Title: Profit before Tax. 1241.05. PBT & Extraordinary Items
1TRIVENI ENGINEERING INDUSTRIES LTD.CORPORATE
PRESENTATION
2Index
- 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
31. History, Vision and Strategy
4Vision and Strategy
- Sustainable leadership and growth
- Maximise stakeholder value
- Excellence in farmer and customer relations
52. Financial Performance
6Triveni has achieved record turnover and profits
in 2004-05
7Earnings 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
8Various financial ratios also indicatethe
improvement in performance
9Select 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
103. Management Discussion Analysis
11i. 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
12Per 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
13Global Consumption is expected to increase at
1.5 per annum
Source FO Licht, 2005
14Global 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
15WTO 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
16ii. 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
17Competitiveness 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
18Competitiveness 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
19Competitiveness 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
20Sugar Balance
- We at Triveni have been very accurate in
forecasting sugar production in our past annual
reports
Triveni estimates and Actual Sugar Production
21An 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)
22In 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)
23Lower stocks and production have resulted in high
sugar prices
ISMA Ex-factory prices of free sale realization
24In 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
25The 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
26iii. 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.
27High 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
28In 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
29Technology 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
30Proposed 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
31Proposed 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
32Proposed 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
33Triveni 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
34Co-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
35Deoband 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
36Triveni 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
37Triveni 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
38iv. 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
39We believe that we are positioned for rapid
growth in the turbine space
40Industry 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
41The 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
42The 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
43The 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
44v. 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
45The 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
46Business 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
47vi. 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
48India 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
49Business 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
50Current 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
514. Human Resources
52Triveni 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
53Our 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