Analyst Meet Presentation - JSW Meet Presentation ... Issuance Price /10% premium in case of...
Transcript of Analyst Meet Presentation - JSW Meet Presentation ... Issuance Price /10% premium in case of...
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Analyst Meet Presentation Q1 FY11
Analyst Meet PresentationQ1 FY 2011
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Economic and IndustryScenario
Operating Highlights
Financial Performance
Key Developments
Project Progress
Agenda
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Key Developments
Strategic Collaboration with JFE
Leapfrogs to 2nd rank amongst 35 world class steelmakers
Blooming Mill at Salem commissioned on July 19, 2010
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JSW – JFE Partnership
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Overview
Game Changer for JSW
At Over $1 bn, Transaction Is One Of The Largest
FDI In The Indian Metals And Mining Space
Japan-India Strategic Transactions
Preferential Allotments By An Indian Company
Access To Cutting Edge Technologies
Access To Fast-Growing Automotive Market
Lower Cost Of Production By Operational Excellence
Deleveraged Balance Sheet To Fuel Next Phase Of Growth
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India’s Largest Private Sector Steel Maker with 11 MTPA Capacity By FY2011
Achieved CAGR Of 39% (Last 5 Years) in Production
World’s Fifth* Largest Steel Maker With~30 MTPA Capacity
Operational Excellence With State-of-the-Art Technology
* Source: World Steel Association – Based on 2009 production
Strategic Intent
Value Creation for Both Partners
Aggressive Expansion Plans in India
Optimize Capital Structure Through Deleveraging
Technology For Operational Excellence and Production Of
Automotive Steel ProductsStrategic Production Base In India for
Existing Automobile Customers
Presence in Fast-Growing Indian Market
Future Growth through Equity Participation in India
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Strategic Collaboration Agreement - Nov 2009
Subscription Agreement
Foreign Collaboration Agreement
Automotive Technical Assistance Agreement
Substrate Supply Agreement
General Technical Assistance Agreement for Plant Performance Improvement
Next Phase of Collaboration
Giant Leap Towards Global Leadership
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Automotive Technology Agreements
Technology for Automotive Steel in CRM-1
Substrate from JFE
Technology to Manufacture Substrate at Vijaynagar
Project Consultancy to Build Modern CRM2
Benefits to JSWAccess to Fast Growing Auto MarketShort Learning CurveApplication EngineeringNew Product DevelopmentBenchmarking and Training of Personnel
Access To The Cutting Edge Technologies
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Safety Practices
Training
Talent Sharing
Maintenance Practices
Fuel Rate Reduction
Productivity Improvement
Standardization of Process
Environment Management
Benchmarking
Energy Efficiency
Yield Improvement
General Technical Assistance Agreements
Quality ImprovementOperational
Excellence
Higher
Productivity
Lower Cost of
Production
Short learning
Curve
Sustainable Business Operations
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Initial Subscription Amount: `̀ 4800 crores
Investment Structure
CP>= CP>= `̀ 1,365
32mn shares @ `̀ 1,500
Fully Convertible Debenture
Tranche I
1mn shares + 3 mn GDRsMin. proceeds of `̀ 600 cr
Tranche II
Tranche III
On maturity, 36mn shares @ `̀ 1,331
Up to 2mn shares on conversion of current o/s FCCBs into sharesMin. proceeds of `̀ 300 cr
JFE holding JFE holding 14.99%14.99%
JFE holding JFE holding 14.99%14.99%
Instrument Determination
Event
Trigger Event
* “CP” means Avg closing price in 2 consecutive weeks/10 days or closing price during 5 consecutive days
7 days prior to closing
18 Months
CP < CP < `̀ 1,365
CP>= CP>= `̀ 1,365 CP < CP < `̀ 1,365
Potential Equity Infusion `̀ 5700 crores
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FCD: TermsTenure: 18 monthsCompulsorily Convertible into equity shares on occurrence of the Trigger Event or maturityFurther, JFE has option to convert at any time @ ` 1500/ shareInterest of 4.5% pa payable in arrears on conversion dateNon-transferable and not listed
Tranche I -` 4,800 Cr
Equity Shares and GDRs issued at Higher of ` 1500 per share/GDR or 10% premium to SEBI floor price
GDR TermsNon Voting Rights, Non-transferable and not listedFungible into equity shares on conversion of Promoter Warrants
Tranche II -` 600 Cr
Equity shares issued on conversion of outstanding FCCBs into equity shares at higher of ` 1,500 per share or 10% premium to SEBI floor price
Tranche III -` 300 Cr
Equity Infusion In Tranche II & III At Premium To SEBI Price With A Floor Price Of ` 1,500
Terms of the Securities
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Right to nominate JFE nominee on the Board of JSW
Nominee Director
Right to maintain upto14.99% share or prevailing shareholding, if shareholding falls below 14.99%Price: Issuance Price /10% premium in case of issuance to promoters
Anti Dilution Right
Rights to JFE
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Jul 27 Aug 26 Sep 09Aug 31
Instrument Determination
Board Approval & Announcement
Closing – Settlement/Allotment
Shareholder s’ Approval
Process and Timeline
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JSW achieved a 10 out of 10 rating on following parameters
Conversion costs; YieldsExpanding capacityLocation in high growth marketsLabor cost
7.53
NLMK
Nucor
JSW Steel
Posco
Severstal
TATA/Corus
CSN
Usiminas
7.30
7.25
7.23
7.23
7.16
7.10
7.05
7.09
7.01
SAIL
Gerdau
Source: WSD – Ranking of top 35 “World Class” Steelmakers as on June 2010.
Global size and efficient operation
Leapfrogs to 2nd Position from 7th Earlier
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Blooming Mill Phase-I commissioned
Entering High - end Auto Forging Market
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‐0.6
1.92.5
3.1
3.94.2
4.6
‐3.2
0.00.6
1.3
2.1 2.32.62.5
4.04.7
5.1
6.06.3
6.8
‐4.0
‐2.0
0.0
2.0
4.0
6.0
8.0
Jan‐09 Apr‐09 Jul‐09 Oct‐09 Jan‐10 Apr‐10 Jul‐10
% Growth
World Adv. economies Emerging and developing economies
2009Actual Forecast Dates
Source: IMF
Global economic measures indicate continuing growth
Continuously Improving GDP Growth Forecasts for 2010
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While lead indicators are strong…
80
90
100
110
120
130
140
150
160
170
180
Jan‐09
Feb‐09
Mar‐09
Apr‐09
May‐09
Jun‐09
Jul‐0
9Au
g‐09
Sep‐09
Oct‐09
Nov‐09
Dec‐09
Jan‐10
Feb‐10
Mar‐10
Apr‐10
May‐10
CLI
IIP
Vehicle Sales
Non‐Food Credit
Index, Jan 2009 = 100
Source: CSO, Reuters, SIAMCLI: Composite Lead Index
95
100
105
110
115
120
125
Jan'09
Feb'09
Mar'09
Apr'09
May'09
Jun'09
Jul'09
Aug'09
Sep'09
Oct'09
Nov'09
Dec'09
Jan'10
Feb'10
Mar'10
Apr'10
May'10
Jun'10
Food
Overall
Fuel
Index, Jan 2009 = 100
Indian Economy
…WPI is an area of concern
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4.4
15.0
6.7
4.2
Import Export
‐34%
257%
129.0
133.4
160.4
151.4
Production Consumption
24%13%
Source: WSA
0
1
2
3
4
5
6
0
20
40
60
80
100
120
140
Jan' 08
Apr' 08
Jul' 08
Oct' 08
Jan' 09
Apr' 09
Jul' 09
Oct' 09
Jan' 10
Apr' 10
India (RHS)
World
World ex. China
ChinaJun' 10
Apr ‐Jun' 09 Apr ‐ Jun' 10
Steel Trends
Crude Steel Production (MnT) Chinese Steel (MnT)
19Source: SBB
300
400
500
600
700
800
900
Jan 09 Mar 09 May 09 Jul 09 Sep 09 Nov 09 Jan 10 Mar 10 May 10 Jul 10
USD
/ton
N.America domestic FOB US Midwest mill Europe import CIF S.European port China domestic Shanghai (incl. 17% vat)
678
671
752
781
426424
463
657
573
HRC Prices
Touched yearly high at the quarter beginning but softened later on…..
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0
100
200
300
400
500
600
0
50
100
150
200
250
Jun 09
Jul 09
Aug 09
Sep 09
Oct 09
Nov 09
Dec 09
Jan 10
Feb 10
Mar 10
Apr 1
0
May 10
Jun 10
Jul 10
USD
/ton
USD
/ton
Indian Iron Ore 63% Fe dry / China import CFR N.China port Australian Spot HCC FOB
Scrap / Shredded / Rotterdam export FOB (RHS) China Coke export FOB (RHS)
Iron Ore
Coke
Scrap
Coking Coal
177
124
448
333
237
211 495
465
Source: SBB, Deutsche Bank Research
…. Impact partially redeemed by reducing raw material prices
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1.5
0.7
2.7
0.6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Import Export
Apr ‐Jun' 09 Apr ‐ Jun' 10
75%
‐15%
Source: JPC
12.9 13.3 13.3
14.9
10.0
11.0
12.0
13.0
14.0
15.0
16.0
Finished Steel Production Apparent Steel Consumption
Apr ‐Jun' 09 Apr ‐ Jun' 10
3%
12%
Indian Steel Market: Demand continues to be strong
Production Vs. Consumption (MnT) Import Vs. Export (MnT)
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Q1'10, 1.376
Q1'11, 1.574
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
Crude Steel
YoY %
14%
Q1'10, 0.871
Q1'11,1.093
0.00
0.50
1.00
1.50
Rolled : Flat
YoY %
26%
Q1'10, 0.181
Q1'11, 0.309
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35
Rolled : Long
YoY %
71%
Production – Q1 FY 11
All Numbers are in Mn Tonnes
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Q1 '10, 0.154
Q1 '11, 0.225
0.00
0.05
0.10
0.15
0.20
0.25
Q1'10, 1.321
Q1'11, 1.191
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Total Sales
YoY %
‐10%Q1'10, 0.855
Q1'11, 0.859
0.00
0.20
0.40
0.60
0.80
1.00
Rolled : Flat
Q1 '10, 0.311
Q1 '11, 0.107
0.000
0.050
0.100
0.150
0.200
0.250
0.300
0.350
Semis
YoY %
‐66%
Q1 '10, 0.366
Q1 '11, 0.346
0.00
0.10
0.20
0.30
0.40
Value Added (CR/GI/PPGI)
YoY %
‐5%
Rolled : Long
YoY %
46%
All Numbers are in Mn Tonnes
Saleable Steel Sales – Q1 FY 11
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PerformanceFinancial
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Particulars Q1 FY 11 Q1 FY 10 Growth
Net Sales 4,647 3,894 19%
Op. EBITDA (excl. Fx Variance) 1,093 747 46%
Op. EBITDA Margin (excl. Fx Variance) 23.6% 19.1%
EBITDA 1,038 988 5%
EBITDA Margin 22.2% 25.2%
Less: Interest 214 221 ‐3%
Less: Depreciation 317 272 17%
Profit Before Tax 506 496 2%
Profit after Tax 350 340 3%
` Cr.
Financials – Q1 FY 11 (Standalone)
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` Cr.
988
(71)
(550)
87185
48
(333)
1038
EBITDA Q1'10 Volume Cost NSR Mix impact CER/Others FX Impact EBITDA Q1'11
EBITDA MOVEMENT – Q1 FY 11
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PRODUCTION (NT) Q1 FY 11 Q1 FY 10 Growth
Plate Mill 38,408 27,727 39%
Pipe Mill 12,033 5,432 120%
SALES (NT) Q1 FY 11 Q1 FY 10 Growth
Plate Mill 34,986 14,376 143%
Pipe Mill 12,927 4,308 200%
Particulars Q1 FY 11 Q1 FY 10
Turnover 42.59 17.97
EBITDA + Other Income 7.94 (13.74)
Profit After Tax (7.36) (19.92)
USD Mn
Operational & Financial Performance - USA
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Particulars Q1 FY 11 Q1 FY 10 Growth
Total Income 4,858 4,014 21%
EBITDA 1,082 928 17%
Less: Interest 273 298 ‐8%
Less :Depreciation 361 317 14%
Profit Before Tax 447 313 43%
Profit After Tax 295 234 26%
` Cr.
Consolidated Financials Q1 FY 11
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1414314606800
(484)
224
(77)
Net LT Debt as on Mar'10
New Loan Taken Repayments Fx Variance Movement in FD/MF
Net LT Debt as on Jun'10
` Cr.
Long term Debt Movement - Consolidated
Working Capital loan - ` 2,837 Crs.Cash and Cash equivalent - ` 926 Crs.
FD/Mutual Fund – ` 246 Crs.
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* Not Annualized
Financial Ratios
Particulars Q1 FY 11 Q1 FY 10
Op. EBITDA Margin (excl. Fx Variance) 23.6% 19.1%
PAT Margin 7.5% 8.7%
Diluted EPS (`) 18.12* 17.72*
ROCE 11.80% 13.72%
Particulars 30.06.2010 31.03.2010
Net L.T. Debt/ Equity (x) 1.02 1.07
Net L.T. Debt/ EBITDA (x) 2.31 2.36
Net L.T. Debt/ Equity – Consolidated (x) 1.41 1.49
Net L.T. Debt/ EBITDA – Consolidated (x) 3.19 3.38
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ProgressProject
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As on Mar 10 As on June 10
BENEFICIATION PLANT
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As on Mar 10 As on June 10
COKE OVEN
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As on June 10As on Mar 10
BLAST FURNACE
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As on Mar 10 As on June 10
SMS (Phase II)
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Q & A Session
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Certain statements in this report concerning our future growth prospects are forward looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward looking statements. The risk and uncertainties relating to these statements include, but are not limited to risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition within Steel industry including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixedprice, fixedtime frame contracts, our ability to commission mines within contemplated time and costs, our ability to raise the finance within time and cost client concentration, restrictions on immigration, our ability to manage our internal operations, reduced demand for steel, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which the Company has made strategic investments, withdrawal of fiscal/governmental incentives, impact of regulatory measures, political instability, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry. The company does not undertake to update any forward looking statements that may be made from time to time by or on behalf of the company.
Forward Looking and Cautionary Statement
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Thank you