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Tata Steel GroupTata Steel Group
C lid t d Fi i l P fConsolidated Financial Performance
Year Ended March 31, 2009
Analyst Meet – MumbaiJune 26 , 2009
1
Agenda
Environment & Consolidated HighlightsEnvironment & Consolidated Highlights
Performance of European Operations
Performance of Asian Operations
S G fTata Steel Group Financial Performance
2
E i tEnvironment
&&
Consolidated HighlightsConsolidated Highlights
3
Global Steel Industry
Unprecedented economic crisis globally
Severe contraction in demand since October 2008
Significant production cuts especially in developed economies
Continued de-stocking phenomenon across all geographies
Raw material prices are coming down compared to 2008
China and India likely to demonstrate relatively stronger growth
World stimulus package holds the key to sustainable recovery of global
economy
Tata Steel Group has responded with great speed with several initiatives
to counter the slowdown
4
Consolidated HighlightsDeliveries (Mt) Turnover US$ Mn
28.5 31.7 28,962
25,857
( )
FY'09 FY'08 FY'09 FY'08
EBITDA PAT *3,636 3,595 2,428
973
5
FY'09 FY'08
Conversion Rate USDINR - 50.87 uniformly applied for all comparable periods ; * PAT after Minority Interest and Share of Associates
FY'09 FY'08
Managing the Crisis – Key Highlights
India & S.E. AsiaHigher sales volume in India – Increase of 18% in H2FY’09 over H1 FY’09
Manufacturing costs – Decline by US$ 47/t in H2FY’09 vs. H1 FY’09
Focus on Performance Improvement in India yields US$ 167 Mn in FY’09
P d ti t i Th il d i H2 FY’09 H1 FY’09 49%Production cuts in Thailand in H2 FY’09 vs. H1 FY’09 - 49%
Capex Review to prioritize value creating Capex with accelerated benefits
EEurope
‘Weathering the Storm’ initiative yields – US$ 1,018 Mn in H2 FY’09
‘Fit F F t ’ i iti ti ill l d t l h t i EBITDA US$ 286 M‘Fit For Future’ initiative will lead to annual enhancement in EBITDA US$ 286 Mn
6
Recent DevelopmentsMozambique Project of RiversdaleMozambique Project of Riversdale
Resources declared 4 Bn Mt – one of the largest resources of coal globallyTS enhances its shareholding to ~15% in the listed entity, effective holding 44.75%
IJmuiden Power PlantMOU with Tata Power signed for a 51:49 JVWill create a sustainable model for Tata Steel’s Netherland operationsp
Tata RyersonAcquiring 50% stake held by Ryerson Will id f ll b fit t T t St l l d lWill provide full range benefits to Tata Steel on enlarged volumes
Teeside Cast ProductsConsortium members renege on the off take agreementArbitration process has commenced
7
Performance ofPerformance of
European Operations
8
Environment
Credit crisis leading to Economic crisis in Europe
Contraction in auto, yellow goods and construction sectors resulting in demand
collapse in Europe for steel
Industry responded by significant production cuts to avoid over stockingIndustry responded by significant production cuts to avoid over stocking
Continued de-stocking in progress . Absolute level of stocks decline, Inventory
Shipment ratio do not fall at the same pace
Significant erosion of capital by banks – leading to bank nationalizations
Government stimulus packages announced to ensure renewal of industrial
activity and credit flow
9
activity and credit flow
Operating Highlights - TS Europe
FY 2009 FY 2008
Liquid steel production (mt) 16 2 20 3Liquid steel production (mt) 16.2 20.3
Steel deliveries (mt) 19.7 22.8
On time in full deliveries (OTIF %) 85 84
E ti (GJ/t) 18 8 17 6Energy consumption (GJ/t) 18.8 17.6
Environment CO2 emissions (t/tls) 1.9 1.8
Safety – Lost time injuries (LTIF – employees & contractors) 1.8 2.4
10
Key Highlights - TS Europe
EBITDA (US$ Mn) EBITDA Margin (% )
1,751 1,788 8.1%
9.1%
FY'09 FY'08 FY'09 FY'08
11Conversion Rate USDINR - 50.87 uniformly applied for all comparable periods
Response to the Crisis
Fl hi I iti tiFlagship Initiatives:
Weathering the Storm
Cash savings through cost avoidanceCash savings through cost avoidance
Optimizing production capacity in a cost effective manner
Unlocking value through favorable hedging contracts and surplus carbon creditsUnlocking value through favorable hedging contracts and surplus carbon credits
Fit for Future
To create a more robust & sustainable business in the futureTo create a more robust & sustainable business in the future
Restructuring of facilities through consolidation
Right sizing of manpowerRight sizing of manpower
Fit for Future II
Restructuring of Corus Tubes business to make it competitive
12
g p
To align operating costs to current and future activity levels
‘Weathering the Storm’ – Cash Savings
US$ Mn
Annualized temporary fixed cost reduction
Temporary Fixed Cost Reduction Break down 1,234
US$ Mn
Other , 10%
yin FY’10
625 Manufacturing, 38%
One off Items, 13%
393 Logistics , 4%
Q3 FY'09 Q4 FY'09 FY'10 E
Employment , 35%
13Conversion Rate : GBPUSD - 1.4300
Operating Performance - TS Europe FY’09 Q4 FY’09
Mn T
5.25.7
16.219.720.3
22.8
2.73.5
Production DeliveriesProduction Deliveries
Key Highlights in FY’09Q4 FY’09 Q4 FY’08FY’09 FY’08
Key Highlights in FY 09Cost reduction of US$ 167/t of liquid steel output in H2 FY’09 achieved through ‘Weathering the Storm’
Finished goods inventory reduced from 3 4 Mn tonnes in Mar’08 to 2 58 Mn tonnes in Mar’09Finished goods inventory reduced from 3.4 Mn tonnes in Mar 08 to 2.58 Mn tonnes in Mar 09
Major capital schemes –
Replacement of the control system for hot rolling mill at Ijmuiden implemented.
14
BOS Gas Recovery Project in Port Talbot on track
C1 Program’s IT implementation project , rolled out at major sites
* Europe - Liquid Steel Production
Operating bridge – TS EuropeUS$ Mn
Working Capital Release of US$1022 Mn in Q.E March’09
£270m£270m
15Conversion Rate : USDINR - 50.87
Teeside Cast Products - Update
On 7th April, consortium members served notice of termination of the off take
agreementagreement
Arbitration process initiated
90 days consultation process with the unions initiated, to end on 6th August’09
TCP has been EBITDA neutral to the Company
16
Proposed Power Plant at IJmuiden
MOU signed with Tata Power for setting up 525 MW power plant at IJmuiden on Build,
Own and Operate (BOO) basis
Th l t ill id Ij id ith l t f th bThe new plant will provide Ijmuiden with a secure, long- term source of energy, thereby
strengthening its competitive position
Long term production gas supply agreement and a power purchase agreement withLong term production gas supply agreement and a power purchase agreement with
Tata Power will replace the part of the existing power supply arrangement
Equity holding of the Joint Venture: Tata Power : 51% & Tata Steel : 49%Equity holding of the Joint Venture: Tata Power : 51% & Tata Steel : 49%
Benefit of increased Carbon credits expected
Commissioning expected around 2013Commissioning expected around 2013
17
‘Fit For Future’ II
Restructuring of Corus Tubes Business
Focus on Precision and Automotive activities in the Oosterhout and Zwijndrecht
sites; resulting in closure of the Arnhem site and strech mill in Oosterhout
Closure of cold drawn tube operation in Corby
Reduction of shift activity levels at the Saw mills in Hartlepool
Reduction in employment levels across units to bring about structural improvement
in the cost base
Aligning operating costs to current and future activity levels at Long Products Division
Reduction in manpower, mainly at Rotherham & Scunthorpe
Review of the overhead structure with focus on optimisation of support services
18
Performance ofPerformance of
Asian Operations
19
Environment
S CSustained monetary easing by Central Bank in India to boost private
consumption and corporate investment
Two Stimulus packages introduced by Govt. to boost infrastructure spending
Landed cost of imported materials from CIS at a discount to domestic pricesLanded cost of imported materials from CIS at a discount to domestic prices
Construction & Auto sectors poised for recovery
Indian Industrial Production (IIP) showing positive trend
Singapore Government focusing on stimulating industrial activity through g p g g y g
government sponsored projects. Steel consumption showing revival in Vietnam
Political turbulence in Thailand continues to affect the economy
20
Political turbulence in Thailand continues to affect the economy
Operating Highlights - TS India
FY 2009 FY 2008
Crude steel production (mt) 5 7 5 0Crude steel production (mt) 5.7 5.0
Steel deliveries (mt) 5.2 4.8
On time in full deliveries (OTIF %) 80 77
S ifi E ti (G l/t ) 6 6 6 7Specific Energy consumption (Gcal/tss) 6.6 6.7
Environment CO2 emissions (t/tcs) 2.1 2.1
Safety – Lost time injuries (LTIF – employees & contractors) 0.8 1.7
21
Key Highlights - TS India
EBITDA (US$ Mn) EBITDA Margin (% )
1,856
1,623 39%43%
FY'09 FY'08 FY'09 FY'08
22Conversion Rate : USDINR - 50.87; FY’08 figures are based on Proforma numbers
Response to the Crisis– India & S.E. AsiaTata Steel India
Cost reduction of US$ 47/t through performance improvement measures undertaken to maximize margins
Increase in turnover (US$ 1,402 Mn) of branded products to gain premium and market shareIncrease in turnover (US$ 1,402 Mn) of branded products to gain premium and market share
Nat Steel AsiaMaximize plant capacity with cheaper domestic scrap and minimize rebar imports
Reduced working capital by around US$ 150 Mn in 6 months and preserving cash by postponing capital expenditure. No long term debt liabilities on its Balance Sheet
Continue to reduce operating & overhead costs & Optimize product mix by selling higher downstream tonnagesdownstream tonnages
Improvement initiatives to lead to yield improvement and reduction in power consumption
Tata Steel ThailandSpecial Wire rod sales to be increased to export markets for higher realizations
Enhance Cash conservation and liquidity management by introducing Credit Insurance backed Securitization scheme
23
All old stocks of scrap (prior to September 2008) have been liquidated
Operating Performance - TS IndiaFY’09 Q4 FY’09
Mn Tonnes
1.61.8
1.3 1.3
5.4 5.24.9 4.8
4
5
6
1
2
3
Production Deliveries
0
Production Deliveries
Q4 FY’09 Q4 FY’08FY’09 FY’08
Best ever Hot metal (6.3 million tonnes), Crude steel (5.7 million tonnes) and
Saleable steel (5.4 million tonnes) production
Newly commissioned Blast Furnace (‘H’ furnace) in its very first year of operation
surpassed its yearly target and is now running at 2.9 mtpa which is 117% of the
rated capacity
24* India- Saleable Steel Production
rated capacity
Operating Performance - S.E Asia Mn Tonnes
Nat Steel Asia
0.4 0.4
0.6 0.7
1.5
2.4
1.6
2.5
Production DeliveriesProduction Deliveries
Tata Steel ThailandFY’09 FY’08 Q4 FY’09 Q4 FY’08
0.36
0.2
0.38 0.4
0.250.300.350.400.45
1.1 1.1 1.4 1.4
0.000.050.100.150.20
25
Production DeliveriesProduction Deliveries
Q4 FY’09 Q4 FY’08FY’09 FY’08
* Nat Steel Asia & Tata Steel Thailand - Finished Steel Production
Operating Profit Bridge – TS IndiaUS $ MUS $ Mn
678 ( 600)
1,459 1,665
678
34 136 (30) (13)
FY'08 NR Cost Vol / Mix Impr Savings Other Inc / Exps
Exch Loss FY'09
26Conversion Rate : USDINR - 50.87
Savings Through Improvement Initiatives - IndiaUS$ Mn Break up of Savings achieved in FY’09 through
31 09
US$ Mn p g gimprovement initiatives:
167.0931.1
Cost reduction of US$ 47/tof Saleable Steel achieved in H2FY’09 against a target of 31.09
101.63
77.6
17 9
40.4
g gUS$ 39/t
136.00
8.6587.08
*
17.9
Aspire Projects TOC Marketing Initiatives Synergy
87.08 92.98 Examples of Initiatives resulting in Savings in FY’09
Increase in Caster utilization Converter Life and
FY 2007 FY 2008 FY 2009
Increase in Caster utilization, Converter Life and
lower ferro alloys consumption – US$ 25.5 Mn
Increased domestic coke production substituting
27
Process Improvement Synergy
Conversion Rate : USDINR - 50.87 * Synergy Benefit incremental over previous year
imported coke requirement – US$ 24.2 Mn
Performance Improvement Plan FY’10 - IndiaNew Product DevelopmentKey Initiatives New Product Development
HS 600 HR for cold formed applications
Key Initiatives
Increase output from larger efficient Blast
(Wheels)
Coated skin panels for Nissan and Toyota
Furnaces
Reduction in coke rate and increase in coal
IFHS 340 with high r-bar for Hyundai and
Maruti through Batch Annealing process
Achieved world benchmark in billet quality
injection rate.
Special drive to increase sales to Govt
projects and Railways Achieved world benchmark in billet quality
with zero complaints on rhomboidity &
scrappiness
projects and Railways
Launch of GP Brand (Galvano)
Wider coverage of Supply Chain Solution asDevelop plasma coated Rebar
Develop air cooled, corrosion resistant
Rebars
Wider coverage of Supply Chain Solution as
per the ‘Theory of Constraint’
Export of billets to South East Asian countries
28
Rebars
Recent Developments
Mozambique Project
90% increase in inferred reserves to 4.0 Bn
Tata Ryerson
Tata Steel set to acquire entire equity stake
tonnes in Benga Coal Project
Govt of Mozambique has approved the mining
(50%) of Tata Ryerson Ltd held by Ryerson
Plans for gradual development of the
contract
Initial run of mine (ROM) development at 5.3
company into a full fledged material
management service company
mtpa, increasing subsequently to 10 mtpa and
ultimately to 20 mtpa
In the last five years, Revenues, EBTIDA
and PBT grew at CAGR of 40%, 21% and
Construction of rail line between Tete and Beira is
underway and expected to be completed by 2010
25% respectively.
Company has increased its stake in the parent
29
Company has increased its stake in the parent,
Riversdale Mining Ltd to ~15%
Tata Steel GroupTata Steel Group
Financial Performance
30
Consolidated Financial Performance –Apr- Mar FY’09US $ Mn
T t TS NSA TSTH T t St lTata Steel
TS Europe
NSA TSTH Tata Steel Group(*)
Deliveries (mt ) 5.23 19.7 2.4 1.1 28.5( )
Turnover 4,780 21,539 2,648 780 28,962
EBITDA – Reported 1,856 1,751 55 29 3,636
Underlying 1 856 2 228 58 89 4 212– Underlying 1,856 2,228 58 89 4,212
EBITDA margin (%) 38.8 8.1 2.1 3.7 12.6
PBT – Reported 1,438 (36) (33) 3 1326
U d l i 1 438 1 246 (30) 63 2 707– Underlying 1,438 1,246 (30) 63 2,707
PBT margin (%) *** 30 (5.8) (1.1) 8.1 9.4
PAT** - Reported 1,023 27 (46) 2 973
- Underlying 1023 1,309 (43) 62 2,354
One off items – Loss / (Gains)
- 1,282 3 60 1,381
$
31(*) Includes other JVs, Subsidiaries & share of profit of Associates of the Tata Steel Group
(**) Profit after taxes, MI and Share of Associates ; (***) PBT Margin is calculated on underlying PBT ; Conversion Rate : USDINR - 50.87
Diluted EPS (US$) 1.16
Balance SheetUS$ MnUS$ Mn
As at 31st Mar'09
As at 31st Mar'08
Assets
Reflects lower sales in TS Europe in the fourth quarter
NRV Provisions in TS EuropeAssets
Cash 1,209 832
Receivables 2,562 3,676
I t 4 260 4 534
NRV Provisions in TS Europe
Inventory 4,260 4,534
Other Assets 6,969 7,284
Net Fixed Assets 8,906 8,250
Reflects reduction in pension fund assets of TS Europe . Revaluation of foreign currency hedges show an increase in TSL India
Total Assets 23,905 24,575
Liabilities
Creditors 4,540 5,182 Reflects less purchase of raw materials S
Capital expansion in Indian and foreign subsidiaries
, ,
Interest Bearing Liabilities 11,775 10,542
Provisions& Other Liabilities 1,670 1,966
17 985 17 690
Net Increase in Borrowings & Revaluation Impact in ECB loans in TSL India
in TS Europe due to production cuts
32
Total Liabilities 17,985 17,690
Net Assets 5,920 6,885
Conversion Rate : USDINR - 50.87
TSL India
Reconciliation between Underlying & Reported EarningsUS$ Mn
Apr – Mar FY’09
EBITDA PBT PATFY
2009FY
2008FY
2009FY
2008FY
2009FY
2008
Apr – Mar FY 09
2009 2008 2009 2008 2009 2008
Numbers as Reported 3,636 3,595 1,326 3,218 973 2,428
Add:Add:Exchange (Gains)/Loss , Actuarial Gains & Others - - - (1,245) - (1,245)
Inventory Write Down 576 576 576Inventory Write Down 576 - 576 - 576 -
Restructuring, Disposal , Accelerated Depreciation / Impairment Costs - - 805 - 805 -
Underlying Earnings 4,212 3,595 2,707 1,973 2,354 1,183
33Conversion Rate USDINR - 50.87 uniformly applied for all comparable periods
Consolidated Inventory Write Downs
US$ MUS$ Mn477 Total Inventory Write
Downs in FY’09 –
US$ 576 Mn
60 34
3 23 2
TS Europe TS Thailand Tata Metaliks NatSteel Holdings Others
Steel prices have corrected across the globe, whereas certain markets have
additionally been impacted because of the sharp fall in demand.
This has resulted in significant inventory write downs across geographies
34
This has resulted in significant inventory write downs across geographies.
Conversion Rate : USDINR - 50.87
Balance Sheet – Net Worth AnalysisUS$ Mn
35Conversion Rate : USDINR - 50.87
Net Debt / EBITDA Interest Cover
Consolidated Financial Ratios
2.72 2.64 4.323.46
ROIC (%) – Pre Tax – (Annualised) Diluted EPS ( $ )
Mar '09 Mar '08 Mar '09 Mar '08
203.20
20 19
1.16
Mar '09 Mar '08 Mar '09 Mar '08
36
Mar 09 Mar 08
Conversion Rate : USDINR - 50.87 uniformly applied for all comparable periods
a 09 a 08
Consolidated Free Cash FlowUS$ MnUS$ Mn
37Conversion Rate : USDINR - 50.87
Working Capital ManagementTata Steel India Tata Steel Europe
US$ MnTata Steel India Tata Steel Europe
4,025
4,705 5,345
4,545
3,457 4,881 4,463 5.00
6.00
7.00
8.00
4,000
5,000
6,000
0.82
573649
835
1,086
766 0.80
1.00
800
1,000
3.44 2.99 3.17 2.98
2.58
3,730 ,
2,991 2,526
1 00
2.00
3.00
4.00
5.00
1,000
2,000
3,000
0.38 0.41 0.47 0.50
573
120 183 213
124 140 0.20
0.40
0.60
200
400
600
Nat Steel Asia Tata Steel Thailand
0.00
1.00
0
Mar'08 Jun'08 Sep'08 Dec'08 Mar'090.000
Mar'08 Jun'08 Sep'08 Dec'08 Mar'09
272
417
330
262314 0.40
0.50
0.60
300
400
500
0.11 201
285
160 0 10
0.12
0.14
0.16
200
250
300
0.23 0.19
0.28 0.29 0.26
233 262
143
245
189 203
0.10
0.20
0.30
100
200
300
0.06
0.08 0.07
0.04
134 139 160
67
87 60
27 16 0 02
0.04
0.06
0.08
0.10
50
100
150
38Inventory Receivables Finished Inventory in Mn TonnesAvg USDINR : 45.45
0.000
Mar'08 Jun'08 Sep'08 Dec'08 Mar'09
67
0.00
0.02
0
Mar'08 Jun'08 Sep'08 Dec'08 Mar'09
Pensions – TS EuropeBSPS Asset Mix US$ MnCombined Surplus of all TS Europe Pension Funds
68% 65%51%
2% 5% 1%$Combined Surplus of all TS Europe Pension Funds
US$ Mn
1,908
25% 26%42%
5% 5%
6%
879
March'09 March'08 March'07Equities Property Bonds Cash
879
337
531 Tri-ennial valuation completed
Shift made from investment in volatile market assets to fixed income bonds as part of de-risking strategy337
Mar'09 Dec'08 Mar'08 Mar'07
to fixed income bonds as part of de risking strategy
Closure of defined benefit schemes for new entrants and fixing contribution @12% for old members for 3 years, accepted by trustees
39
Mar 09 Dec 08 Mar 08 Mar 07
CESPS merged into BSPS w.e.f. 1-4-2009
Conversion Rate : GBPUSD - 1.4300
Capital Initiatives
Covenant Reset Consortium bankers of TS Europe’s non recourse debt voted
unanimously to relax the earnings related covenants
Raising of Finances
Rupee Bond – US$ 423 Mn; Tenure 10 years
Rupee bank loans – US$ 560 Mn; Tenure 6-10 years
Bank syndication for financing of Brownfield expansionBank syndication for financing of Brownfield expansion
near completion
Prepayment of Debt Prepayment of SFA Facility Debt in Sep’08 – US$ 421 Mn
Term debt of Natsteel repaid
40
Covenant Reset - Senior Facilities Agreement - TSUK
Lenders under the SFA to TSUKLenders under the SFA to TSUK
Banks Loan Outstanding Voting%(£ Bn)
Mandated Lead Arrangers 1.01 30.5%
Indian Banks 0.93 28.2%
(£ Bn)
Indian Banks 0.93 28.2%
Other Banks 1.08 32.6%
Non Banks / Funds 0.28 8.7%
TOTAL 3.31
Total No. of Lenders - 70
U i t f d d t bt i d
41
Unanimous consent for proposed amendments obtained
Covenant Reset - Senior Facilities Agreement - TSUK
Net Leverage (Indexed to 200)
Interest Cover (Indexed to 400)
42
Gross Debt Movement & Net Debt Position
43
* Cash and cash equivalents includes current investments
Gross Term Debt Repayment ObligationUS$ MUS$ Mn
Company will prepay debt
of GBP 200 Mn in1 153
589
of ~ GBP 200 Mn in
TS Europe
No scheduled repayment of
1,153
564284
No scheduled repayment of
non recourse debt in FY’10
due to prepayment
284
284FY'10 FY'11
Tata Steel Europe Tata Steel India
p p y
Debt in TSL India of US$ 216
Mn prepaid in the month of Tata Steel Europe Tata Steel India p p
May’09. FY’10 number is net
of prepayment
44Conversion Rate : USDINR – 50.87
Liquidity PositionUS $ MnUS $ Mn
3,509
933
1,331
1 917
2,712
746 548
933 1,9171,704
1,171 1,156 1,779
2,178
Sep'08 Dec'08 Mar'09 20th Jun'09
Cash & Cash Equivalents Undrawn lines
45(*) Excludes other JVs, Subsidiaries & share of profit of Associates of the Tata Steel Group
Conversion Rate : USDINR - 50.87
Thank You
46