Welspun Group | Welspun Corp Ltd
WCL - Investor & Analyst meet 2014 29 April 2014
Welspun Group | Welspun Corp Ltd
Disclaimer
Certain statements made in this presentation may not be based on historical information or facts and may be “forward looking
statements,” including those relating to general business plans and strategy of Welspun Corp. Limited (“WCL"), its future outlook and
growth prospects, and future developments in its businesses and its competitive and regulatory environment. Actual results may differ
materially from these forward-looking statements due to a number of factors, inter alia including future changes or developments in
WCL's business, its competitive environment, its ability to implement its strategies and initiatives and respond to technological
changes and political, economic, regulatory and social conditions in India. This presentation does not constitute a prospectus, offering
circular or offering memorandum or an offer invitation, or a solicitation of any offer, to purchase or sell, any securities of WCL and
should not be considered or construed in any manner whatsoever as a recommendation that any person should subscribe for or
purchase any of WCL's securities. Neither this presentation nor any other documentation or information (or any part thereof) delivered
or supplied under or in relation thereto shall be deemed to constitute an offer of or an invitation by or on behalf of WCL to subscribe
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WCL, as such, makes no representation or warranty, express or implied, as to, and does not accept any responsibility or liability with
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contained in this presentation, unless otherwise specified is only current as of the date of this presentation. WCL assumes no
responsibility to publicly amend, modify or revise any forward looking statements contained herein, on the basis of any subsequent
development, information or events, or otherwise. Unless otherwise stated in this presentation, the information contained herein is
based on management information and estimates. The information contained herein is subject to change without notice and past
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Welspun Group | Welspun Corp Ltd
Agenda
FY14 SCORE CARD
BUSINESS OUTLOOK
ANALYSIS OF MAJOR MARKETS
ROAD AHEAD
Welspun Group | Welspun Corp Ltd
FY14 SCORE CARD
BUSINESS OUTLOOK
ANALYSIS OF MAJOR MARKETS
ROAD AHEAD
Welspun Group | Welspun Corp Ltd
0
200
400
600
800
1,000
1,200
FY 10 FY 11 FY 12 FY 13 FY 14
816909
835
1,018 1,019
In '0
00 M
T
Total Pipe Sales
5
Sales volume - At an all-time high
1, 019 K tons - Highest annual Sales
Breaks the ‘Million ton’ barrier for the second year in a row
Welspun Group | Welspun Corp Ltd
-
200
400
600
800
1,000
1,200
FY 10 FY 11 FY 12 FY 13 FY 14
814
958819
1,010 1,022
In '0
00
MT
Total Pipe Production
6
Production Volume - At an all-time high
1,022 K tons - All time high annual production
Breaks the ‘Million ton’ barrier for the second year in a row
Welspun Group | Welspun Corp Ltd
Financial highlights for FY14
Results maintained in spite of challenging environment
Notes:
a) Operational EBITDA = Reported EBITDA – Non-operational income + Unrealised Forex loss/(gain)
b) Cash PAT = PBT – Current tax + Depreciation + Post-tax Unrealised Forex loss provision/(gain)
* Adjusted for Unrealised Foreign Exchange loss of Rs.1,046 mn in FY14 and gain of Rs. 232 mn in FY13
Equity dividend of Rs. 0.5/share declared; track record of dividend payments over
the last six years
Particulars FY13 FY14
Net sales 90,831 77,047
Operational EBITDA* 7,079 7,742
Reported EBITDA 9,191 8,439
PBT before exceptional 2,076 1,412
PAT after Minority 1,404 734
Cash PAT* 5,635 5,768
(Rs. In Million)
Welspun Group | Welspun Corp Ltd
Net debt/equity at a comfortable level
Increase in Net worth is on account of preference capital issued by US subsidiary
Net debt/equity comfortable at 0.84x
Debt increase mainly on account of higher working capital
Particulars FY13 FY14
Share capital 1,315 1,315
Net worth 27,556 29,569
Gross debt 38,907 37,411
Cash and cash eqv. 15,737 12,590
Net debt 23,170 24,821
(Rs. In Million)
Welspun Group | Welspun Corp Ltd
Working capital
Better inventory management and strong execution results in lower inventory days
Payable days lower due to reduction in acceptances
Days of sales FY13 FY14
Inventory 93 61
Receivables 62 30
Other current assets 23 23
Current assets 178 114
Trade payables 99 29
Other current liabilities 67 35
Current Liabilities 166 64
Cash conversion cycle 12 51
Welspun Group | Welspun Corp Ltd
FY14 SCORE CARD
BUSINESS OUTLOOK
ANALYSIS OF MAJOR MARKETS
ROAD AHEAD
Welspun Group | Welspun Corp Ltd
11
Key Business Highlights
Source – Welspun
Successfully completed Demerger of Welspun Corp Ltd
Achieved 1 Mn plus tons sales and production tonnage milestone – second year in a row despite
challenging business environment
HFIW plant put into commercial production at Little Rock and achieved stabilization in Q4-FY14
Orders/Approvals from reputed clients
DJ plant commissioned in Saudi Arabia; Internal & External Coating Plant commissioned in Anjar,
India
New marketing office in Dubai for greater focus on EMEA (Europe- Middle East- Africa) customers
Other Milestones
Single Largest Order from Saudi Arabia
Supply of niche product – 128” x 18 mm extra large dia pipe
Welspun Group | Welspun Corp Ltd
12
Order book highlights – Strong visibility for next year
Booked orders in excess of 1,260 K MT in FY14
Closing Order Book of 901 K MT of pipes as on 1st April 2014 (vs. 657 K Mt as on 1st April
2013)
Pipe Order book in K MT
Pipe Orders Booked Pipe Orders Executed Closing Pipe Orders
Year MT (in '000 tons) MT (in '000 tons) MT (in '000 tons)
FY 2008-09 807 695 781
FY 2009-10 824 814 791
FY 2010-11 844 909 726
FY 2011-12 762 835 653
FY 2012-13 1,022 1,018 657
FY 2013-14 1,261 1,019 901
Welspun Group | Welspun Corp Ltd
13
Current Order book details
Americas , 16%
MENA, 55%
India, 28%
Geographical Distribution
LSAW, 32%
HSAW, 62%
ERW, 6%
Product Wise
Welspun has begun FY15 with a strong order book (order book value at approx Rs. 58 Bn)
Welspun has currently active bids of 3.5 million MT
Welspun Group | Welspun Corp Ltd
FY14 SCORE CARD
BUSINESS OUTLOOK
ANALYSIS OF MAJOR MARKETS
ROAD AHEAD
Welspun Group | Welspun Corp Ltd
North America – Resurgence in demand likely!
• Oil production is expected to rise over the next decade leading to a reduction in net import dependence in the USA. (Source: EIA)
• The United States is set to become a net exporter of natural gas by 2020 (source: EIA)
• Rise in Gas production drop in the gas prices export of gas from USA, an attractive proposition in the future
USA
• Due to gas production boom in US, export of gas from Canada into US is not likely to remain a feasible option
• Hence there is an urgent imperative for Canada to develop new markets
• Canada contemplating transport of oil to the refineries in eastern Canada which are currently dependent on imported oil
Canada
• Mexico’s oil industry witnessed a landmark event in 2013, ending 75 years of the PEMEX monopoly and opening up unexplored areas for development by foreign E&P firms (Source: DW report)
• PEMEX to invest $28bn in 2014 (Source: Upstream)
• CFE plans to setup another 19,000 MW of Gas based power plants which would need onshore pipelines
Mexico
Welspun Group | Welspun Corp Ltd
Marcellus shale play, Ohio, PA, NY, W. Virginia
North America –Natural Gas Map
16
Major Current Active Shale Plays
Existing Gas Pipelines
Existing LNG import terminals
Montney, BC, AB
Bakken, North Dacota, AB,
Saskatchewan
Mancos, Idaho, Utah, Wyoming
Monterey, CA
Avalon, TX
Barnett, TX
Eagle Ford, TX
There is a vast unexplored shale potential and
most import LNG terminals in USA shall be
converted to export which would need further
pipeline infrastructure to interconnect
various shale plays and further connect them
to refineries and/or to export terminals
Upcoming LNG export terminals in Canada
Welspun Group | Welspun Corp Ltd
Canada Oil and Gas Map
Oil Sands
Welspun Group | Welspun Corp Ltd
Replacement Demand Potential in USA
18
A soaring number of pipeline incidents suggests extensive damage from operating on higher load
factors as well as the deteriorating state of a significant share of the US transmission pipeline network
This could lead to tighter standards of control along with stricter requirement for regular inspections
and higher replacement rates from pipeline operators in the future.
According to the Office of Pipeline Safety (OPS), there were 305,000 miles of transmission pipeline
in USA at the end of 2011. At a replacement rate of 0.2% pa, estimated demand will be around 600
miles pa (968km).
Majority of transmission pipeline was laid during the 1950s and 1960s and is now more than 50 years
old, this replacement rate could be significantly higher (2%).
Welspun Group | Welspun Corp Ltd
Middle East, Africa, Europe – Continue to remain strong!!
• Saudi Arabia will continue to maintain strong demand in FY15, FY16 as it completes its Gas Master plan with large cross country East-West pipelines
• There are visible oil and gas projects in UAE, Oman, Kuwait which continue to strengthen their infrastructure for internal grid connectivity and export
• Iraq is expected to continue its steady demand for pipelines as the country is moving further on the path of stability and resurgence
Middle East
• The ultra large project South Stream will be implemented in Europe which would keep the European mills occupied
• Trans Anatolian Pipeline in Turkey will be an important pipeline in Europe as it presents as alternative to Russian Gas in Europe
Europe
• Algeria will continue its steady demand as it improves its mainland pipeline connectivity and increases supply to Algerian Shore for European export
• Mozambique will present large demand in FY15 and FY 16 as it develops its offshore fields
• Nigeria and other African states like Angola, Kenya will also present a few projects
Africa
Welspun Group | Welspun Corp Ltd
India, APAC –Demand sluggish, Competition intensity will
be a challenge
• Oil and Gas pipeline market would be under close watch with
large cross country gas pipelines planned for FY16
• FY15 will present opportunities in water pipeline segment
India
• Thailand, Malaysia and Indonesia will be the prime countries of focus
• Vietnam and Myanmar are the new markets in this region which
have large potential oil and gas reserves
• Japanese and Chinese Competition is a big challenge in APAC
APAC
Welspun Group | Welspun Corp Ltd
Facility
Marketing Office
Little Rock,
AR. Houston.
Delhi
Mumbai
Dammam
Dubai
Anjar, Dahej
Mandya
Global Manufacturing and Sales Footprint
Welspun Group | Welspun Corp Ltd
360 Degree Line-pipe and Coating Solutions
Total Global Capacity - Coating
Capacity
32.05 million m2
Internal Coating
14 inch to 100 inch
(Internal Diameter)
External Coating
2 inch to 120 inch
(Outer Diameter)
Total Global Capacity 2.425 Mn MTPA
Grade up to API X120
HFW
MTPA : 0.375
OD: 1.25-20”
WT : 2-14 mm
HSAW
MTPA: 1.35
OD: 18-140”
WT: 5-27 mm
LSAW
MTPA: 0.7
OD: 16-60”
WT: 6-43 mm
Complete Product range with Hot induction bends and bends coatings which makes Welspun
a one-stop-shop and a preferred vendor for line pipe projects
Welspun Group | Welspun Corp Ltd
China
India
Brazil
France
Japan
Korea
Germany
AMERICAS
Coil
Plate
Global Sourcing
Ukraine
Welspun Group | Welspun Corp Ltd
FY14 SCORE CARD
BUSINESS OUTLOOK
ANALYSIS OF MAJOR MARKETS
ROAD AHEAD
Welspun Group | Welspun Corp Ltd
Road Ahead
No additional Capex planned in FY 15 other than the regular maintenance capex.
Welspun continues to explore relocation options in key markets
Overall global pipe demand outlook for FY 15 is expected to remain slow.
Welspun, despite the market conditions, has a strong opening order book
Welspun with its global manufacturing base and global raw material sourcing capabilities is fairly placed to maintain its performance
Slow down in one region not to have a large adverse effect on Welspun as it will get compensated by high performance in another region
Outlook for FY16 and beyond is expected to improve
• Shale gas and associated LNG terminals shall be the major factor driving the demand surge, as USA and
Canada plan for LNG exports to Europe and South East Asia
• This coupled with Replacement demand is expected to lead to a scenario where potential demand may be
greater than the local competition which would lead to higher margins
Welspun Group | Welspun Corp Ltd
On The Path of Global Leadership…
Thank You
Welspun Group | Welspun Corp Ltd
Contacts
For further details, please contact:
Harish Venkateswaran
GM - Group Finance and Strategy
Email: [email protected]
Akhil Jindal
Director – Group Finance and Strategy
Email: [email protected]
Company Website: http://www.welspuncorp.com