Ambuja Cement

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Ambuja Cement
February 2005
2
Cement in IndiaA Cyclical Business of SupplyNot
Demand
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AsCement Growth Not a Challenge in India
Demand has been Growing At a CAGR of 8 over
last decade
4
Cement Demand(Apr-Dec)

• Mn. Tonnes Growth ()
• 2004 91.3 8
  2003 84.5
  4

December 2004 - 10.84 Mn. tonnes Decades
second highest demand
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Momentum of Growth to continue.
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Demand Drivers

• Housing New Start ups Negligible housing
  inventory rising property prices
• Hedge against Inflation - Property
• High Mortgage Penetration - Low Interest Rates
• Increased investments in Infrastructure
  

• Increased Construction will lead to
• higher cement demand

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Expected Cement Demand
mn tonnes

• 
  2004-05 2005-06 2006-07
• Base Domestic Demand 114 122
  132
• Growth - 7 8
• - 8 10
  11
• Expected Domestic Demand 122 132
  142
• Exports (Potential to be even higher) 4
  4 4
• Expected Cement Demand 126 136
  146

8
Demand set to outstrip Supply
9

• As
• Last Plant was set up in March 03
• No new supply expected till June 06

It Never happened in past
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Cement Production Capability
mn tonnes

• 
  2004-05 2005-06 2006-07
• Base Clinker Production 103 107
  111
• Increased Production due
• to improvements 4 4 4
• 107 111 115
• Clinker Export 6 6 6
• Clinker for Cement Grinding 101 105
  109
• Blending Ratio
  1.26 1.29 1.32
• Cement Production 127 135 144

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Structural change in Pricing Scenario
Result
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Local Prices
Rs / per Bag

• Jan 2005 Jan 2004
  June 2004
• Bombay 171 153
  168
• Delhi 131 112 137
• Kolkatta 178 155 175
• Ahmedabad 134 132 146
• Jaipur 136 108 147
• Hyderabad 117 122 130
• Chennai 155 159 160

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Global Prices
US (FOB)

• Cement Clinker
• 2003-04 25 19
• 2004-05 40 28

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• But
• Cement Industry
• Not without challenges

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Challenges

• Cement is energy intensive industry
• Coal, Power Oil constitute major costs
• Increasing cost of fuel
• Better realisation only in few markets

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• Growth in Profits for only those
• who can meet these Challenges

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Our Strategy

• Presence in the growing markets of North West
• Retail Focus Premium pricing
• Largest Exporter of cement 15 of Production
• 35 Cement transport by sea - Cheapest Mode
• And ... Lowest Cost Cement Producer

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Lowest Cost ProducerManaging the Cost Increases
well
Rs./ tonne

• FY 2004 FY 2003 Increase / (Decrease)
  ()
• Power 177 187 (5)
  
• Fuel 244 227 7
• Raw material 143 136 5
• Consumables 46 48 (4)
• Direct cost 610 598 2
• US 13.9 12.9

USD/INR Rs. 44
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Gujarat Ambuja Cements Limited(Consolidated
Income Statement)
Rs. Mn.

• 1H 2005 1H
  2004 Growth()
• Sales 14425 9764 48
• Operating Profit 4113 2262
  82
• Interest 455 485 (6)
• Depreciation 1204
  1002 20
• Profit Before Tax 2454
  1219 101
• Profit After Tax 2038 844
  141
• Minority Interest 112 58
  93
• Net Profit 1926
  786 145
• Net Operating Margin () 28 23 -

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A Comparative Analysis(Oct - Dec 2004)
Rs. Mn.

• Ultra Tech
  Grasim ACC GACL
• Production
• - Clinker 3.20 3.02 2.90
  3.10
• - Cement 3.36 3.32 4.17
  3.70
• Sales
• - Qty (mn tonnes) 4.15 3.33
  4.18 3.70
• - Value 6877
  6885 9553 7353
• Operating Profit 577 1087 1526
  1986
• Profit Before Tax (194) 504 741
  1162
• Operating Margin() 8 16 16
  27
• O/P per tonne (Rs.) 139 329 365
  537

Cement Results Includes Clinker Sale 0.8 mn
tonnes
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Our Score Card 1987-2004

• Parameters CAGR ()
• Capacity 20
• Sales 29
• Net Profit 35
• Networth 30
• Return to Shareholders 25
• Wtd. Avg. EBIDTA Margin 33
  

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New Initiatives
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ACIL

• A Joint Venture between GACL, AIG , GIC
  formed in February
  2000.

Current Ownership Structure
GACL
AIG, GIC
40
60
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ACIL Investments

• Shares of ACC (13.80) 9280
• Shares of ACEL (94.08) 4250
  13780

Rs. Mn.
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Proposed Investments By Holcim
Rs. Mn.

• Purchase of AIG/GIC Investments in ACIL
  8970
• Fresh Investments in ACIL
  
• Equity Capital 18340
• Preference Capital 8100 26440
• Total 35410

The Largest FDI in the Cement
Sector in India
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Proposed Utilisation
Rs. Mn.

• Purchase of AIG/GIC Investments in ACIL
  8970
• Open Offer
• ACC Shares (36.20) 25640
• ACEL Shares (5.92) 800 26440
• Total 35410

Result ACIL Shareholding in - ACC up to
50.01 - ACEL up to 100
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Structure after Equity Infusion
GACL
HOLCIM

33
67
ACIL
ACC 50.01
ACEL 100
Due to this Structure GACLs effective
shareholding in ACC goes up to 16.5 from 8.3
without any fresh investments by GACL.
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Benefits of the Partnership

• Holcim Investments in India through ACIL only
• Access to Holcims best practices in areas such
• as waste heat recovery, use of alternative
  fuels, human resources and Information
  technology
• Opening of new cement trading opportunities in
  Middle East and Indian Ocean

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Ambuja Growth Plans

• Plan to grow to 20 mn. tonnes in next 3 years
• By way of Productivity enhancement and
  Acquisitions
• Growth to be funded from free cash flows

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Ambuja Cement Most Profitable Cement Company
With Growth and Value
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Thank You