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Disclaimer
No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained in this presentation. Such information and opinions are in all events not current after the date of this presentation. Certain statements made in this presentation may not be based on historical information or facts and may be "forward looking statements" based on the currently held beliefs and assumptions of the management of J. K. Cement Limited (“Company” or “JKC”), which are expressed in good faith and in their opinion reasonable, including those relating to the Company’s general business plans and strategy, its future financial condition and growth prospects and future developments in its industry and its competitive and regulatory environment.
Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, financial condition, performance or achievements of the Company or industry results to differ materially from the results, financial condition, performance or achievements expressed or implied by such forward-looking statements, including future changes or developments in the Company’s business, its competitive environment and political, economic, legal and social conditions. Further, past performance is not necessarily indicative of future results. Given these risks, uncertainties and other factors, viewers of this presentation are cautioned not to place undue reliance on these forward-looking statements. The Company disclaims any obligation to update these forward-looking statements to reflect future events or developments.
This presentation is for general information purposes only, without regard to any specific objectives, financial situations or informational needs of any particular person. This presentation does not constitute an offer or invitation to purchase or subscribe for any securities in any jurisdiction, including the United States. No part of it should form the basis of or be relied upon in connection with any investment decision or any contract or commitment to purchase or subscribe for any securities. None of our securities may be offered or sold in the United States, without registration under the U.S. Securities Act of 1933, as amended, or pursuant to an exemption from registration therefrom.
This presentation is confidential and may not be copied or disseminated, in whole or in part, and in any manner.
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Indian Cement Industry: Sustained Demand Growth
• Expected interest rate cuts in 4QFY13 positively impacting demand from housing, infrastructure and industry segments
• Multiple state/general elections in the next 18 months
• The government’s focus on reviving investment demand
• Positive outlook on the Rabi crop rubbing off on rural housing demand.
Demand growth - 8% (FY13) & 10% (FY14-FY15)
The Cement industry has witnessed secular growth in consumption with quarterly variation in a year
The momentum will sustain and gather further steam, driven by:
India, the 2nd largest cement producer in the world with total installed capacity of 350 mn tonnes
Source: CMA
Source: Company Estimates
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lExpected Slowdown in New Capacity Addition will Improve Utilization of Current Capacity In the current economic and political scenario,
setting up a new Greenfield project has become challenging in view of the following:
• Long arduous process of environmental approvals
• Land acquisition • Complexity of mineral composition in new areas• Supporting infrastructure of rail connect and
water availability• Greenfield project cost in current context is
$135-$150/ton, depending on the site location
With strong volume growth and decline in pace of capacity addition, utilization (%) will improve, having bottomed out in 2H CY11
The average utilization will be 80% going ahead
• Most regions will operate at 90%+ utilization except Andhra Pradesh, which has capacity overhang
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Capacity Utilization to improve from FY13 onwards
Source: Company Estimates
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lPrices will Continue to Remain Robust Resulting in Improved Profitability
An annual increase of INR 20-25 / bag is expected, considering:
• Improvement in demand growth
• Pass-on of cost-push
• Increase in capital costs
• Slowing capacity addition
The rising costs of power, fuel and freight are likely to stabilize, although at slightly elevated levels
50% of India’s installed capacity has come up in last 5 years
• This relatively new capacity requires an EBITDA/ton of Rs.1,000 – 1,100 to justify equity returns
At the current Replacement Cost and Variable cost levels, an increase of Rs.20-25/bag is necessitated to earn new capacities 15% RoCE
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A significant improvement is seen in EBITDA/ton from the trough levels of ~INR525/ton in 2HCY10. The EBITDA/ton is likely to be ~INR1034/ton in FY13 and INR 1,184/ton in FY14 (v/sFY12 average of INR 850/ton).
Source: Company Estimates
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Company Background J. K. Cement Ltd. (“JKCL” or “Company”) is part of the $3 billion
conglomerate, JK Organisation. The company is promoted by Dr. Gaur Hari Singhania & Mr. Yadupati Singhania and entered cement business in 1975
2nd largest white cement manufacturer in India with 0.40 MTPA capacity and one of the leading grey cement producers in North India with over 36 years of experience.
Highly reputed brand with extensive nation-wide distribution Integrated Cement manufacturing company with 7.5 MTPA grey
cement capacity• Nimbahera, Mangrol and Gotan (Rajasthan): 4.5 MTPA• Muddapur (Karnataka): 3 MTPA• 105.5 MW of Captive power• Proximity and access to large high quality reserves of limestone,
sufficient to operate cement plants for the next 30 years. Expanding domestic grey cement capacity to 10.5 MTPA and
white cement capacity to 0.60 MTPA and wall putty capacity to 0.60 MTPA by Sept 2014.• Mangrol (Rajasthan): 1.5 MTPA • Jhajjar (Haryana): 1.5 MTPA split grinding• Gotan (Rajasthan): 0.20 MTPA white cement and 0.30 MTPA wall
putty Greenfield Expansion in the Middle East
• Fujairah (UAE): Dual process plant - 0.6 MTPA white cement or 1.0 MTPA Grey cement
JK Cement’s LT credit rating was recently upgraded to AA- by CARE Ratings
Listed on National Stock Exchange (“NSE”) and Bombay Stock Exchange (“BSE”) with a market capitalization of INR 23bn
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Key Highlights
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Cement Sector on Strong Foundation with Positive Future Outlook• Sustained demand coupled with slowdown in capacity addition resulting in higher capacity utilization
• Improvement in profitability, backed by higher cement prices and operating margins
Integrated manufacturing facilities at multiple locations• Plants in North & South India enable the company to serve multiple regions
• 105 MW of captive power and large limestone reserves at close proximity, sufficient for the next 30 years
White cement business cash cow with strong growth and profitability • White cement & wall putty segments contribute consistently to profitability and provide healthy margins
& stable cash flows
• White cement capacity to increase from 0.4 mtpa to 0.6 mtpa by Sept ‘14 and augment current market share of 40%.
• Wall putty capacity will increase from 0.3 mtpa to 0.6 mtpa, in phases during next two years
Domestic expansion to consolidate leadership in North and improve operating efficiencies • Expansion plan to tap new markets, increase market share in North India and derive benefit from VAT
incentives for entire production at Mangrol and Haryana
• North based plants operating at 90%+ and newer plants will offer better operating efficiency
• Increase in share from south plant, which serves higher realization markets, will improve margins
Dual process plant in UAE to grow internationally• Cater to white cement demand in Middle East & North Africa(MENA) and infrastructure development
projects in Qatar
• Unit in UAE provides logistical advantage to serve GCC and MENA countries and frees up current export quantity from India for domestic sale
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Corporate Milestones
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May 1975Entered cement business with 0.3 mtpa plant at Nimbahera, becoming one of the first few to enter the cement business
Nov 2004Acquired a cement division from its affiliate through slump sale, on a going concern basis, with a capacity to manufacture 3.55 mtpa of grey cement and 0.3 mtpa of white cement along with 15 MW of captive power plant
June 2005The Company got listed on the Bombay Stock Exchange (“BSE”)
March 2006Successfully raised INR 2960 mn through the Follow on Public Offer (“FPO”)
Sept 2009Commissioned a 3 mtpa Greenfield plant in south at Muddapur, Karnataka
Oct 2012Foundation laying ceremony for brownfield expansion at Mangrol
Dec 2012Company’s long term credit rating upgraded from A+ to AA- by CARE Rating.
2007Enhanced grey cement capacity by 0.50 mtpa, set up a 20MW coal based power plant and 13.2MW of heat recovery based power plant at Nimbahera and enhanced white cement capacity by 0.1 mtpa at Gotan, through IPO proceedsAcquired a 0.1 mtpa white cement unit at Gotan from Nihon Nirmaan and subsequently in 2009, converted the unit to produce 0.47 mtpa grey cement
July 2012“National Award for Excellence in Cost Management – 2011” from The Institute of Cost Accountants of India
Nov 2012“Best Employer Award - 2011” from Employer’s Association of Rajasthan Foundation laying ceremony for setting up a split grinding unit at Jhajjar, Haryana
Nov 2011Foundation laying ceremony at Fujairah to set up dual process plant
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Existing Plant locations and Market Reach
Cement Plant
Power Plant
Market Reach
Gotan - Nagaur (Rajasthan) 0.47 MTPA# :Grey Cement 0.40 MTPA* :White Cement 0.3 MTPA: Wall Putty 7.5 MW: Thermal Power Plant
Nimbahera – Chittorgarh (Rajasthan)
3.2 MTPA : Grey Cement 20 MW:Thermal Power Plant 13 MW: Waste Heat Recovery 15 MW (Bamania): Thermal
Plant
Mangrol - Chittorgarh (Rajasthan) 0.75 MTPA - Grey Cement
Muddapur - Bagalkot (Karnataka) 3 MTPA: Grey Cement 50 MW: Thermal Power Plant
Pan-India market reach in white cement & presence in 13 states for grey
cement. 105.5MW of
captive power and abundant
limestone reserves
# The grey cement capacity is interchangeable with white cement* The white cement capacity is being expanded to 0.60 MTPA
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Established Brands
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Ordinary Portland Cement (OPC) is sold under the J.K. Cement brand name,
Sarvashaktiman
Grey CementPortland Pozzolana Cement (PPC) and Portland Slag Cement (PSC) variants are sold under the J.K. Super Cement
brand name
White CementJ.K. White Cement is marketed and
distributed across the country
Value Added ProductsWhite cement based Wall Putty and Water
Proofing Compound
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lSuperior Product Mix on account of White Cement
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Growth DriversWhite cement growing at 10% annually and expected to increase on account of:
• Increase in per-capita consumption
• Demand from wall putty, registering 30% annual growth
• Increase in demand for Housing sector
JK White Cement Current market share: 40% Pan-India reach with
established brand White cement contributes
~25% to revenue & ~30% to profitability
Sufficient to service interest liability & tax payout of the entire company
White cement provides J.K. Cement with superior product mix and unique position to leverage on high-growth, superior margin segment
White Cement Industry in India
Installed Capacity: 1.0 mtpa
Only 2 producers – UltraTech Cement & JK Cement
Domestic Sales: 0.9 mtpa
Export Quantity: 0.1 mtpa
Key Export Markets: South-Asia, Middle East & Africa
Entry of new players remote as:
Requirement of Special quality limestone
High investment costs
Problems in mine allocation
Price Realization (INR/ton) – Grey vs White*
* White cement price including wall putty
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Advantageous Revenue & Market Mix
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Increasing share of White Cement in Revenues
Product Mix – Grey Cement (FY12)
Market Mix evenly distributed (FY12)Rising share from West & South to improve Realization
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Strategy
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STRATEGY
Poised to be among top 5 white cement producers globally
Increasing white cement and wall putty capacity to sustain present share of revenue from this business
All plants enjoy proximity to raw material & growth markets
Brown field expansionSplit grinding in Haryana for logistical advantage in National Capital Region
A leading brand in North for Grey Cement. JK White and JK Wall Putty are marketed across the country
Enhance visibility further through print & online media and consumer promotions
Captive power generation to provide long term sustained source of low cost power at fixed rate
Use of waster heat recovery to reduce environmental impact
Dual process plant in UAE to cater to growing markets of Middle East & Africa
Infrastructure development demand in Qatar for soccer world cup
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Expansion Plan
Domestic – Rajasthan & Haryana Fujairah, UAE
Nature BrownfieldGreenfield- In a subsidiary, held 90% by JK Cement along with Govt. of UAE (10%)
Capacity 3.0 mtpa, with 1.5 mtpa grinding in Mangrol & 1.5 mtpa split grinding at Jhajjar, Haryana
Dual process cement plant capable of producing 0.6 mtpa white cement or 0.9 mtpa grey cement
Commissioning Haryana: June ’14 Mangrol: Sep ’14 Mar ‘14
Features Abundant land Captive thermal plant of 25 MW and 9 MW
WHR Railway siding at both locations
Connectivity to road & port Quality limestone reserves Flexibility to switch between white & grey
cement
Capital Outley & Funding Mix
Total project cost: Rs. 1734 Cr.Debt: Rs.1200 Cr.Equity Contribution: Rs. 534 Cr.
Total project cost: Rs. 765 Cr.Debt: Rs. 510 Cr.Equity Contribution: Rs. 255 Cr
Tied-up
Proposal moved to banks and in the process of tie-up. Company also has sufficient internal resources forequity financing
Financial closure achieved for debt portion. Loan of Rs.150 Cr. for promoter contribution and Rs.95 Cr. of own resources remitted
Project Status
Entire land acquired at both locations Mining lease allotted for additional
limestone mine Civil work has commenced Orders placed for equipments with renowned
vendors
Civil & mechanical work progressing on schedule.
60% of the RCC work completed till date Erection of equipment has commenced
Target Market
Haryana unit provides logistical advantage to serve the National Capital Region and helps consolidate JK’s leadership position in the North.
Cater to Middle East and North African white cementdemand and infrastructure development projects in Qatar for soccer world cup
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Past consolidated financials
Income Statement Highlights
INR mn FY '10 FY '11 FY '12 H1FY13
Operating Income 18,268 20,943 25,468 14,483
Other Income 193 299 469 287
Total Income 18,461 21,243 25,936 14,770
Total Operating Expenses 13,891 18,180 20,329 11,623
EBIDTA (B’fore Excep. Items) 4,570 3,063 5,608 3,147
Interest 616 1,185 1,443 665
Depreciation 855 1,128 1,256 633
Exceptional Item - (72) 78
-
PBT 3,098 823 2,830 1,850
Provisions 853 196 1,085 620
PAT 2,246 626 1,746 1,230
Balance Sheet Highlights
INR mn FY '10 FY '11 FY '12H1FY1
3Equity Share Capital 699 699 699 699
Reserves & Surplus
12,786
13,250 1,4522
15,762
Networth
13,486
13,949
15,221
16,461
Long Term Loans
10,138
10,584
9,965
9,455
Total Borrowings
10,737
11,183
10,808
10,618
Deferred Tax Liability (net)
1,858
2,109
2,291
2,436
Other Liab & Provisions
3,579
6,746
7,440
8,402
Net Fixed Assets (Incl CWIP)
22,822
23,996
24,071
23,997
Investments
48
42
92
1,483
Cash & Cash Equivalents
1,318
3,215
4,332
3,445
Other Assets
5,473
6,734
7,264
8,993 Note: H1FY13 numbers are on standalone basis.
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Latest Quarter Performance
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Particulars Q3 FY13
Q2 FY13 Chang
e (%) Q-o-Q
Q3 FY13
Q3 FY12 Chang
e (%)Y-o-Y
9M 9M Change (%)
Y-o-Y
FY 12
INR million Dec 31, 2012
Sept 30,
2012Dec 31,
2012Dec 31,
2011Dec 31,
2012Dec 31,
2011Mar 31,
2012 Total Operating Income (Net) 6880.8 7148.7 - 3.7% 6880.8 6158.9 11.7% 21404.1 17373.8 23.2% 25467.8
EBITDA 1348.8 1316.8 2.4% 1348.8 1204.0 12.0% 4249.6 3138.8 35.4% 5166.3
PBT 775.6 830.1 - 6.6% 775.6 645.7 20.1% 2625.2 1437.1 82.7% 2857.8
PAT 543.8 540.9 0.5% 543.8 435.2 25.0% 1773.5 969.8 82.9% 1773.3 EPS – Basic & Diluted 7.78 7.74 7.78 6.22 25.36 13.87 25.36
Raw Material Cost % 15.3% 13.1% 15.3% 12.1% 13.6% 12.4% 12.2%
Power & Fuel Cost % 24.8% 24.4% 24.8% 25.3% 25.1% 26.5% 25.7%
Freight Costs % 20.5% 20.4% 20.5% 19.3% 20.0% 19.5% 19.1%
Others % 19.8% 23.7% 19.8% 23.8% 21.5% 23.6% 22.8%
EBITDA % 19.6% 18.4% 19.6% 19.5% 19.8% 18.0% 20.2%
PAT % 7.9% 7.5% 7.9% 7.0% 8.2% 5.5% 6.9%
During 9MFY12, Company’s revenue grew by 23.2% as compare to the corresponding period 9MFY11.
During 9MFY12, Company’s EBIDTA margin improved by 1.8% primarily on account of reduction in power & fuel cost and other expenses.
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Management
Board Of DirectorsGaur Hari Singhania Chairman
Yadupati Singhania
Managing Director and CEO
K.B. Agarwal Independent Director
J. P. Bajpai Independent Director
Suparas Bhandari Independent Director
J. N. Godbole Independent Director
Achintya Karati Independent Director
K. N. Khandelwal Independent Director
Raj Kumar Lohia Independent Director
Ashok Sharma Independent Director
Key Management Experience
Raghavpat Singhania Special Executive 5 years
Madhavkrishna Singhania Special Executive 2 years
A K Saraogi President (Corp. Affairs) & CFO
25 years
M. P. Rawal President (Tech. & Mgmt Service)
37 years
D Ravisankar President (Projects) 35 years
R. C. Shukla President (Mktng, Grey Cement)
28 years
Mohan Sharma Head (Mktng, White Cement) 24
years
Kaustubh Dadhich Head (Mktng, South-West) 25
years
B. K. Arora President (J.K. White Cement Works)
34 years
K. K. Jalori Plant Head, Nimbahera 32 years
A. K. Jain Plant Head, Muddapur 26 years
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Awards & Recognition
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Best Employer Award, 2011 Employers’ Association of
Rajasthan
9th National Award for Excellence in Cost Management, 2011 (The Institute of Cost
Accountants of India)
Commemorative Stamp in honor of the Founding
Father
Productivity Excellence Award 2009-10 (Rajasthan State
Productivity Council)
Over All Performance Award by Indian Bureau of
Mines