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1
Hindalco Industries Limited
Performance Review Performance Review Consolidated 2007Consolidated 2007--0808
Presentation to the InvestorsPresentation to the Investors2020thth June’08June’08
2
The Big Picture - Backdrop & Highlights
Consolidated Hindalco – An Overview
Business Performance – Standalone Hindalco
3
Hindalco: Impressive GrowthHindalco: Impressive Growth
Sales $Bn 0.47 14.8
EBIDTA $Bn 0.25 1.8
PAT $Bn 0.15 0.6
Capital employed $ Bn 1.00 14.1
Business Segments 1 2
Countries 1 13
Plants 2 46
FY 00 FY 08
64%
Spread
Across 5
continents
CAGR
33%
46%
22%
4
Hindalco Growth Path 2000Hindalco Growth Path 2000--20082008
2006
Majority stakein Indalthrough
largest all-cash
acquisition inIndia
2000 2001 2003 2004 2005 20072002
Increase stakein Utkal from20% to 55%.
Further increased to 100% in 2007.
Acquisition ofNifty & Mt.
GordonCopper Mines
Copperbusiness
acquisitionand expansion
to 250,000 tpa
AluminiumExpansion atRenukoot to342,000 tpa,Hirakud to 65,000 tpa
Doubling ofcopper
capacity to500,000 tpa
Acquisition ofNovelis
JV agreementsigned withAlmex foraerospace
alloys
HINDALCO – ALMEX AEROSPACEHINDALCO – ALMEX AEROSPACE
Acquisition
Expansion
Others
Doubling ofHirakudSmelter
capacity to 143,000 tpa
Listing of Aditya Birla Minerals
Ltd. on Australia Stock Exchange
in May 2006raising AUD 299
million
AluminaExpansion at
Muri
2008
5
A Multinational Company with over 33,000 employees with 15 Nationalities
Hindalco: Global Non Ferrous Metals Hindalco: Global Non Ferrous Metals CompanyCompany
Copper
India: One of the largest single location Smelters with integrated port facilities located at Dahej, Gujarat.
Australia: In 2005, Hindalco acquired and put into operation copper mines at Nifty and Mt. Gordon. The Australian subsidiary, ABML is the first Indian Company to be listed on the ASX.
Aluminium
India: India's largest aluminium producer having low cost upstream operations with power / coal backup, and strategically located downstream units close to the markets.Pursuing several exciting upstream projects.
Novelis: In May 2007, Hindalco completed the acquisition of Novelis - an acquisition so significant, it still engages headline writers. Novelis has manufacturing presence in 4 continents and has marketing presence worldwide.
3 years agoA
BluechipIndian
Company
NowA
KeyGlobalPlayer
6
Consolidated Hindalco: DimensionsConsolidated Hindalco: Dimensions
Subsidiaries
Associates
Joint Ventures
18
01
02
57
06
02
Number Of Entities
FY 07 FY 08
7
46 Operations in 13 countries46 Operations in 13 countries
Locations
Rolled Products
Recycling
Regional Office
Executive OfficeSales Center
Research and Development
Coke
Power
Primary
BauxiteAlumina
Copper MinesCopper Smelter
Extrusion
Wheels
RENUKOOT (U.P)
USA
EUROPE
ASIA
AUSTRALIA
CANADA
S. AMERICA
8
Consolidating position in two of the fastest Consolidating position in two of the fastest growing metals in the worldgrowing metals in the world
-
2.50
5.00
7.50
10.00
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Tin Lead Crude Steel Zinc Nickel Copper Aluminium
Gro
wth
Mul
tipl
e
TinTin
LeadLeadSteelSteel
ZincZinc
NickelNickel
AluminiumAluminium
CopperCopper
9
Global Portfolio:FY07 VS FY08 Operational Global Portfolio:FY07 VS FY08 Operational PerformancePerformance
Volume Growth in Volume Growth in Volume Growth inAluminium Metal Aluminium FRP Aluminium Extrn.
31% 1429% 13%
Volume Growth in Volume Growth in Volume Growth inCopper Cathodes Copper Concentrate CC Rods
12% 74% 28%
Higher Production Volumes
10
Consolidated Financial HighlightsConsolidated Financial Highlights(Rs. Crores)
ResultsFY
2006-07FY
2007-08
Net Sales 19,316 60,013
EBITDA 4,840 7,291
EBIT 3,975 4,835 Profit before Tax 3,662 2,986
Net Profit 2,686 2,387 Capital Employed 23,285 56,266
Net Worth 12,814 17,346 4.32.9
14.15.4
0.60.6
0.70.8
1.20.9
1.81.1
14.84.2
FY 2007-08
FY 2006-07
(Bn US$)
11
Towards Sustainable Predictable GrowthTowards Sustainable Predictable Growth
•India centric Operations•Globally cost Competitive due to secured key inputs•Presence in upstream predominantly commodity segment
•Global scale of Operations•High Value added Products•Marquee Customer base•Multi location, Proximity to Customers•Advanced Technology
2007
2015
De-risked Operations owing to • Presence in multiple geographies• Costs and revenues in different
currencies• Presence across the value chain
Hindalco Cost Advantage & NovelisTechnology & customer base, offersEnormous growth potential especiallyIn emerging markets.
Recycled aluminium an importantgrowth segment going forward with
Rising power costs and scarcity of Raw material.Growth in both primary as well asrecycled aluminium segment
Sustainable Future
12
NovelisNovelis: Significant EBITDA & Free cash : Significant EBITDA & Free cash Flow improvementFlow improvement
Driven By……..
o Reduced price ceiling exposure
o Product Mix & Price Gains
o Volume improvements
o WC management
FY07 FY08 Change
NormalisedEBITDA ($Mn)
303 491 62%
Free cash Flows improved by $ 164 Mn
13
Hindalco Standalone OverviewHindalco Standalone Overview
14
Adverse Global Macro economic factorsAdverse Global Macro economic factorsBackdrop : FY08, a Challenging yearBackdrop : FY08, a Challenging year
46.37
39.82
45.47
36
38
40
42
44
46
48
Q1FY07
Q2FYT07
Q3FY07
Q4FY07
Q1FY08
Q2FY08
Q3FY08
Q4FY08
Sharp appreciation of INR Vs USD
Avg FY 08 - 40.5
Avg FY 07 - 45.5
11%
2000
2100
2200
2300
2400
2500
2600
2700
2800
2900
3000
3100
AprilMayJu
ne July
Aug
Sept Oct No
vDe
cJa
nFe
bMar
ch
FY07 FY08
Average Al LME lower than last year
FY 07 Average- US$2,664
FY08 Average- US$2,623
FY 08
FY 07
US$/Mt
15
Adversities On Domestic Front Too…… Adversities On Domestic Front Too……
• Reduced Import duty differential
o Aluminium Customs duty down from 8.08% to 5.72%
• Annual Impact- Rs.109 Cr
Aluminium import duty
5.7%10.6%
8.1%
33.0% 31.0%28.0%
19.0%15.0%
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08
Copper Duty Differential
3.1%
11.3%18.8%20.0%
30.0%33.0%
4.9%5.7%
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08
o Copper duty differential down from 4.9 % to 3.1 %.
• Annual Impact- Rs.57 Cr
16
Impact Of Adverse Macroeconomic TrendsImpact Of Adverse Macroeconomic Trends
Sharp fall in Aluminium Realisation(Rs/Mt)
125,400
111,098
100000
105000
110000
115000
120000
125000
130000
FY07 FY08
131,124
111,748
100000
105000
110000
115000
120000
125000
130000
135000
Q4 FY07 Q4 FY08
QOQ drop15%
(Rs/Mt)
YOY drop11%
17
CopperCopper-- Strong Demand & PricesStrong Demand & Prices
But little to cheer for Custom smelters as TC/RC remained subdued.
LME CSP US$
Copper LME continues to be strong with falling stock
(Mt) US$/Mt
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2002
2003
2004
2005
2006
2007
2008
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
* 2008 LME figures is Till March’08
0
50
100
150
200
250
2000
2001
2002
2003
2004
2005
2006
2007
2008
Weakening spot TC/RC
Indexed
FY07 Avg
FY08 Avg
18
Incessant Cost PushIncessant Cost Push
Backdrop : FY08, a Challenging yearBackdrop : FY08, a Challenging year
Energy prices reached all time highs
97.9
8.75
20
30
40
50
60
70
80
90
100
110
Q1FY07
Q2FY07
Q3FY07
Q4FY07
Q1FY08
Q2FY08
Q3FY08
Q4FY08
3
4
5
6
7
8
9
10
WTI Crude ($/bbl)
Nymex Natural gas ($/mbtu)
3141
4442
7107
8626
1000
2000
3000
4000
5000
6000
7000
8000
9000
H1 FY07 H2 FY07 H1 FY08 H2 FY08
Surging Freight costs
Baltic Dry Freight Index
19
The following steps had already been taken which helped in mitigating
the adverse macro economic impact
• Aluminium
o Brownfield expansion:
• Timely progress of Hirakud expansion led to incremental production growth of
35% compared to FY07
o De-bottlenecking smelter assets
• At Renukoot- Metal production enhanced by more than 9,200 Mt
o Continued sweating of assets in downstream businesses resulting in
• Higher value added downstream production (FRP up 2%,extrusion up 13%)
o Focus on improving markup of value added products
• FRP-exports net markup grew by 7% & Extrusion exports net markup grew by
28% during FY08 through improved product mix and better premium.
• Domestic markups also improved for FRP (3%) as well as Extrusions (16%)
Performance Overview:Performance Overview:
20
• Copper
o Improved operating efficiency
• Cathode production increased by 12% to 324KT (19% growth excluding
production from Cu II in FY07)
• Continuous Cast Rod production rose by 28% to 140KT
• Conversion costs improved significantly
o Improved geographic & product mix
• More sales in domestic markets (up 37%)
• Increased Continuous Cast Rod Sales (up 27%)
• Alumina
• More sale of Specials in domestic market (52% of total sales as against 49%
during FY07)
Performance Overview continued…..Performance Overview continued…..
21
Operations: FY 2008 at a GlanceOperations: FY 2008 at a Glance• Highest ever Aluminium production at 477,726 T
• Highest ever FRP production at 215,198 T
• Highest ever Extrusion Production at 43,315 T
• Highest ever Copper cathode Production at 323,883 T
• Highest ever Copper CC rod production at 139,833 T
• Improved Copper conversion cost
12%12%
28%28%
2%2%
All round improvement in Operating performance
8%8%
Vs FY 2007
Without by-product credit
13%13%
24%24%
19% growth excluding Cu II production in FY 07
22
Hindalco StandHindalco Stand--alone Financials:alone Financials:Recap FY08 VS. FY07Recap FY08 VS. FY07
(Mn US$)
FY07 FY08
Change
%
4025 4741 18%
964 961 -
770 747 -3%
564 573 2%
564 706 25%
0.56 0.60 7%
(Rs. Cr)
FY07 FY08
Change
%
18,313 19,201 5%
4,385 3,894 -11%
3505 3026 -14%
2564 2320 -10%
2564 2861 12%
25.5 24.5 -4%
Net Sales & Op revenues
EBIDTA
PBT
PAT (before tax write backs)
PAT (after tax write backs)
Basic EPS
23
Aluminium BusinessAluminium Business
24
Aluminium Performance affected due to 11% drop Aluminium Performance affected due to 11% drop in metal in metal realisationrealisation & sharp increase in input & sharp increase in input
costs.costs. Aluminium
EBIT
Net Sales & Operating Revenue
2,929
7,344
FY 07
-17%
-3%
Change(%)FY08
2,423
7,145
Note: As per SEBI Format
(Rs.Cr)
598
1,764
FY08
644
1,614
FY07 Change(%)
-7%
9%
(Mn US$)
25
Cost escalations: Cost Push to ContinueCost escalations: Cost Push to ContinueAluminium
CP Coke Price at all time high
Rs/Mt (Indexed Base=100)
100
110
120
60
80
100
120
2005-06 2006-07 2007-08
Coal price gone up by 10% from Q4 FY07.
100
109
9799
93
98 97
109
85
90
95
100
105
110
115
Q1FY07
Q2FY07
Q3FY07
Q4FY07
Q1FY08
Q2FY08
Q3FY08
Q4FY08
Rs/Mn Kcal (Indexed Base=100)• Alloying element prices have moved
up significantly
• Crude price increase is a major factor
for most cost escalations
o Higher crude derivative costs such as
CP coke or Fuel oil
o Higher freight costs
o Higher alternate energy sources cost
Fuel Oil Price at High Levels
100112
127
60708090
100110120130140
2005-06 2006-07 2007-08
Rs/Mt (Indexed Base=100)
26
Adversity Mitigation: Consistent production Adversity Mitigation: Consistent production growthgrowth
All round improvement in production
_______________________Source: Company Data
67,7
30
32,3
28
26,1
84
190,
580
429,
140
442,
685
68,9
98
211,
088
38,2
8 2
28,7
21
477,
726
71,8
14
215,
198
43,3
15
27,6
45
Primary Metal Wire Rods FRP Extrusions Foils
FY 06 FY 07 FY 08
Aluminium(Mt)
27
Adversity Mitigation: Adversity Mitigation: MaximisingMaximising sales revenue sales revenue throughthrough
441,301
473,429
425,000
430,000
435,000
440,000
445,000
450,000
455,000
460,000
465,000
470,000
475,000
480,000
FY 07 FY 08
+7%
(Mt)
Improved Aluminium sales volume … Consistent increase in value added sales volume
170
38
180
32
152
43
0
20
40
60
80
100
120
140
160
180
200
FRP Extrusions
FY 06 FY 07 FY 08
‘000 Mt
28
High input costs & adverse macroHigh input costs & adverse macro--economic factors are economic factors are affecting even the global leaders; but our margins affecting even the global leaders; but our margins
maintainedmaintained
FY 07 Indexed: Base =100 (All currencies translated into US$)
EBIT as per SEBI format for Hindalco
EBIT comparison
100 100 100 100
76
56
26
72
0
20
40
60
80
100
120
Hindalco GlobalMajor 1
GlobalMajor 2
IndianCompany
Q4 FY07 Q4 FY08
39%45%
40%37%
31%
10%
14%
18%
22%
26%
30%
34%
38%
42%
46%
50%
2003-04 2004-05 2005-06 2006-07 2007-08
EBIDTA Margin fall contained
29
Copper BusinessCopper Business
30
FY 08 key levers of performance ………..FY 08 key levers of performance ………..• All round improvement in performance…
o In FY 08, compared to FY 07
o Cathode production increased by 12%
o Continuous Cast Rod production rose by 28%
o Sulphuric Acid production increased by 15 %
to 1,023KT
o Overall Copper sales volumes up 10 %, to
320KT
• Improved product & market mix (more domestic
& CC rod) resulted in higher realizations
• Significantly higher by-product Realization as
compared to FY07.
• Operating efficiency and Conversion cost
improved.
323.9
290.4
0
50
100
150
200
250
300
350
FY 07 FY 08
Copper
109.0
139.8
0
40
80
120
160
FY 07 FY 08
Cathode Production KT
CC rod Production KT
31
Improvement in bottom line in spite of drop in the Improvement in bottom line in spite of drop in the TCRCTCRC
Copper
Better working capital management , Operational efficiency & higher by product
credit boosted the bottom line by 20% even though TCRC dropped by 30%
97
120
100100
70
100
60
70
80
90
100
110
120
130
140
150
FY07 FY08
PBT EBIT TCRC
TCRC , PBT & EBIT Indexed. Base=100
Operational and by-
product credits
Improvements
Reduction in finance cost by better working capital Management
32
Copper Business performanceCopper Business performance
Note: As per SEBI Format
EBIT
Net Sales & Operating Revenue
503
12,066
FY08
- 3%
10%
Change(%)FY07
517
10,978
(Rs.Cr)
Copper
124
2979
FY08
114
2413
FY07 Change(%)
9%
23%
($ Mn)
33
Aluminium OutlookAluminium Outlook
34
Aluminium demand expected to be robust.Aluminium demand expected to be robust.
-6,000
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
Asia*
W. Euro
peN. A
merica
E. Eu
ropeChin
aMiddle
East
Africa
Lat. A
merica
Austra
lia CISWorl
d
kt
2005 2007 2009
Regional Metal Imbalance to grow, leading to deficit in the relevant markets
Asia’s SupplyAsia’s Supply Gap (excluding China& Middle east) to remain large.
Source: CRU April’08
World Aluminium consumption to grow sharply driven largely by China
Source: CRU Long term Outlook -2007
24482
50892293
55153
27442
22062
0
10000
20000
30000
40000
50000
60000
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
China World
CAGR - 3.7%
CAGR - 8.1%
CAGR - 14.2%
CAGR - 19.1%
(Kt)
35
Major investments required for the production to Major investments required for the production to catch up with demandcatch up with demand
Source: CRU Long term Outlook-2007 Edition
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
2006 2007 2008 2009 2010 2011 2015 2020 2025 2030
Required capacity Projected capacity
By 2010, ~ 1.1 Mn Tonnes additional smelting
capacity needed to meet the world demand. The
gap is expected to rise to 32.7 Mn tonnes by 2030.
Kt
Asia’s Supply
2,791
3,823
4,604
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Capex HistoricalProjects
Capex 2005/06 Capex 2007
US$
/Mt
Avg. Capex
Capex for new smelter construction to be
significantly higher
36
• Last quartile of the cost
between US$2,014 and
US$2,700 in CY2007 as per CRU
• 2008 will be even higher
• 1/4th of the world capacity has
to be shut down if the prices
fall below US$2,000.
US$/t
1129
2699
2014
17281540
0
500
1000
1500
2000
2500
3000
0% 11%
24%
31%
42%
49%
55%
60%
64%
69%
75%
80%
85%
90%
95%
98%
Source CRU 2007 data
CRU Aluminium Cash cost curve
(% of World Production)
Operating cost Increase to Keep the Prices UpOperating cost Increase to Keep the Prices Up
37
Other Drivers influencing priceOther Drivers influencing price
• Power shortages: Almost a million tonne metal production was lost in last 12
months; of which Chinese smelters lost around 600,000 tonnes
• South African power supplier ESCOM is running short of power generating
capacity and also facing issues with coal supplies
o Around 10% production cut in Hillside, Bayside and Mozal smelters of total capacity
of 1.5mn tonnes
• Production cut in Rio’s smelter in New Zealand due to lower water level
• Power cuts in Tajikistan smelter & in Brazil
• Rising oil and coal prices
• Increasing interest by funds in the commodities on account of depressed equity
markets following sub prime crisis.
• Rumors of increase in export tax on Aluminium in China
38
Conclusion: Prices to remain strongConclusion: Prices to remain strongAluminium
3,007
3,240
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
3/A
pr/0
6
12/M
ay/0
6
10/J
ul/0
6
5/Se
p/06
31/O
ct/0
6
27/D
ec/0
6
22/F
eb/0
7
23/A
pr/0
7
20/J
un/0
7
16/J
ul/0
7
11/S
ep/0
7
6/N
ov/0
7
7/Ja
n/08
3/M
ar/0
8
800
1,300
1,800
2,300
2,800
3,300
3,800
LME US$-CSP
Exchange Stock
In recent months, in-spite of an
increase in LME stock, prices have
shown an upward trend in
anticipation of supply concerns
A rising forward curve reflects the
bullish sentiments about
aluminium prices 2000210022002300240025002600270028002900300031003200
1M 4M 7M 10M
13M
16M
19M
22M
25M
28M
31M
34M
37M
40M
43M
46M
49M
52M
55M
58M
61M
13th June'08 31st Jan'08 20th July'07
39
Copper OutlookCopper Outlook
40
Copper Price ForecastCopper Price Forecast
• Prices expected to remain strong through 2008 on account of
continued strong demand & concerns about Supply
o Demand: Chinese copper consumption continue to drive the market
o US consumption decline will be offset by demand from emerging
markets
o Supply: Restricted Chilean supply due to energy, security, water
availability and labour unrest
o Delay in New mine capacities due to Socio-political & environmental
issues
o Increasing interest by funds in the commodities on account of
depressed equity markets following sub prime crisis
o Rising Capital & Operating costs due to increased input, interest costs
and declining copper grades
Copper
41
Low global copper inventories & strong price Low global copper inventories & strong price forecastforecast
Source : Bloomberg (14-06-2008)
3,500
4,700
5,900
7,100
8,300
9,500
2008 2009 2010 2011
Merril Lynch JP Morgon Chase & CoDeutsche Bank Societe Generale
YearBloomberg
Average LME (USD/t)
2008 7878
2009 6951
2010 5089
2011 4917
USD/t
Copper stock at historically low levels has led to strong price forecast in coming years
USD/t
Source : Brrok Hunt May 2008
42
Copper Consumption growth Copper Consumption growth Copper
India and China followed by E.Bloc are the main drivers of copper demand
thereby offsetting weaknesses elsewhere
9.2%
7.0%6.6%
4.5%
1.7%
1.2%
0.6% 0.4%
Indi
a
Chi
na
E.Bl
oc
Rus
sia
Braz
il
Ger
man
y
W E
urop
e
USA
Source Q4 2007 Brook hunt
6.0%
Growth in 2008-10 Driven by
4%
3.34% 3.42%
World Consumption Growth
2003-06 2007 2008 2009-20
6%
43
India Presents Significant Growth India Presents Significant Growth Potential …Potential …
27.8
16.414.9
10.0
6.94.7
3.50.5
0
5
10
15
20
25
30
Taiw
an
Ger
may
Italy
Japa
n
USA
Russ
ia
Chin
a
Indi
a
Copper Per Capita Consumption
Kg/Person
Source : Population CIA fact book July’07 estimates Copper consumption Q4 2007 Brook hunt
Copper
Per capita consumption of Cu in India and china is very low
44
Custom smelters : No immediate relief Custom smelters : No immediate relief Copper
• TC/RC expected to continue to remain subdued on account of
• Tightness in concentrate supply as incremental supplies finding
difficult to keep pace with demand
o High input costs, rising capex ,credit crunch & environmental issues
resulting into delay in planned production
o Major new discoveries and projects located in politically sensitive
countries and involve high risk
• Strong refined copper demand resulting in continued expansion in
smelting capacities
• Higher consolidation in the mining industry resulting in increased
supplier power
45
ProjectsProjects
46
MuriMuri Alumina ExpansionAlumina Expansion• Basic & Detailed Engineering - Completed
• Environmental Clearance -“Consent to Operate”
application filed on 24.11.07.
o Inspection completed. Deemed consent
• Other Statutory Clearances - Obtained
• Land for future mud disposal site - Notification &
acquisition by Govt. awaited
• Construction Status -
o Muri expansion Overall- Commissioning in
progress
• Power Plant Overall- +99% complete
• Refinery Overall- Commissioning in
Progress.
• Rail Network Overall- Completed and
Rail movement commenced.
47
• Smelter – Phase-I (35 kTPA expn.)-
o Completed in Dec’06 & operation stabilized.
o Phase-II (43 kTPA expn.)–
o Conversion of 314 pots completed and operations
stabilized
o Conversion of balance 86 pots in progress.
o Completion Date of Phase II: Q2 ’FY 08-09
• Power - 100MW (Unit#4),Three boilers and single turbine
o Commissioned with two boilers (Boiler-10 & 11) on 8th
Feb 08
o 100 MW generation achieved on 17th May08
o All systems stabilised
HirakudHirakud ExpansionExpansion
Line #2 pots after prebakedconversion
Power House
48
Mining4.5 million tpa bauxite mining capacity at Baphlimali(Rayagada District)
Refinery1.5 million tpa alumina refinery at Doragurha (RayagadaDistrict), which after debottlenecking can produce 2 million tpa within 3 years of startup Bauxite mine & refinery
Project Highlights
UtkalUtkal Alumina ProjectAlumina Project
Land - Land acquisition mostly completed. R&R scheme Phase 1 completed and Phase 2 is under implementationTechnology - Technology supplier finalized (Alcan). Basic engineering completedEPCM consultants – Finalized for all major areasEquipments- Major orders issued for all major equipments. Imported supplies for various packages has started arriving.Clearances – All major clearances are in placeOrganization – Project organization finalized. Recruitment being done as required
• Mechanical Completion Date – Q3’ 2010
49
Mining4.2 million tpa bauxite mining capacity at Kodingamali(Koraput District)
Refinery1.5 million tpa alumina refinery at Kansariguda(Rayagada District), which after debottlenecking can produce 2 million tpa within 3 years of startup
Coal20 million TPA JV Coal Mine at Ib Valley, Talabira 2& 3, Orissa
Power900 MW capacity captive power plant at Lapanga
Smelter359 ktpa capacity aluminium smelter at Lapanga
Coal mine, CPP & smelter
Bauxite mine & refinery
Project Highlights
AdityaAditya Alumina and Alumina and AluminiumAluminium ProjectProject
• Technology agreement with Aluminium Pechiney (AP) signed. SIA clearance from Government received. Alumina Technology tie up with ALCAN signed
• Engineering consultant for smelter as well as power plant finalised and Engineering work in progress.• In-principle approval obtained for 855 ha of SEZ at Lapanga , district Sambalpur. Area measuring 115.71 ha is already
notified .• Water : Agreement signed for drawal of water. • Environment Clearance for Kodingamali Mine cleared by expert env. committee of MoEF. • Expected date of Project completion : Q3’2011
50
Smelter359 ktpa capacity aluminium smelter near Bargawan, Singrauli District of Madhya Pradesh
Power900 MW capacity captive thermal power plant near Bargawan, Sidhi District of Madhya Pradesh
Coal3.5 million tpa of coal from Mahan Coal Block of Main Basin in Singrauli Coal Fields (in joint venture with Essar Power)
Project Highlights
JHARKHAND
District HQ
Proposed site
BhopalBhopal
Mahan Mahan AluminiumAluminium ProjectProject
Coal: Coal block allotted in Apr’06 in JV with ESSAR. Pre project activities in progress.
SEZ: Govt. of India extended the validity of in-principle approval of SEZ up to 31st Oct’08
Construction Power: 132KV grid connectivity approved.
Water: Water resource department of GOMP has allotted 45.12 cusecs
Environmental Clearances: Application has been submitted to MOEF on 31st January 07 and TOR obtained from MoEFon 18th July 2007. Public hearing conducted on 14th Mar’08.
Technology Agreement: Signed with Pechiney for Smelter. SIA clearance obtained.
EPCM consultant: For Smelter & Power plant finalised
Expected Commissioning date: Q3’2012
51
Proposed site
JharkhandJharkhand AluminiumAluminium ProjectProject
Smelter359 ktpa capacity aluminium smelter at Jharkhand
Power900 MW capacity captive thermal power plant at Jharkhand
Coal4.6 million tpa of coal from Tubed Coal Mine of Auranga Coal Fields, Jharkhand(in JV with Tata Power) inclusive of 0.6 million tpa coal requirement of Muri
Project Highlights
Tubed Coal Mine Allotted-
Joint venture formed between Tata power and Hindalco. JV agreement in progress
Water Allocation – awaiting clearance from GoJ for 55 MCM water from Subernrekha basin.
Land Acquisition: Few sites have been short listed but work can start only after GoJ indicates the location of water source.
Technology Agreement signed with Aluminium Pechiney for Aluminium Smelter
All other activities can start only after finalisation of location of water and land is cleared by GoJ.
Expected Commissioning date: Q3’2013
52
Summary: Hindalco OperationsSummary: Hindalco OperationsA Challenging year, on account of macroeconomic factors & these
factors are here to stay……
Anticipation of the adverse trend and the remedial steps taken to
face the emerging challenges have helped in containing the
adverse impact
TCRC will continue to have a negative influence on Copper
Business; enhanced asset productivity, containment of input costs will be key.
Domestic consumption growth for both aluminium and copper
augers well for Hindalco, which has embarked on the ambitious
growth plan through the low cost greenfield aluminium projects
So, inspite of major challenges in the coming volatile period, the
Management feels encouraged to face them and to maintain the
growth trend.
53
AdityaAditya BirlaBirla MineralsMinerals
54
ABML ABML –– Highlights Highlights • Highest Metal production since acquisition of mines.
• Long Hole – Stope mining has successfully been implemented in the Nifty underground mine.
• The project for Oxide Heap re-treatment has been taken forward – construction of screening and washing plant is in progress.
• Explorations / infill drilling is in progress in MGO to extend the mineralization at depth with encouraging initial result – Construction of a new haulage shaft has been conceptualised for cast reduction by increasing ore production from depth and extension of mine life.
• Ongoing underground drilling has successfully extended mine life of MGO till 2012. Further explorations drilling is in progress in MGO.
• Development of Esperanza south UG mine is being taken up in FY09.
• Maroochydore- Scoping study is in progress.
55
ABML Financials ABML Financials –– FY 08FY 08
(Rs. Crs) FY07 FY08 Chg (%)
Net Sales 1127 2335 107%
EBIT 39 562 1342%
Operating Cash Flow* -390 447 215%
* Operating Cash Flow is after capex and mine development expenditure
EBIT Trend (Rs. Crs)
39
-40-99
562
-200
-100
0
100
200
300
400
500
600
FY 05 FY 06 FY 07 FY 08
Year
Rs.
Crs
56
NovelisNovelis
57
Novelis Acquisition Novelis Acquisition –– A RecapA Recap
• In May 2007, Hindalco acquired Novelis for US$6 billion
• The rationale:
o Immediate global reach and scale along with technological
expertise
o Downstream business derives its margin through conversion
mark-up, should act as a natural hedge for LME-driven,
volatile, upstream commodity business
o Industry leading technology, assets and expertise can be
leveraged to grow high-value-added, flat rolled products in
fast-growing markets such as India and China
58
Challenges of the AcquisitionChallenges of the Acquisition
• Quick completion: Approvals from government agencies, company
boards, lenders and courts
• Integration: Integration of companies with diverse cultures,
nationalities across various levels and functions
• Retaining cutting edge: Spirit and capability of innovation, key
customer relationships, people skills to be expanded across greater
Hindalco
• Identifying and realising synergies: IT and risk management skills,
jointly realising downstream vision, and international marketing
• Improving Novelis’ financial performance: focus on costs,
operations, pricing and working capital
59
Sustaining Global LeadershipSustaining Global Leadership
• Fusion Technology : Process Stabilisation, Research on new end-uses,
Expansion of Fusion Facilities.
• Thrust on recycling Capacities: New investments and de-bottlenecking
• Increasing rolling capabilities through mill upgrades and innovative
practices
• Renewed focus on OEE & energy efficiencies
• Partnering with customers for product development/enhancement:
Several auto programs on the anvil
• Leverage on first mover advantage in high value added product
segments in India
60
• Hindalco has embraced an aggressive growth plan, a combination of
organic & inorganic growth
• Upstream growth through organic route; a prudent mix of Brownfield &
Greenfield expansions
• Downstream growth through acquisition (Novelis)
To Sum Up: Beginning of an exciting new eraTo Sum Up: Beginning of an exciting new era
Priorities Maintain Growth Momentum Build New Assets Realise Novelis
Synergies
•Continued stress onoperational excellence
•Progress on plannedGreenfield projects &deliver as per schedule
•Financial turnaroundWith continued Operational improvement•Leverage on technology
Well Positioned for Greater Value Creation
Brighter ideas with aluminium
Novelis Fiscal Year 2008Presentation to Investors
Martha Brooks, President and COOSteve Fisher, CFOJune 20, 2008
62
Safe Harbor StatementStatements made in this presentation which describe Novelis' intentions, expectations or predictions may be forward-looking statements within the meaning of securities laws. Forward-looking statements may include statements preceded by, followed by, or including the words “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” or similar expressions. Novelis cautions that, by their nature, forward-looking statements involve risk and uncertainty and that Novelis' actual results could differ materially from those expressed or implied in such statements. Important factors which could cause such differences include: the level of our indebtedness and our ability to generate cash; relationships with, and financial and operating conditions of, our customers and suppliers; changes in the prices and availability of aluminum (or premiums associated with such prices) or other raw materials we use; the effect of metal price ceilings in certain of our sales contracts; our ability to successfully negotiate with our customers to remove or limit metal price ceilings in our contracts; the effectiveness of our hedging activities, including our internal used beverage can and smelter hedges; fluctuations in the supply of, and prices for, energy in the areas in which we maintain production facilities; our ability to access financing for future capital requirements; continuing obligations and other relationships resulting from our spinoff from Alcan; changes in the relative values of various currencies; factors affecting our operations, such as litigation, labor relations and negotiations, breakdown of equipment and other events; economic, regulatory and political factors within the countries in which we operate or sell our products, including changes in duties or tariffs; competition from other aluminum rolled products producers as well as from substitute materials such as steel, glass, plastic and composite materials; changes in general economic conditions; our ability to maintain effective internal control over financial reporting and disclosure controls and procedures in the future; changes in the fair market value of derivatives; cyclical demand and pricing within the principal markets for our products as well as seasonality in certain of our customers' industries; changes in government regulations, particularly those affecting environmental, health or safety compliance; changes in interest rates that have the effect of increasing the amounts we pay under our principal credit agreements and other financing arrangements; the development of the most efficient tax structure for the Company; and the integration with Hindalco. The above list of factors is not exhaustive. Other important risk factors are included under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008, as filed with the SEC, and may be discussed in subsequent filings with the SEC. Further, the risk factors included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008, are specifically incorporated by reference into this presentation.
63
Operational Highlights
Martha Finn BrooksPresident and Chief Operating Officer
64
Significant Financial Improvements
Normalized Operating EBITDA increased 62%
Free Cash Flow improvement: $ 164 M*
$0
$100
$200
$300
$400
$500
FY2007 FY2008
Normalized Operating EBITDA ($ M) Free Cash Flow ($ M)
($100)($80)($60)($40)($20)
$0$20$40$60$80
FY2007 FY2008* FY’08 FCF reduced by acquisition cost of $92 M
65
Achieving Higher Profitability
Record production in key locations
Can ceiling volumes reduced from approximately 20% - 10% of global sales
Portfolio improvements
Price increases
Novelis Fusion expanded to each of our four regions
Working capital improvements: better inventory, logistics and accounts receivable management
Significant SG&A cost reductions, primarily corporate office
$ 65 M Net of input cost increases
66
Overcoming Challenges
New metal risk management program
One contract with can price ceiling remains
Cost increases in energy, freight and alloys - $110 M
Softness in certain North American markets – housing and transportation
LME and SHFE volatility
Strong Real (BRL) and Euro (EUR)
67
Strong Growth for Flat Rolled ProductsNovelis a Market Leader in All Regions
North America -6.2%
Asia Pacific+18.6%*
Western Europe +2.6%
Latin America+9.3%
Middle East +10.2%
Eastern Europe & CIS +10.7%
Source: CRU, 2007 as compared to 2006 flat rolled products consumption
Global growth + 4.2%Global growth + 4.2%
Japan-1.2%
68
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
thou
sand
s of
tonn
es
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Growth in Aluminium Beverage Cans
Source: CRU, Aluminium Flat Rolled Products Quarterly, May 2008
5 YR CAGR2.2%
69
Novelis is Leader in Can Sheet Market
0200400
600800
1,0001,200
1,4001,6001,800
2,000
thou
sand
s of
tonn
es
2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
100
200
300
400
500
600
700
800
900
1000
thou
sand
s of
tonn
es
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0
50
100
150
200
250
300
350
thou
sand
s of
tonn
es
2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
100
200
300
400
500
600
700
800
900
1000
thou
sand
s of
tonn
es
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
North America
Latin America
Europe
Asia Pacific
Novelis37% global market share
#1 producer in all regions
5 YR CAGR*0.3%
* CAGR Percentage Increase 2007 - 2012Source: CRU, Aluminium Flat Rolled Products Quarterly, May 2008
5 YR CAGR*6.1%
5 YR CAGR*4.2%
5 YR CAGR*1.8%
70
37 38 38 40
4552 54 55 59 60 61 62 63 64 66 68 71 75
79
8387
9296
102 10
6 110
114 11
7 120 12
5 130 13
4 140 14
5 149 15
3 157 16
1
0
20
40
60
80
100
120
140
160
180
Kilo
gram
s pe
r veh
icle
73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Aluminium Use in Autos –North America
Source: Ducker Worldwide 2006
71
32
3743 44 45 46 47 48 52 56
60 61 62 64 6872 76 78 81 83 85
9210
0 106 11
0 113 11
7 120
122 12
6 130 133
135 137
140 14
214
6 150
0
20
40
60
80
100
120
140
160
180
Kilo
gram
s pe
r veh
icle
78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Aluminium Use in Autos –Europe
Sources: Ducker Research, Knibb Gormezano & Partner, EAA, AMM, JAA, GDA, McKinsey, Novelis
72
North America Europe
Source: Novelis estimates
NovelisPreferred partner for automakers
Over 70 models in production4.5 million vehicles this year
First entry into Asia
Novelis is Leader in Auto Sheet Market
Korea
73
Global Footprint for Novelis Fusion™
Oswego, New YorkInstallation of new melting furnace this spring will significantly increase Novelis Fusion™ casting capacity
Ulsan, South KoreaSmooth, rapid startup. Commercial volume production started in March
Sierre, SwitzerlandGreenfield casthouse commissioned in April. Novelis Fusion™ casting to begin in August
Ouro Preto, BrazilInvestment announced May 2008. Facility to be operational in 2009
Sierre start-up team
74
Global marketsHeat exchangersAutomotive structures and body panels
Regional marketsHousehold AppliancesArchitectural/BuildingHigh Pressure CylindersExisting Clad ProductsTransportation
Growth Platforms for Novelis Fusion™
Examples of target markets for Novelis Fusion
75
In ProgressStart-up Novelis Fusion production at SierreInstall new melting furnace at Oswego ($9M)Upgrade anneal/lacquer line at Nachterstedt ($17M)Upgrade rolling and recycling at Pinda ($21M)Install Novelis Fusion™ at Ouro Preto ($5M)Pilot project to integrate IT systems in Brazil ($5M)Expansion of hydro capacity in Brazil ($41M)
Investments for Strategic Growth
Completed in FY’08Start-up laser cutting center at Sierre ($4M)Install new melting furnace at Pinda ($7M)Start-up Novelis Fusion™ at Ulsan ($5M)Expand rolling mill at Yeongju ($30M)Construct new casthouse at Sierre ($49M)
Multi-stand rolling mill in Yeongju
Hydroelectric dam in Brazil
76
Cost-effective Research & Development
Kingston Global Technology Center -- innovation partnering and consolidation of footprint through facility sharing with a leading Canadian university
Exited Neuhausen, moved resources to market-focused innovation centers at Gottingen, Dudelange and Sierre
Opened innovation center in Ulsan
Strengthened in-house capabilities for molten metal & advanced solidification technology
“Solution Center” tools and techniques fostering creativity, helping customers to solve challenges and find solutions
Ulsan Technology Center
77
Product and Process Innovation
Goals:
Generate increasing levels of profits from new products, process or business model breakthroughs
Be rated best innovation partner by our customers
NIMES: Novelis Innovation Management and Execution System
78
Customer and Industry Recognition
World Excellence Award - Ford Motor Co.
Supplier of the Year - Alcoa Architectural Products
Supplier of the Year - Plus Pack, a leading European packaging company
Recycling Industry Award - Valpak, a leading UK provider of recycling solutions
Design & Innovation Award for Novelis Fusion™ - The Manufacturer
Export Tower Award for top performing exporter - Republic of Korea
Alcoa supplier award
Korean export award
79
Price/Mix Currency Volume
12% GrowthFY 2007 – FY 2008
Driving the Conversion Model
80
Regional Highlights: North AmericaFY07 vs FY08
Reduced ceiling exposure (one contract remains)
Purchase accounting benefit
Price increases in face of difficult economic conditions
Improved metal inputs mix
FY07 FY08 Growth %FRP Shipments (kt) 1,135 1,102 (3)Sales ($ M) 3,722 4,110 10
Operating EBITDA ($ M) (54) 242 550
81
Regional Highlights: EuropeFY07 vs FY08
Price increases across all major markets and strong Euro effect
Solid operational performance, but capacity constrained in some markets
Construction of Novelis Fusion™ casthouse at Sierre
FY ’08 nearly $60 M better than FY ’07 when metal timing is removed
FY07 FY08 Growth %FRP Shipments (kt) 1,068 1,075 1Sales ($ M) 3,857 4,341 13
Operating EBITDA ($ M) 276 273 (1)
82
Regional Highlights: AsiaFY07 vs FY08
Challenging mix with decline in Korean industrial market
One-time refinancing expenses
Yeongju hot mill upgraded and Novelis Fusion™ capacity added in Ulsan at year end
Price increases across all major markets in Q4
FY07 FY08 Growth %FRP Shipments (kt) 463 495 7Sales ($ M) 1,726 1,829 6
Operating EBITDA ($ M) 72 52 (27)
83
Regional Highlights: South AmericaFY07 vs FY08
Strengthening Real inhibits smelter profits
Price increases across all major markets
Record operational performances; Pinda capacity improvements
Headcount optimization
FY07 FY08 Growth %FRP Shipments (kt) 285 324 14Sales ($ M) 945 1,028 9
Operating EBITDA ($ M) 181 162 (11)
84
Underlying Cost Drivers:LME Cash, Currencies, Crude Oil Price and Hardeners
Crude Oil Price (AoM)
5060708090
100110120
Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
$ pe
r Bar
rel
LME Cash(AoM)
2,000
2,200
2,400
2,600
2,800
3,000
3,200
Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
$/M
T
Currency Movements (AoM)
-10.0%-5.0%0.0%5.0%
10.0%15.0%20.0%25.0%30.0%
Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
. Canadian ($) . Euro . Brazil (Real) . Korea (Won)
Hardeners (China FOB basis)
5001,0001,5002,0002,5003,0003,5004,0004,5005,0005,500
Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
$/M
T
MG 99.9 Mn 99.7 Si 98.5
85
Actions to Reduce Costs
SG&A reductions
Closure of Louisville, Kentucky plant
Restructuring:
Bridgnorth, UK foil operations
Korean finishing lines
Ouro Preto, Brazil smelter potline
Energy projects (Energy Task Force)
Continuous Improvement Process Foil rolling at Bridgnorth
86
Financial Section
Steve FisherChief Financial Officer
87
Explanation on Financial Materials Presented
Under U.S. GAAP, consolidated financial statements for FY 2008 are presented in two distinct periods, as Predecessor and Successor entities, and are not comparable in all material respects.
However, to facilitate a discussion of our results, financial information for the 12 months ended March 31, 2007, are presented on a combined basis.
Comparing the consolidated financial statements for FY 2008 with the combined financial statements for the year ended March 31, 2007, allows a more meaningful analysis.
In addition, our Predecessor and Successor results for the period from April 1, 2007, through May 15, 2007, and for the period from May 16, 2007, through March 31, 2008, are presented on a combined basis.
Combined operating results, segment information and cash flows are non-GAAP financial measures, do not include any pro forma assumptions or adjustments and should not be used in isolation or substitution of the Predecessor and Successor operating results, segment information or cash flows.
88
Financial Highlights
Since the acquisition by Hindalco, the company’s earnings performance on a normalized basis has improved significantly when compared to the prior year. This improvement is driven by:
Reduced exposure to the price ceilingsImproved pricing and mixLower corporate costs
The company has also improved its performance on a Free Cash Flow basis and has maintained a strong position in terms of liquidity. This position has been solidified by:
Stronger earnings performanceRefinancing of Senior Secured Credit FacilitiesBetter working capital management
89
The Conversion Business Model
Product price structure with two components:“Pass-through” aluminium price based on the LME plus specified local market premiumsConversion premium price related to the value added of rolling and the competitive market conditions for the product
Elimination of price ceilings:Approximately 8% of overall estimated shipments are under price ceilings for FY ‘09Cash flows are negatively impacted - utilize internal and external hedges to mitigate the riskNo new contracts with ceilings
90
2,000
2,300
2,600
2,900
Mar-07 Mar-08TIME
$3,005 / t
$2,446 / t
NVL Selling Price
NVL Buying Price
Processing time (60 days)
(Mar. '08)
(Jan. '08)
(LME Graph) USD / ton
Historical: Long term metal price lag exposure balances out; short term exposure exists
Current: Hedging in place to remove LT & ST exposures
Benefit: Substantial mitigation of cash exposure; some non-cash P&L volatility continues because of mark-to-market and inventory accounting
New Risk Management Approach
How we manage the riskMetal Price Lag
Note: illustrative example only
91
Operating EBITDA ReconciliationFY07 vs FY08
FY07 FY08
Net Income (Loss) (265) (69)
Provision (Benefit) for Income Taxes (98) 7 Minority Interests' Share 3 4 Interest Expense and Amortization of Debt Costs, Net 207 199 Depreciation and Amortization 233 395
EBITDA 81 536
Reconciliation to Operating EBITDA:
Sale Transaction Fees 32 32 Other Expenses, Net 18 2 Unrealized Loss on Change in Fair Value of Derivatives 150 2 Proportional Consolidation of Non-Consolidated Affiliates 36 72
Operating EBITDA 316 644
EBITDA = Earnings before interest, tax, depreciation and amortization
92
Normalized Operating EBITDAFY07 vs FY08
FY07 FY08
Operating EBITDA 316 644
NormalizationsMetal Price Lag (Gain)/Loss (43) 21 Purchase Accounting benefit - (219) Stock Compensation expense 30 45
Normalized Operating EBITDA 303 491
Strong operational and market performance translating to significantly higher operating EBITDA
93
Normalized Operating EBITDA Bridge FY07 vs FY08 ($ M)
491
115 33
829
119
303
180
0
100
200
300
400
500
600
700
FY07 Mix, Price andVolume
Price CeilingExposure
CorporateSG&A
Brazil SocialTax
HigherOperating Cost
Currency, Net ofHedge
FY08
US$
, mill
ions
94
Better Working Capital Management
Free Cash Flow Improvement $164M
Operating with lower metal volumes– Inventory reduction by 25 KT year-over-year
Improved collection of Receivables– DSO reduced by 6.5 days
More rigorous cash management ensuring adequate liquidity and lower interest costs year-over-year
95
Liquidity ($ M)
Facilities refinanced to provide for additional capacity
Maintaining forfaiting and factoring arrangements in Asia and South America to provide for flexibility and liquidity
Sufficient liquidity to provide for higher LME
FY07 FY08Cash and cash equivalents $128 $326 Amount available under senior secured credit facilities
234 582
Total estimated liquidity $362 $908
Year Ended March 31Year Ended March 31
96
Credit Facilities
1 Springing Covenant - 10% and monthly reporting of Borrowing Base2 Springing Covenant - 15% and monthly reporting of Borrowing Base
($M) Prior New Current Market
Amount Revolver – $500 Term Loan – $958
Revolver – $800Term Loan – $960 Varies
Maturity Revolver – 2.5 yearsTerm Loan – 4.5 years
Revolver – 5 yearsTerm Loan – 7 years Varies
Rate Revolver – L + 250 bpsTerm Loan – L + 225 bps
Revolver – L + 125 bpsTerm Loan – L + 200 bps
Revolver – L + 175 bpsTerm Loan – L + 350-400 bps
Covenants Financial covenants Revolver1 and Term LoanNo financial covenants
Revolver2 – No financial covenantsTerm Loan – Financial covenants
97
Reconciliation from Operating EBITDA to Net Income (Loss)
Year Ended March 31, 2007
Year Ended March 31, 2008 Variance
Operating EBITDA 316 644 328
Interest expense (207) (199) 8Unrealized gain (loss) on derivativies (150) (2) 148Depreciation and amortization (233) (395) (161)Proportional consolidation (36) (72) (36)Corporate S, G & A (121) (93) 28Corporate Realized Derivatives (37) 13 50Tax 98 (7) (105)Other 106 42 (64)
Net Income (loss) (265) (69) 196
98
Tax Rate Reconciliation – FY 2008
Q1 Q2 Q3 Q4 Combined
Pre-tax income / (loss) (114) (19) (41) 119 (55)0 0 0 0
Income taxes at statutory rate (37) (6) (14) 38 (19)
Increase/(decrease) in valuation allowances:Canada 30 11 8 (37) 12Europe 4 8 6 (23) (5)
34 19 14 (60) 7
Exchange translation items in Canada and Brazil:
Canada 38 22 12 (23) 49
Brazil 5 5 2 1 13
Exchange remeasurement of deferred income taxes 6 4 18 2 30
Enacted tax rate changes 5 (74) (32) 23 (78)
items with no tax effect (20) (10) 0 26 (4)
Tax Rate Differences on Foreign Earnings 4 (2) 0 (12) (10)
Uncertain Tax Positions 2 9 3 3 17Other 3 (3) 1 1 2Provision for taxes on income 40 (36) 4 (1) 7
99
Gains (Losses) on Derivatives
FYQ1 Q2 Q3 Q4 2008
Gain (loss) on derivative instruments - net:Realized and included in Segment Income* 39 22 (28) (1) 32Realized on corporate derivative instruments* 5 29 2 (23) 13Unrealized (10) (87) (24) 118 (3)
Gain (loss) on derivative instruments - net 34 (36) (50) 94 42
FYQ1 Q2 Q3 Q4 2007
Gain (loss) on derivative instruments - net:
Realized and included in Segment Income* 78 61 56 33 228Realized on corporate derivative instruments* 0 0 (35) (2) (37)Unrealized (37) (98) (16) (1) (152)
Gain (loss) on derivative instruments - net 41 (37) 5 30 39
* - For Segment Income purposes we only include the impact of the derivative gains or losses to the extent they are settled in cash (i.e., realized) during that period.
100
Summary
Very strong year for cash flow performance
Substantial operating improvements
Novelis Fusion global footprint
Solid progress on risk management
Improvements in pricing and portfolio
Reduction in price ceilings
Reduction in corporate costs
Brighter ideas with aluminium!
Thank you
102
FinancialsFinancialsHindalco StandaloneHindalco Standalone
Refinancing of Refinancing of NovelisNovelis Acquisition Acquisition Hindalco ConsolidatedHindalco Consolidated
103
Highlights FY’08
• Sales - We sold more and grew @ 10% (Copper) & 7%
(Aluminium) by:
Producing More (Highest ever production of Copper, Aluminium,
FRP & Extrusion)
• CC Rods ⇧28%, Cathodes ⇧ 12%
• Hirakud ⇧ 35%, Renukoot ⇧ 3%
• Taloja ⇧ 7%, Mouda ⇧ 24%, Extrusions ⇧ 13%, Wire Rods ⇧ 4%bv
104
Highlights FY’08
And Improving Realisations by
o Enriching Product Mix –
• CC Rods ⇧ 27%, Specials ⇧ 5% , FRP ⇧ 6%, Extrusion ⇧ 12%,
o Improving Market Mix
• Copper Domestic Sales up 37 % .
• Specials - Domestic Sales up from 49% to 52% of total sales
• Extrusions – Domestic Sales up from 89% to 92% of total sales
o Realising Higher Mark-up & Premium
• Premium on Copper Domestic sales ⇧ 10%
• FRP Exports net mark-up ⇧ 7%
• Extrusions Exports net mark- up ⇧ 28%
o Reducing gap between domestic ingot prices and import parity price
from Rs 5209/ton to Rs 2194/ton
105
Highlights FY’08
• Efficiencies
o Cost pressure off-set by plant efficiencies: Rs 225 Crs.
o Aluminium
• Hirakud Pre baked conversion ⇧ Power Efficiency
• Energy efficiency improved to offset price escalation
o Copper
• Recovery improved by 1%
• Power generation up by 10% (lower grid drawal & surplus exported)
• Byproducts credits improved – Sulphuric acid & DAP subsidy
106
Highlights Highlights FY’08FY’08
• Free Cashflow
o Cashflow from Operations Rs.2427Crs
o Disposal of idle assets – Mouda conductor plant
• Treasury/Tax Management
o Pre-tax treasury yield 10.7%
o ETR down from 26.8% to 23.3%
However all macro economic parameters turned adverse
Aluminium: LME, Re/$, Duty, Fuel, Coal, Carbon PricesCopper: Re/$, Duty, Fuel & Tc/Rc
107
Drivers of Performance : FY08 Drivers of Performance : FY08
LME is a pass thru
but adversely impacts working capital
Particulars Unit FY07 FY08 Change %
Re/US$ Rs 45.5 40.5 -11%
Al. LME $/t 2664 2623 -2%
Effective Al. Customs duty % 8.1 5.7 -30%
Domestic Ingot Realisation Rs/t 125,400 111,098 -11%
Cu LME $/t 6862 7521 10%
Copper TcRc c/lb 34 24 -30%
Cu Duty differential % 4.9 3.1 -35%
All the key value drivers deteriorated against FY07.
Timely brownfield expansions/acquisitions and better asset productivity helped contain EBIT fall.
108
Stand Alone Financial Highlights Stand Alone Financial Highlights ––FY08FY08
FY07 FY08 Change(%)
18313
4385
EBIT 3747 3306 -12%
3505
2564
2564
25.52
19201
EBIDTA 3894 -11%
Net Profit before tax write Back 2320 -10%
3026
2861
24.51Basic EPS (Per Share) -4%
Net Sales & Op. Revenue 5%
Pre-tax profits -14%
12%Net Profit
(Rs. Cr)
109
Key RatiosKey Ratios: Aluminium Business: Aluminium Business
40%42%
1.0
34%31%
0.9
EBIT Margin ROCE % Cap. Turnover
FY07 FY08
35%34%
30%
40%
98286
111098
125400
9088829%
31%
33%
35%
37%
39%
41%
FY05 FY06 FY07 FY08
85000
90000
95000
100000
105000
110000
115000
120000
125000
130000
EBIT Margin Ingot Real Rs/t
110
EBIT Trends and Peer ComparisonEBIT Trends and Peer Comparison
Relatively less impacted by LME & INR volatility compared to pure play companies
HIL ROCE better than Peers
ROCE - Peer Companies Aluminium
29
53
42
13
26 28 31
14
0
10
20
30
40
50
60
Indian Company 1 Indian Company 2 Hindalco Global Major
FY07 FY 08
EBIT/Sales % (Aluminium)
14
49
35
25
55
40
25
3834
0
10
20
30
40
50
60
Indian Company 1 Indian Company 2 Hindalco
FY06 FY07 FY 08
Strategic thrust to combine cost leadership & portfolio derisking
111
PAT BridgePAT Bridge
153
102
391217
FY07 FY08
534
242
640
281
Net Interest Gross Interest
FY07 FY08
617
995
88
(55)FY07 FY08
Current Tax Deferred Tax
TreasuryIncome
TreasuryIncome
370
493705
940
•Net and Gross interest higher due to higher average borrowings & higher average Interest rate
•Treasury income higher due to higher pre-tax treasury yield & higher average treasury
•Provision for Taxes lower due to lower PBT, lower ETR & higher capitalization
Tax Write back
Interest Other Income Tax
Segment Company
Al EBIT
Cu EBIT
Interest Other Income
UnallocableExpenses
PBT Tax PAT Tax W/Back
Reported PAT
FY07 2929 517 (242) 370 (69) 3505 (940) 2564 0 2564
FY08 2423 503 (281) 493 (113) 3026 (705) 2320 541 2861
Change (506) (14) (38) 123 (44) (479) 235 (244) 541 297
Rs.Crs
112
Stand Alone Financial Highlights Stand Alone Financial Highlights ––Q4 FY08Q4 FY08
Q4FY07 Q4 FY08 Change(%)
4749
1173
PBIT 1016 789 -22%
958
721
721
7.32
6%
EBIDTA 941 -20%
Net Profit before tax write Back 536 -26%
-28%
49%
19%Basic EPS (Per Share) 8.78
Net Sales & Op. Revenue 5010
Pre-tax profits 690
1077Net Profit
(Rs. Cr)
113
Drivers of Performance : Q4 FY08 Drivers of Performance : Q4 FY08
Particulars Unit Q4FY07 Q4FY08 Change %
Re/US$ Rs 44.4 40.1 -10%
Al. LME $/t 2800 2742 -2%
Effective Al. Customs duty % 8.1 5.7 -30%
Domestic Ingot Realisation Rs/t 131,124 111,748 -15%
Cu LME $/t 5949 7684 29%
Copper TcRc c/lb 33.8 19.4 -42%
Cu Duty differential % 3.8 3.1 -17%
Impact Rs.Crs
189
88
36
17
89
5
All the key value drivers deteriorated against FY07. Strong rupee, Lower LME, lower Tc/Rc affected the topline. This, coupled with higher input
costs primarily on account of a sharp surge in crude, depressed margins
114
Positive trend going into Q1 of FY09Positive trend going into Q1 of FY09
2000
2200
2400
2600
2800
3000
3200
3400
2/Ja
n
2/Fe
b
2/M
ar
2/A
pr
2/M
ay
2/Ju
n
Avg.$2742 Avg.$2982
Aluminium LME
37
38
39
40
41
42
43
44
1/Ja
n
15/J
an
29/J
an
12/F
eb
26/F
eb
11/M
ar
25/M
ar
8/A
pr
22/A
pr
6/M
ay
20/M
ay
3/Ju
n
17/J
un
Avg.$40.1 Avg.$41.40
Rupee : USD
Leading to…….
115
Improving Domestic Ingot Improving Domestic Ingot RealisationsRealisations
1243
12
1194
03
1266
78
1311
24
1213
55
1091
39
1031
37
1117
48
1224
71
1284
6 9
60000
70000
80000
90000
100000
110000
120000
130000
140000
Q1FY07 Q2FY07 Q3FY07 Q4FY07 Q1FY08 Q2FY08 Q3FY08 Q4FY08 Apr'08 May'08
LME improves but rupee stronger
Fall in LME + Rupee strong + Duty cut
Spurt in LME,
Rupee weakens
marginally
Strong LME,
Rupee depreciates
116
Existing bank loans of US$1.2 billion re-financed through ABL, term loan. Existing
US$1.4 billion notes continue.
NetherlandsEquity
US$450 million
Hindalco Industries Ltd
AV Minerals (Netherlands) BV(Total funds US$3.48 billion)
AV Metals Inc
AV Aluminum Inc
Novelis Inc
Canada
India
Lenders for bridge loan of US$3.03 billion
Funding Structure for the Acquisition of Funding Structure for the Acquisition of NovelisNovelis
117
Take out Financing Plans Take out Financing Plans -- US$ 3.03 US$ 3.03 BnBn Bridge LoanBridge Loan
• Rights Issue Not Exceeding Rs 5000 Crs
• Balance
o International loan or Bonds
o Rupee loan or Bonds
o Treasury
Put in place Optimal Capital Structure to Preserve Balance SheetStrength to Fund Value Accretive Projects
118
Consolidation: Dimensions & SchematicConsolidation: Dimensions & Schematic
Number of EntitiesRelationship
Relevant Account Standards (AS) FY 2006-07 FY 2007-08
Subsidiary AS - 21 18 57
Associate AS - 23 1 6
Joint Venture AS - 27 2 2
Relationship Holding/ Control MethodologySubsidiary > 50% Line by line Consolidation
Minority Interest shown separately
Associate > 20% ≤ 50%
Adjustment in carrying cost of investment
Joint Venture Jointly Controlled Entities
Line by line Proportionate Consolidation
119
Consolidated Financials (Under Indian GAAP)
FY 2006-07 FY 2007-08 Increase/Decrease
Share of Stand Alone
Share of Stand Alone
94.8% 32.0%
53.4%
68.4%
119.8%
90.6%
94.3%
95.5%
Standalone Consolidated Standalone Consolidated Standalone Consolidated
Net Sales 18,313
4,385
3,747
2,564
25.5
12,415
19,201 60,013 4.8% 210.7%
EBITDA
19,316
4,840
3,975
2,686
26.7
3,894 7,291 -11.2% 50.7%
EPS (Rs.) 24.5 20.5 -3.9% -23.5%
EBIT 3,306 4,835 -11.8% 21.6%
12,814
Net Profit 2,861 2,387 11.6% -11.1%
Net Worth 17,436 17,346 40.4% 35.4%
Rs Crores
Quantum growth through Acquisition
120
Consolidated Balance SheetConsolidated Balance SheetRs Crores US$ Bn.
Particulars 31-Mar-07 31-Mar-08 31-Mar-07 31-Mar-08
Application of FundsFixed Assets and CWIP (net) 10,824 25,454 2.48 6.37 Goodwill 159 8,833 0.04 2.21 Other Intangibles 170 3,817 0.04 0.95 Investments 7,874 13,892 1.81 3.48 Net Current Assets 4,257 4,271 0.98 1.07
Total 23,285 56,266 5.35 14.08 Sources of FundsShare Capital 104 262 0.02 0.07 Reserves and Surplus 12,710 17,084 2.92 4.27
Net Worth 12,814 17,346 2.94 4.34 Loans 8,443 32,352 1.94 8.09 Minority Interest 857 1,617 0.20 0.40 Deferred Tax Liabilities 1,171 4,951 0.27 1.24
Total 23,285 56,266 5.35 14.08
121
Major Developments
During the Year:• On May 15, 2007, the Company acquired Novelis Inc., Canada through
its indirect wholly-owned subsidiary AV Metals Inc. (Acquisition Sub) pursuant to a plan of arrangement (Arrangement) entered into on February 10, 2007 and approved by the Ontario Superior Court of Justice on May 14, 2007.
• On October 5, 2007 the Company acquired shareholding of Alcan Inc.consisting of 78,564,384 equity shares of Rs 10/- each in Utkal Alumina International Limited (Utkal).
• Pursuant to a scheme of amalgamation, Indian Aluminium Company, Limited an existing subsidiary was amalgamated with the Company effective April 1, 2007.
• Two new subsidiaries Tubed Coal Company Limited (with Tata Power as the other JV partner) and East Coast Bauxite Mining Company Private Limited (with Orissa Mining Corporation as the other JV partner) have been formed.
122
Novelis : US GAAP and I GAAP Reconciliation
Item Novelis AV Aluminum AV Metals AV Minerals TotalProfit/Loss as per US GAAP (Full Year) (276) (133) (9) (485) (902) Less: Related to Predecessor Period (387) (387) Profit/(Loss) as per US GAAP 111 (133) (9) (485) (515) (for Successor Period wef 16/05/07)Less Adjustment for GAAP differences (i) Deferred Financing cost (107) (5) (13) (125) (ii) Actuarial loss of pension liabilities (68) (68) (iii) Deferred Tax assets on above adjustments 30 30 Profit/(Loss) as per Indian GAAP (33) (133) (14) (498) (677)
Reconciliation of Profit/(Loss) - Rs Crores
GAAP differences are only three
Total Loss of Rs. 644 Crores, mainly interest
123
Reconciliation of Net Sales
2006-07 2007-08
Net Sales of Hindalco Industries Limited (Standalone) 18,313.0 19,201.0
Impact of Subsidiaries:-
Novelis Inc. - 39,909.0
Aditya Birla Minerals Limited (Consolidated) 1,561.1 2,517.2
Bihar Caustic & Chemicals Limited 144.0 174.9
Dahej Harbour and Infrastructure Limited 56.1 54.8
Indian Aluminium Company, Limited 76.5 0.0
Minerals & Minerals Limited 1.3 0.3
1,839.0 42,656.2
Less: Inter Company Sales (1,220.4) (2,426.9)
618.6 40,229.3
Net Sales of Hindalco and its Subsidiaries 18,931.6 59,430.3
Impact of Joint Venture:
Idea Cellular Limited (8.66% of total Sales of Rs. 6,723.5 crores) 384.5 582.5
Consolidated Net Sales 19,316.1 60,012.8
Rs Crores
124
Reconciliation of Net ProfitRs Crores
2006-07 2007-08 2006-07 2007-08
Net Profit of Hindalco Industries Limited (Standalone) 2,564.3 2,860.9
Impact of Subsidiaries:Total Profit Our Share
Dahej Harbour & Infrastructure Limited 37.5 42.8 37.5 42.8 Bihar Caustic & Chemicals Limited 33.6 56.7 20.2 34.8
Aditya Birla Minerals Limited (Consolidated) 30.2 408.4 27.4 228.7
Renuka Investment & Finance Limited 3.9 3.6 3.9 3.6
Renukeshwar Investment & Finance Limited 2.7 2.5 2.7 2.5
Novelis Inc. (Group) - (33.0) - (33.0)
AV Companies (SPVs) - (644.3) - (644.3)
Other Subsidiaries (1.5) 1.0 (1.4) 1.0
Total of Subsidiaries 106.4 (162.3) 90.3 (363.9)
Less: Unrealised Profit in inter Company Inventory (10.6) (200.0)
Less: Others (1.3) (1.9)
Net Change due to Subsidiaries (565.8)
Net Profit of Hindalco and its Subsidiaries 2,642.7 2,295.1
Impact of Joint Ventures & Associate:
Joint Venture - Idea Cellular Limited 502.8 1,042.3 44.3 90.3
Associate - Aditya Birla Science & Technology Ltd. 3.9 (0.5) 1.9
Consolidated Net Profit 2,686.5 2,387.3
125
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