Ambuja Cement

1
Ambuja Cement
November 2005
2
Indian Economy

• On a Consistent growth path
• Impetus on Service Sector
• Changing Demography - A Growth Driver
• Moved from being an Agrarian Economy to Services
  Manufacturing Economy

3
Agrarian to a Service Economy
GDP
Constituent 1997 - 98 2005 - 06
Agriculture 40 22 Manufacturing
35 27 Services 25
51
()
4
Infrastructure Housing New Drivers of
Economic Growth
5
Cement - Proxy to Growth
6
Future Cement Scenario

• Indian economy expected to grow at - 7 to 8
• Infrastructure development at an inflection point
  
• Housing to be the main driver of cement growth
• Cement Growth expected to be over 9
• After a long gap demand would exceed supply

7
Cement Demand(Apr - Nov)

• Mn. Tonnes Growth ()
• 2005 - 06 89.7
  10
• 2004 - 05 81.8 8

Estimated for November 2005
8
Expected Cement Demand
Mn. Tonnes

• 
  2005-06 2006-07 2007-08
• Base Domestic Demand 123 133
  143
• Growth - 8 10 10 -
• - 9
  - - 13
• Expected Domestic Demand 133 143
  156
• Exports 4 4 4
• Expected Total Cement Demand 137
  147 160

9
Cement Production Capability
Mn. Tonnes

• 
  2005-06 2006-07 2007-08
• Base Clinker Production 109 113
  118
• Increased Production due
• to improvements/Expansions 4 5 6
• 
  113 118 124
• Clinker Export 6 6 6
• Clinker for Cement Grinding 107
  112 118
• Blending Ratio
  1.28 1.28 1.28
• Cement Production 137
  143 151

10
Demand set to outstrip Supply
11
Result A Structural change in Pricing Scenario.
12
. As

• No Major Cement Capacity expected in near future
• Reasonably Consolidated Industry

13
Fragmentation To Consolidation
Top 5 Groups
Top 5 Groups
26
65
Others
Others
74
35
2005
1995
14
Average Cement Prices- Domestic -
US / Per Tonne

• US Change
• 2005 - 06 45 13
• 2004 - 05 40 8

Cement Prices Net of Duties, Taxes and Freight
15
- International -
US / Per Tonne (FOB)

• 2005 - 06 2004
  - 05
• Cement 45 37
• Clinker 35 28

(FOB) - Free on Board
16
Ambuja Cement
1986 - 0.7 Mn. Tonnes Today - 14 Mn.
Tonnes
HP
Punjab
Predominant Player in West North
India
Rajasthan
Gujarat
Cement factories
Maharashtra
Sea terminals
Mn. tonnes
Western India 8.0 Northern
India 6.0 Total Capacity 14.0

17
Growth With A Sustainable Business Model
18
Our Business Model

• Owned Infrastructure
• Logistic Management
• Premium Brand - Only selling in Retail Markets
• Environment Friendly operations
• Social Corporate Citizen
• Low Cost Cement Producer

19
Infrastructure Logistic Management

• 200 MW of Captive Power Plants
• 100 captive power - Reliable cheap generation
• Large port handling Export of Cement Import of
  Coal
• 3 Cement receiving terminals
• 7 Owned Ships for transporting Cement by Sea
• 35 Cement transport by sea - Cheapest Mode
• Largest Exporter of Cement - 15 of Production

20
Premium Brand

• India - A bagged market
• Individual home builder - Key driver of demand

• Our focus
• Best quality cement
• Good packaging
• Strong distribution network
• Customer service

Ambuja Cement - Most preferred brand
- Fetching higher realisation
21
Environment Friendly Operations

• Use of surface miners - Blast free mining
• Restoration of mines - green spots water
  reservoirs
• Use of bio-gas, agro waste as alternate fuels
• Rose Garden Cement Plants - Co-exist
• Many International Awards in Environment
  Management
• Global Standards for Environmental Measures
• ISO 14001 for Environment Management System

22

Corporate Social Responsibility

• Raising Environment Awareness
• Building up of check dams, salinity ingress
  checks
• Water Harvesting Ecology Pits - Visit of
  Siberian Cranes
• Programs for rural healthcare and women
  development
• Asian CSR Awards 2005 for Environmental
  Excellence among 94 companies participating from
  16 countries

23
Direct Cost
Rs./ tonne

• FY 2005
• Power 202
• Fuel 298
• Raw material 172
• Consumables 49
• Direct cost 721
• US 16.0

USD/INR Rs. 45
24
Operating Margin
F.Y Operating Margin ()
2005 30
2004 29 2003
29
Highest Operating Margins in the Indian Cement
Industry
25
Gujarat Ambuja Cements Limited(Consolidated
Income Statement)
Rs. Mn.

• FY2005 FY 2004 Growth ()
• Sales 30855 24150 28
• Operating Profit 9278 7098 31
• Interest 902 900 -
• Depreciation 2195 2082
  6
• Profit Before Tax 6181 4116
  50
• Prior Period Adjs (credit) - 425
  -
• Tax 831
  688 20
• Profit After Tax 5350 3853 39
• Minority Interest 169 229 (26)
• Net Profit 5181 3624 43
• Operating Margin 30 29 --

26
Gujarat Ambuja Cements Limited (Consolidated
Balance Sheet)
Rs. Mn.

• FY2005 FY2004
• Sources of Funds
• Shareholders Funds 24873 17314
• Minority Interest 79 6375
• Deferred Tax 3811 3209
• Net Debt
  8447 11845
• Total 37210 38743
• Application of Funds
• Gross Fixed Assets 39210
  44434
• Less Depreciation 14792 16005
• Net Fixed Assets 24418 28429
• Investments 10835 9637
• Net Current Assets 1957 677
• Total 37210 38743

27
Ratios

• FY 2005 FY 2004
• Interest Cover 9.4 7.5
• Operating Margin 30 29
• Net Debt / EBIDTA 1.1 2.2
• Net Debt / Networth 0.37 0.61
• ROCE 17 12
• RONW 21 18

28
Our Score Card (1987 - 2005)

• Parameters CAGR ()
• Capacity 18
• Sales 29
• Net Profit 36
• Networth 30
• Return to Shareholders 29
• Wtd. Avg. EBIDTA Margin 33
  

29
Our First Quarter Financials(June - Sept 2005)
Rs. Mn.

• 1Q 2006 1Q 2005
• Sales 6774 7066
• Operating Profit 1714 1894
• Other Income 8 234
• Interest 220 229
• Depreciation 495
  607
• Share Profit of Associates 339 -
• Profit Before Tax 1346
  1292
• Tax 265
  204
• Minority Interest - 79
  
• Profit After Tax 1081
  1009

The Results are not comparable as ACEL during the
current quarter has been considered as an
associate as compared to a subsidiary company in
the previous quarter.
30
Our Shareholders
Current Market Capitalization - Over US 2 Bln.
Others
Management
17
24
Domestic Pension
FII's (Incl. GDR)
Mutual Funds
41
18
One of the most traded shares in India
31
Payout Ratio
Rs. Mln.

• Year Equity PAT Dividend Payout
• Capital () Ratio ()
• 2005 27038 46829 90
  46
• 2004 17940 33679 80 47
• 2003 15530 22209 70 55

On Expanded Capital
A Policy of 40 - 60 Payout
32
Partnership with Holcim
33
Structure
Before
Current
AIG/GIC

GACL
GACL
HOLCIM
33
67
60
40
ACIL
ACIL
ACC 34.7
ACC 13.8
ACEL 97.0
ACEL 94.6
Due to this Structure GACLs effective
shareholding in ACC goes up to 11.5 from 8.3
without any fresh investments by GACL.
34
Salient Features 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

35
Ambuja Growth Plans

• Plan to increase capacity by 3 to 4 mn. tonnes in
  next 2 - 3 years by way of acquisition,
  upgradation brown field expansion.
• Growth to be funded from free cash flows

36
Thank You