Lines (2005)
23
Lower stocks and production have resulted in high
sugar prices
ISMA Ex-factory prices of free sale realization
24
In 2004-05 the current domestic sugar policy has
supported the rise in prices
  • The Ministry of Food and Civil Supplies has only
    allowed import of raw sugar by sugar factories,
    and not traders, with an export obligation
  • As a result there have been record sugarcane
    price payments to growers in 2004-05
  • In U.P., not only have the current years
    sugarcane supplies have been paid in time, but
    substantial payments have also been made for the
    past supplies

25
The U.P Government Sugar Policy
  • Besides new units, existing units making
    investments in the expansion of their mills, and
    any investment connected with the sugar industry,
    such as Ethanol/Alcohol from molasses and
    co-generation from bagasse will be covered
  • Various incentives in the form of capital
    subsidy, reimbursement of transportation costs of
    sugar etc. have been given
  • For investment of over Rs 3.5 billion, the
    incentive would be applicable for 5 years and for
    investment over Rs 5 billion, the incentive would
    be applicable for 10 years. The overall
    incentive cannot exceed the amount of capital
    investment

26
iii. Trivenis performance in sugar in 2004-05
has been at the highest tier
  • Khatauli, Deoband and Ramkola units crushed 1.87
    million tonnes sugarcane 1.38 million tonnes
    sugarcane and 0.34 million tonnes sugarcane
    respectively
  • Sugar recovery at Khatauli was 10.06, at Deoband
    10.19 and at Ramkola 9.86
  • The Company imported 0.185 million tonnes of raw
    sugar
  • Triveni was one of the largest producers of sugar
    in the country, while Khatauli crushed more cane
    than any other factory in India.

27
High production will allow Triveni to benefit
from high prices in 2005-06
  • Sugar produced, including processing of raw
    sugar, was 196,000 tonnes in Khatauli,
    152,000tonnes in Deoband and 33,600 tonnes in
    Ramkola
  • A total of 3,81,600 tonnes of sugar was produced
    in 2004/05 versus 3,64,400 tonnes in 2003-04
  • Engineering stoppages were within the budgeted
    targets and there was a good improvement in the
    consumption of steam, all resulting in lower
    process losses and more bagasse production

28
In SY 2004-05, Khatauli crushed the highest
amount of cane in India
Cane Intensity 2004-051
1 Overall drawal rate in FY05 was 49 Source
Company Data
29
Technology improvements allowed usto further
improve quality
  • The Continuous Vacuum Pan (CVP) developed by
    Triveni in association with Sugar Research
    International (SRI) of Mackay, Australia was
    installed in the Deoband sugar factory for usage
    on C massecuite
  • A Syrup Clarifier System was installed at the
    Deoband and Khatauli sugar plants for improvement
    in the quality of sugar
  • In 2005-06 we shall be installing an improved
    Short Retention Clarifier of SRI design at
    Khatuali

30
Proposed cap-ex will make Triveni oneof the the
largest regional players
  • Khatauli sugar unit is being modernized and
    expanded to 16,000 TCD, which will make it the
    largest sugar unit in the country
  • The company has already put up a 22 MW
    cogeneration facility at Deoband and aims to put
    up a 23 MW co-generation plant at Khatauli unit
    by September, 2005

31
Proposed capital expenditure will make Triveni
the largest regional player (cont)
  • We have finalised one location for a new sugar
    unit of 7,000TCD and are in the process of
    finalising 2 other locations for setting up
    facilities of similar capacity
  • These projects will allow us to avail of the UP
    Government Sugar Incentive Policy1
  • The new sugar plants are proposed to have a
    capacity ranging from 5000 to 7000 TCD and will
    be expandable to 12,000 TCD

1If implemented before March 2007
32
Proposed capital expenditure will make Triveni
the largest regional player (cont)
  • The inaugural ceremony for one of the plants at
    Sabitgarh in Western UP has already taken place
    and production is expected to start in December
    2005
  • This is one of the best sites in India today,
    with 75 of the cultivable area being canal
    irrigated
  • Over 5000 hectares of area, high recovery
    sugarcane will be planted, the seeds for which
    have been procured and supplied by Triveni
  • In addition, a substantial amount of self
    planting by farmers has already occurred

33
Triveni Future Sugar Capacity
  • With the proposed establishment of the new sugar
    units and the ongoing expansion at our current
    units, sugarcane crushing capacity is expected to
    significantly rise from our current base of
    25,250 TCD
  • We plan to optimise the use of our by-products
    and are exploring plans of using molasses, which
    is one of our primary by-products
  • Our goal is to be a fully integrated manufacturer
    of sugar and its by-products

34
Co-generation Overview
  • Effective utilisation of sugar by-products
  • The total established potential of power from
    bagasse based co-generation, in India, is 3500MW
    of which 400MW has already been installed
  • UP experience peak load shortages of 20
  • Potential exportable power from UP sugar mills is
    estimated at 1250MW of which 120MW has already
    been installed

35
Deoband co-generation has been very successful
  • Triveni commissioned a 22MW ultra-modern and
    highly efficient bagasse based co-generation
    power plant in Deoband on 5th December, 2004
  • This was one of the fastest implementations
  • The 87ATA 515degree 120TPH boiler and a matching
    22MW Turbo generator (turbine from Skoda) was set
    up at a cost of Rs. 76 crores
  • Triveni has a PPA with UPPCL at Rs.2.81 per unit
    with a 11p / annum escalation for 10 years
  • A similar 23MW project is underway at Khatauli

36
Triveni is also active on the carbon credit front
  • Triveni has appointed Ernst Young for
    assistance in the sale of CERs
  • We are also in negotiation with Rabobank, Shell
    Trading and Japan Carbon Fund for the sale of
    CERs
  • We believe that there is potential to the extent
    of Rs.50-80mn through the carbon credit trade
    route

37
Triveni Khushali Bazaar Helping the farmer help
themselves
  • Rural retail initiative to develop farmer
    relationships with Triveni, currently 5
    operational
  • Provide a one-stop-shop for all non-perishable
    needs, products range from toothpaste to tractors
    and insurance to loans
  • Extensive base of channel partners
  • Locational focus on current and future Triveni
    sugar growing areas, thereby also providing
    sugarcane seed and technical assistance
  • Helps mitigate risks for sugarcane cultivation
    while operating on an independent PL

38
iv. Turbine Business Performance
  • Triveni continues its dominant position as the
    market leader in the steam based industrial power
    generation and rotating machinery segments
  • The Turbine Business Group now offers
    comprehensive solutions for steam based power
    generation ranging from 0.5MW to 50MW

39
We believe that we are positioned for rapid
growth in the turbine space
40
Industry Scenario looks positive for Triveni
turbines
  • Single stage turbine demand will decline, and as
    a result there will only be scope for high margin
    spares sales and service revenue
  • The demand for steam turbines in the below 3MW
    segment will also decline.
  • The market for 6-15MW steam turbines will
    continue to expand
  • There is likely to be a substantial increase in
    demand in the 15-25MW segment

41
The turbine business has achieved record turnover
and profits in 2004-05
  • Our spares and refurbishing business has
    performed extremely well and we expect that we
    will be able to derive high margins from this
    side of the business in the years to come
  • Turbine sales in new sectors have allowed us to
    gain access to new clients and have been
    instrumental in the record gross turnover of
    Rs.174.74 crores and a profit before tax Rs.11.43
    crores

42
The promise of new world-class technology has
impressed many clients
  • The most impressive accomplishment has been the
    completion of our RD project, in collaboration
    with Impact Technologies (USA) and consulting
    professors from the Indian Institute of Science
    and the Indian Institute of Technology
  • We are proud to announce that we have
    successfully been able to develop highly
    efficient low pressure twisted and tapered
    blades.
  • We have also been able to develop new efficient
    turbine models up to 22MW

43
The turbine unit expects to triple its turnover
in 3 years
  • With the current factory expansion in progress we
    will have doubled our capacity by March 2006
  • We expect the commercialization of our in-house
    22MW technology in the next 24 months
  • Over the next 3 year period we expect turnover to
    grow 3-fold and margins are expected to increase
    substantially as well
  • For the year 2005-06, we already have 190 of
    2004-05 orders on hand

44
v. High-Speed Gears Unit Performance
  • Power deficiency and encouragement in terms of
    new power policy to put up captive power /
    co-generation plants has largely contributed to a
    healthy growth for the unit
  • Economic viability of setting up thermal captive
    power plant in industries like steel, sugar,
    paper and other process also is a major demand
    driver
  • Even the smaller sized gear boxes segment for
    smaller turbines has grown due to thrust by
    industry

45
The high-speed gears units performance has been
outstanding
  • The unit achieved 26 growth in sales over the
    year 2003-04 and has a healthy order book
    position as of the end of 2004-05
  • One of the key focus areas of the Unit has been
    retrofitting / replacement market including
    import substitution
  • Significant break-throughs were made in securing
    specialized high value and high margin orders due
    to superior quality offered by the unit

46
Business outlook also looks bright
  • In this year we will extend our range for
    gearboxes up to 25MW (presently at 15MW) for
    production domestically, while we will continue
    to supply the higher ranges under the terms of
    our license agreement
  • Our 5 year projections for this unit include a
    tripling of turnover at a growth rate varying
    from 18-35, and a consistent improvement in net
    margins over the entire period

47
vi. Water and Wastewater business performance
  • Water pollution is a serious problem in India as
    almost 70 of surface water resources have
    serious pollution problem
  • Although, the Industrial sector accounts for only
    3 of annual water withdrawals in India, its
    contribution through the effluent load is
    disproportionate to its consumption figures
  • Domestic wastewater is also one of the major
    pollution source causing 14 major river systems
    to get heavily polluted

48
India is a large emerging market for water and
wastewater treatment
  • According to various estimates the size of Indian
    environmental industry is in the range of US 1
    3.5 Billion per annum and growing at a rate of 6
    15 annually
  • KPMG estimates that the annual market for water
    wastewater treatment over the next five years is
    estimated to be in the range of Rs. 2600 to 3300
    Crores
  • This is expected to grow at 6-7 per annum

49
Business performance and outlook
  • The Company has restructured its efforts to
    conform to its core competency of mechanical
    equipment engineering and manufacturing
  • The Company signed an agreement with US Filter
    Corporation along a broad set of process
    equipment and solutions in May, 2004
  • Our current product lines as well as those
    products available to us through our association
    with US Filter include the most comprehensive
    product portfolio of any company in India

50
Current year performance is a drop in the ocean
as compared to forecasts
  • In this present year the Company has entered into
    higher technology fields like high purity water
    systems and wastewater reuse, securing several
    orders
  • Our order book for 2005-06 already exceeds the
    entire billing we had in 2004-05
  • With at least another 8 months to book orders
    that can be executed within the current financial
    year, we hope to grow in exponential terms

51
4. Human Resources
52
Triveni believes that continuous development is
the essence of growth
  • Emphasis is laid on development of
    entrepreneurial skills through work independence,
    freedom of expression and ownership of actions
    and decision at all levels
  • Training programs were organized for officers and
    non-officers in technical as well as managerial
    function for 2637 man-days
  • Accordingly, 4.37 days training was imparted per
    officer and 2.18 days for per supervisor

53
Our age profile is fairly young and resources are
extremely qualified
  • Over 80 of the officers are professionally
    qualified i.e. Engineering Graduates, Management
    Graduates or Diploma Engineers
  • 68 officers are technically qualified i.e.
    having degree/diploma in engineering
  • The average age of officers is 41 years even
    though plants are 30 to 70 years old
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