Presentation is loading. Please wait.

Presentation is loading. Please wait.

Housing Road Bridges June 2006.

Similar presentations


Presentation on theme: "Housing Road Bridges June 2006."— Presentation transcript:

1 Housing Road Bridges June 2006

2 Disclaimer Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding our ability to successfully implement our strategy, our growth and expansion plans, change in market prices for cement, changes in competitors’ pricing and other competitive strategies, change in weather patterns that affect consumer demand for cement, loss or shut down of operations at any of our plants,adverse outcome in the legal proceedings in which we are involved, actions by our authorized dealers and distributors that adversely affect business, labour unrest or other difficulties, change in interest rates and in exchange rates, change in construction activity in India, change in cement demand and prices, change in raw material and energy prices, general economic conditions affecting our industry. JK Cement may, from time to time, make additional written and oral forward looking statements, including our reports to shareholders. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company. Good morning/afternoon, my name is [ ] and I am the [designation]. I’d like to thank you for the opportunity to present the JK Cement story to you. Before we get started, I would like to remind you that comments today will include forward-looking statements which are subject to certain risks and uncertainties. For a complete discussion of these risks, we encourage you to read this safe-harbor statement and to refer to JK Cement’s red herring prospectus for more details.

3 North India : Favourable Environment
Agenda An Introduction Projects North India : Favourable Environment Summary

4 Leading Cement Producer with Significant Market Share
Cement operations since over 30 years experience in the Indian cement industry Third largest grey cement producer and fifth largest market share in Northern India (1) with aggregate grey cement capacity of 3.55 MnTPA Second largest producer of White Cement (0.3 MnTPA) in a pre-dominantly two producer market (2) 0.3 MnTPA White Cement (1984) 2.8 MnTPA Grey Cement (1975) Gotan Nimbahera Mangrol 0.75 MnTPA Grey Cement (2001) Significant Market Share in Key Markets in North India Let me give you a brief introduction to our Company : We are one of the leading cement players in the country with over 30 years experience We have 2 grey cement plants at Nimbahera and Mangrol, both in Rajasthan, within a distance of 10 kms of each other, and 1 white cement at Gotan in Rajasthan with a capacity of 0.3 MnTPA With a combined capacity of 3.55 MnTPA of grey cement, we are one of the top 10 cement producers in the country and the 3rd largest cement producer in North India We are one of the only 2 cement producers who are also in the production of white cement Post the restructuring of JKSL in Nov 2004, (and we will discuss that in a minute), JK Cement stands at the threshold of high growth - growth led by the buoyancy of the Indian economy and strengthened by our internal projects JK Cement today represents … an opportunity to invest in a turnaround, high growth story...an opportunity to invest in a India infrastructure story with presence in [high value add] white cement segment as well Key grey cement market for JK Cement Northern India ( ) Number in bracket represents year of commissioning of plant (1) Source : CMA (2) Based on capacity and production published by select players in their annual report in white cement industry in India

5 Second Largest White Cement Producer in a Predominantly Two Producer Market
Predominantly 2 producer market Strong entry barriers Limited access to high quality limestone reserves Restricted market size Stable cash flow  Less volatile earnings during industry downturn in grey cement Access to high quality limestone  provides us with a competitive advantage The decision to enter white cement as a strategy to straddle the national market for building products, create a diverse product portfolio, and build a tangible differentiator vis-à-vis other cement companies JK Cement is one of the only two grey cement producers who are also in the production of white cement White cement market in India, being largely a two producer market has witnessed less volatile price and superior margins. Consequently our white cement business has generated stable cash flows for us which provides us cushion even during industry downturns in grey cement. We therefore believe that we are less vulnerable to grey cement industry downturns as compared to our competitors. Production of white cement significantly enhances our overall brand image and acts as a an added testimony to our quality of limestone Our white cement sales have increased at a CAGR of [ ]% over the last 2 years. To further enhance our share of the white cement market, and proactively create newer applications for the product, we are investing in creating value added products such as durable white wash and flooring solutions [to check]

6 Large Reserves of High Quality Limestone Reserves
High Quality Limestone Mines Access to large reserves of limestone for both grey and white cement operations JK Cement being one of the first cement producers in Northern India was able to choose limestone reserves in an area with high quality limestone resources Large Reserves of Limestone Sufficient to support current and planned capacity for approximately 40 years for both grey and white cement Proximity to mines Our cement plants located in close proximity to our limestone reserves, resulting in lower transportation costs We have access to large reserves of high quality limestone for both our grey and white cement operations As one of the first cement producers in Northern India, we were able to choose our limestone reserves in an area with high quality limestone resources. Due to its high quality, we are not required to purchase sweeteners to improve the quality of our limestone for our grey cement operations, which provides us with a cost advantage. Based on independent geological surveys, we believe that our limestone reserves are sufficient to support our current and planned capacity for approximately 40 years for both grey and white cement. White cement requires [much higher] quality limestone, which has been one of the entry barriers for cement manufacturers Our manufacturing plants are in close proximity to our limestone reserves, resulting in lower transportation costs.

7 Experienced Management Team and Strong Processes
People Process Professionally managed company - supported by an experienced senior management and operating team Most of our senior management have been with the company for more than 20 years Good labour relations Nimbahera plant selected as the Regional Training Centre for Northen India, by the World Bank and DANIDA Grey cement plant at Nimbahera : ISO 9001 : 2000 QMS;ISO :2004 EMS certified White cement plant at Gotan : ISO 9001 : 2000 QMS; ISO : 1998 EMS and OHSAS : 2005 certified Continuously Improving Productivity(1) Over the years, we have built a highly experienced team of extremely competent professionals. The strength of the management can be gauged from the fact that a number of our key people are with the company for more than two decades, beginning at lower levels and gradually growing to assume senior positions. This has also led to the creation of a pan-organisation, cross functional synergy which leads to superior performance. We are proud to state that we have had no labour unrest for the last [ ] years Our focus on training best practices is reflected in the selection of our Nimbahera Plant as the Regional Training Centre, set up with aid from the World Bank and DANIDA. It is one of the four regional centres in the country and serves as a on-the-job skill upgradation ground for all aspects of cement manufacturing for professionals in the industry. (2) (1) Combined production of grey and white cement divided by total number of full-time employees (2) Production in FY months annualised

8 Strong Sales and Distribution Network
Well developed distribution network for Grey Cement in North India Strong national distribution network for White Cement Strong Brands Sales Handling Team Works closely with the distribution channel 64 Warehouses Cater to more than 1,400 industrial consumers (White Cement) 4,000 Retailers Customer Marketing Team We have a strong and wide distribution network for grey cement in North India and a strong national distribution network for white cement Our distribution network covers 64 feeder depots and 4,000 stockists. We believe that the extent of this network, and our relationships with our dealers, enables us to market and distribute our cement widely and efficiently At JK Cement, we have carefully cultivated a brand which stands for longevity, trust and quality. This translates into a positive recall value and enhanced mindshare, and therefore, leads to JK Cement being a generic term at quite a few of our sales locations. In a commoditized market with a multitude of brands we have created tangible differentiators of quality and consistency around JK Cement in order to generate a customer pull Together with this, we work closely with our customers to develop applications for our white cement product like durable white washing products, tile bonding products and flooring applications. Grey Cement 79 Members White Cement 101 Members Co-ordinate with dealer network and direct consumer: Efforts to increase production of blended cement to meet growth in demand Works closely with customers to retailers and increase awareness and usage of white cement producers

9 North India : Favourable Environment
Agenda An Introduction Projects North India : Favourable Environment Summary

10 JK Cement : The Journey 1975 1984 1987 1997 2001 Nov ‘04 Feb ‘06
Part of a BIFR company (JK Synthetics) : Inability to build low cost captive power sources No working capital arrangement with banks Following the separation of our cement business from a BIFR company: We have recently been sanctioned a working capital of Rs.650mm Strengthen company by investing net proceeds in: Captive power projects Capacity expansion Period of Financial Distress for JK Synthetics Post Restructuring Future… 1975 1984 1987 1997 2001 Nov ‘04 Feb ‘06 Grey Cement plant at Nimbahera commenced commercial production A captive thermal power plant was set up at Bamania Acquisition of cement business by JKCL from JKSL JK Cement has a rich history of leadership in the cement industry we were amongst the first few grey cement manufacturers in North India we were amongst the first white cement manufacturers in the country we set captive thermal power plant in [1994] - years before other regional players started doing it we adopted the most modern technology available globally at the time, with the recognition that it will be key to sustained efficiency and a mindset of excellence we located our manufacturing facilities in close proximity to some of richest and largest limestone deposits, which even today can support growing production for at least the next 40 years However, during the 1990s, JKSL’s man made fibre operations became unprofitable JKSL.and was consequently referred to BIFR in 1997. As part of JK Synthetics, the cement division had the onerous responsibility of supporting the losses and liabilities of the man-made fibres division. As such, there was a hindrance to growth Inability to modernize our captive power plant, while other cement manufacturers set their own captive power plants resulted in significantly higher cost of power Zero working capital facility from banks resulted in high creditor period and consequently high cost of procurement and production Now that we are liberated from the burden of being a BIFR company, we have initiated steps to reduce our cost of production We have been recently sanctioned a working capital of Rs 650 mm and We propose to invest the net proceeds from the public offering to develop cheap captive source of power The events and our success in the last 15 months have transformed us and built significant momentum for the years ahead As I mentioned earlier, JK Cement represents ... an opportunity to participate in a turnaround story... an opportunity to invest in growth White Cement plant established in Gotan Commissioning of 0.75 MnTPA grey cement plant at Mangrol Public Issue of Shares of JK Cement

11 Correcting the Power Situation
1 Correcting the Power Situation Developing Captive Power Sources Approx 86% of our power requirement in FY05 can be met from the low cost source of captive power proposed Power Cost (Rs./kwh) Grid power purchase cost (September 30, 2005) 4.3 Potential of using Waste Heat to generate power Average power cost in FY05 3.9 Does not involve any fuel consumption Potential to generate revenue from carbon trading Waste Heat Recovery project registered with United Nations Framework Convention on Climate Change (UNFCCC) Amongst the few cement companies in the world to be registered for carbon trading Expected to generate around 70,800 carbon credit (CER) per annum We propose to invest around Rs 2,045 mm to develop cheap source of captive power Waste Heat Recovery JK Cement has the unique potential to use high temperature gases to generate power Not all cement plants can use the technology - our 4 stage pre-heater and planetary cooling system results in emission of high temperature gases which can be used to generate steam that will then be used to rotate turbines and produce power [please check] WHR was first implemented in India at India Cements’ plant of [ ]; JKCL will be amongst the first few in India to implement the technology. This technology has however been implemented at several plants in Japan successfully WHR technology will be sourced from [Taiheiyo Engg], a leading cement manufacturer in Japan and the equipment will be supplied by Thermax As per our consultant, the cost of generating power will be around Rs [ ]only which is less than [ ]% of the cost of purchasing power from the electricity grid WHR has NO FUEL requirement - we are therefore not exposed to any fuel price risk - further, power generation is environment friendly - we are in fact exploring the potential to earn revenue from sale of carbon credit Petcoke based Power Plant Our petcoke power plant will operate on a mix petcoke & coal as fuel in the ratio of 70:30 As per our consultant, the cost of generating power will be around Rs [ ]only which is also significantly lower than the cost of purchasing power from the electricity grid Thermal Power Plant We also propose to replace and existing non-operation 7.5MW turbine with a 10MW turbine. These power projects can meet upto [86]% of our power requirements in FY05 We expect these power projects will significantly reduce the cost of power More importantly, this growth in operating profits is not dependent on external factors like cement prices but is driven by internal projects and is hence less vulnerable to market environment 1.33 Low operational cost due to ZERO fuel requirement We expect to reduce our cost through captive power projects (1) Estimates as per techno-economic feasibility report by Holtec (2) In the second year of operation

12 2 Capacity Expansion Increasing Capacity of Grey and White Cement Plants Grey Cement White Cement Expansion at Nimbahera grey cement facility Increase in grinding capacity to produce more blended cement (PPC) Rs.190mm(3) out of project cost of Rs.225mm already incurred Increased production of blended cement will reduce overall cost of production PPC constitutes 29% of our grey cement sales(4) Increase in production capacity at white cement at Gotan Phase I to increase capacity to 0.35MnTPA under commissioning and trial run – Funded from Internal Accruals Rs.27mm(3) out of project cost of Rs.90mm for Phase II already incurred To capitalize on the high growth in Northern India we intend to increase our production capacity of blended cement by increasing the grinding capacity at our Nimbahera facility. This will enable us to increase the production of blended cement, without requiring us to increase kiln capacity, and also reduce our overall cost of production. We also plan to increase the production capacity at our white cement plant to meet the peak seasonal demand as well as meet future growth in demand. Both the capacity expansion projects are in progress and we expect to commission the expanded capacity by June 2006 The capacity expansion plans are in line with our strategy to maintain our position as a leading player in Northern India (1) Trail run to expand from 0.30 to 0.35 million tonnes capacity currently under progress; expansion funded from internal accruals (2) Based on capital expenditure of Rs 90 mm to expand from 0.35 to 0.40 million tonnes (3) As on March 31, 2006; (4) By volume; for six months ended September 30, 2005

13 North India : Favourable Environment
Agenda An Introduction Projects North India : Favourable Environment Summary

14 Indian Cement Industry Overview
Cement Demand Growth(1) Cement demand dependent on the general economic condition Focus on infrastructure development Increasing demand from housing and commercial construction Demand Potential : Low per Capita Cement Consumption(2) We operate in exciting times for the Indian economy - India is at the cusp of transition - from being a fringe player to being a key participant in the global economy And as we see it, Cement Industry in general and JK Cement in particular, is both a catalyst and beneficiary of this trend Cement demand is generally positively correlated with the growth in economy, and more so for a developing country like India which requires significant investment in infrastructure Today, despite being the 2nd largest cement manufacturer in the world, the per capital consumption of cement in India is around 1/3rd of the global average and far less than that in fast developing economy. And therein lies the significant growth and investment opportunity (1) Source : CMIE, CMA (2) Source : CMA

15 Demand Drivers Increased focus on infrastructure development, together with increasing demand for housing and commercial construction expected to drive growth in cement industry Infrastructure Housing Sector Housing Sector growth driven by declining retail interest rates and incentives for housing loans Government has indicated commitment to developing infrastructure and undertaking large projects involving construction of ports, airports, power plants and highways linking different parts of the country Commercial Projects India: Investing in Infrastructure(1) India Inc.: Capital Investment Plans (2) Cement consumption is driven largely by demand in 3 sectors : Infrastructure, Commercial Projects and Housing Sector Infrastructure Infrastructure is expected to be the biggest growth driver in the coming years The Planning Commission projects a CAGR of [12%]for increased infrastructure spend And just to spell the target the Government has set for itself under the “Bharat Nirman project” for Rural Infrastructure Every habitation over 1000 population and above (500 in hilly and tribal areas) to be provided an all-weather road 60 lakh houses to be constructed for the rural poor by 2009 one realises that the requirement of cement to build our country is huge Commercial Projects The healthy state of our economy and improved competitiveness of Indian industry is expected to result in increased investment in commercial projects. As the chart shows, the proposed capital investment by India Inc is at an all-time high reflecting the high level of optimism and confidence in the Indian industry Housing Sector With continued incentives to housing sector, affordable and easier availability of housing loans, a growing middle class and favorable demographics, residential construction is expected to generate increased demand for cement products. The growth potential in housing sector is evident from the rise in property prices and interest demonstrated by realty venture capital funds in recent times (1) Source : CRIS INFAC, Data represents construction in infrastructure (2) Source : CMIE; Capital Investments includes proposed, announced and under implementation projects (3) Includes Airports and Ports, Telecom and Tourism

16 Northern India : Favourable Environment
Northern India has reported capacity utilization consistently higher than any other region Northern India : High Growth Demand Region(1) Northern India : High Capacity Utilization (FY05) (1)(2) Capacity : 21.2 Production : 22.5 Capacity Utilization : 106% Capacity : 28.8 Production : 29.7 Capacity Utilization : 103% Capacity : 28.7 Production : 27.1 Capacity Utilization : 94% North India represents a region of consistent high growth and high capacity utilization Cement manufacturers in Northern India operated at more than 100% capacity utilization in FY05 - higher than any other region in the country. We expect plants in North India to operate at higher utilization levels in FY06. Further, cement plants in neighboring regions - Western India and Central India also operated at reasonably high level of utilisation which limits threat of any surplus inflow from neighboring regions North India has also been amongst the high cement consumption growth regions And more importantly, cement consumption growth in North India has demonstrated consistent growth unlike other regions We expect Northern India to continue to demonstrate strong cement demand, driven by increased emphasis on infrastructure projects including urban infrastructure and power projects and continued growth in housing sector. Capacity : 22.2 Production : 20.1 Capacity Utilization : 90% Capacity : 47.9 Production : 45.4 Capacity Utilization : 95% North South East West Central North East South West Central India (1) Source: CMA data (2) Includes export of cement and clinker; FY05 data; All regions capacities adjusted for non-operational plants

17 Northern India : Favourable Environment
The chart reflects the positive environment for cement prices in North India - we have taken retail price of a cement bag in Delhi as a proxy Cement is a seasonal business - demand during the monsoon period of June - Oct is generally low resulting in slackening in cement prices You will notice during all these periods in 2002, 2003 and 2004, that cement prices in October end have been generally lower than that in April beginning. But 2005 was different - cement prices instead hardened upwards, a reflection of the favorable demand - supply situation Consequently, the recent 1.2 million ton brownfield expansion that was commissioned by Shree Cement in October 2005 was easily absorbed by the North India market without any impact on price At this point, I would also like to make an additional point [check] Cement plants in Rajasthan enjoy sales tax exemption benefit for sales within the state of Rajasthan. While JK Cement plants enjoyed 25% sales tax exemption benefit, most of our key competitors enjoyed upto 75% sales tax exemption benefit. This differential provided significant competitive advantage to our competitors. Revision of sales tax scheme in Rajasthan and possible implementation of VAT in near future will significantly reduce the disadvantage for JK Cement (1) Retail price of Cement in Delhi; Source: CRIS INFAC

18 North India : Favourable Environment
Agenda An Introduction Projects North India : Favourable Environment Summary

19 White Cement : Low Earnings Volatility White Cement EBITDA (Rs.mm)
Financial Summary Please refer to page 25 (Presentation of Financial Data) for discussion on financials Net Sales (1) EBITDA White Cement : Low Earnings Volatility (Rs. mm) (Rs. mm) White Cement EBITDA (Rs.mm) (1) Excludes Excise Duty and Sales tax

20 Summary : JK Cement Investment Case
North India : Favourable Environment Leading Cement Player White Cement Producer in a Pre-Dominantly 2 Producer Market High Quality Limestone Reserves While JK Cement is an exciting turnaround growth story, let me also highlight several other reasons why we represent an attractive investment opportunity We operate in a highly attractive region - Northern India and we have all the right ingredients to be successful Strong Sales & Distribution Network Experienced Management Team and Strong Processes

21 Summary Captive power projects to reduce cost of production FY08 Capacity expansion Replacement of existing non-operational 7.5 MW turbine with 10.0 MW turbine at Bamania FY07 Higher cement prices Sanction of Working Capital Facility FY06 In summary, JK Cement presents an attractive investment opportunity today…. - an opportunity to invest in the Indian infrastructure - an opportunity to invest a turnaround high growth story JK Cement is a Growth Story Post restructuring in FY05, we have initiated several cost reduction exercises and benefited from higher cement prices As I mentioned, our EBITDA in 9 months of this year at Rs [ ]mm is already higher than our full year profitability in FY05 Higher capacity in FY07 and upgrading of our thermal power plant should add to the profitability of the company Implementation of power project by Q1-FY08 will significantly enhance our profitability And this will only strengthen the company further…for us to pursue further growth Restructuring wherein cement business was acquired by JK Cement FY05

22 Annexure

23 Restructuring Exercise
Shareholders Issue of shares ~ 14 %post issue capital Promoters Lenders ~ 86 % post issue capital JK Synthetics Man-made Fibres Cement (Grey, White) Nimbahera, Mangrol, Gotan Rs.5,300 mm JK Cement Debt Rs.4,970 mm Kota, Jhalawar Business Transfer with effect from Nov 4, 2004 As part of restructuring of JK Synthetics, the cement operations were hived off into JK Cement Purchase consideration was used by JK Synthetics for one-time settlement with Banks / Financial Institutions / Secured Lenders One share of JK Cement issued for every 10 shares held by shareholders of JK Synthetics; Consequently, JK Cement was listed on BSE on June 30, 2005 There exists no cross-holding of shares between JK Synthetics and JK Cement Cement Business was a division of JK Synthetics till November 3, 2004 During the 1990s, JKSL’s man made fibre operations became unprofitable and began to accumulate losses which resulted in the erosion of the net worth of JKSL.and was consequently referred to BIFR in 1997. Let me emphasize here that the Cement division was always profitable [can we say this?] Under a Scheme of Rehabilitation approved by AAIFR (Authority for Industrial and Financial Reconstruction), on November 4, 2004, JK Cement acquired the cement business from JKSL. The consideration was used by JKSL to repay all of its outstanding debt to its secured creditors including banks, financial institutions and debenture holders completely The management and employees were transferred on an on-going basis In addition, JK Cement also issued 1 share to shareholders of JKSL for every 10 shares held in JKSL free of cost and consequently got listed on June 30, 2005. So while the cement business have been operating for more than 30 years, its history as part of JK Cements is a little more than a year only

24 Presentation of Financial Data
Pursuant to the Scheme of Rehabilitation, with effect from November 4, 2004, the JKSL Cement Division was acquired by the Company. Prior to such acquisition, the Company did not have any significant operations. The financial information for fiscal 2003 and 2004 and as of and for the six months ended September 30, 2004 represents financial information relating to the JKSL Cement Division, which was one of the two business segments of JKSL prior to its acquisition by the Company. The other business segment of JKSL was the JKSL Man-made Fibre Division As the Scheme of Rehabilitation became effective in the middle of fiscal 2005, in order to facilitate a more meaningful comparison, we have presented the aggregate of the results of the JKSL Cement Division for the period from April 1, 2004 to November 3, 2004 and the results of the Company for the period from November 4, 2004 to March 31, 2005 as our results of operations (until the line item “profit before depreciation, interest and tax” in our profit and loss account) in fiscal However, the actual results of the Company would vary from the information presented for fiscal 2005 had the Scheme of Rehabilitation become effective as of April 1, 2004 In addition, certain administrative and other expenses incurred by JKSL were not allocated to either the JKSL Man-made Fibre Division or the JKSL Cement Division in its audited financial statements. We have for purposes of presentation of the financial information allocated 50% of such expenses to the results of operations of the JKSL Cement Division You are cautioned not to place undue reliance on this financial information comparison. This slide capture our Net Sales and EBITDA for both Grey and White Cement separately. I would like to highlight a few key points: Grey cement While, our profitability per tonne in grey cement is low as compared to other cement players, any reduction in our cost structure will add significantly to our profits For example: Reduction of power cost by every Re 1 per unit at say 90 units of power consumption per ton adds Rs 90 per tonne of grey cement. So saving of Re 1 per unit only increases our profitability by [33%] That is the impact of our power projects that we are looking at. White cement Our profits from white cement have been largely consistent. And as we mentioned, this provides us a cushion for any downturn in a more cyclical grey cement industry Our performance post restructuring Post restructuring in FY05, we have initiated several cost reduction exercises Consequently, our EBITDA in 9 months of this year at Rs [ ]mm is already higher than our full year profitability in FY05

25 Shareholding Pattern : Increasing Public Float post Offering
Pre-Issue Post-Issue (post March 10, 2006) Post Listing, JK Cement stock has performed in line with our peers, other cement players Post offering, the promoter holding will reduce from [ ] to [ ]

26 Financial Summary Balance Sheet Income Statement
(1) Includes Capital Work in Progress (2) Includes secured and unsecured debt (3) Includes registered office and corporate office expenses and prior period items (4) Includes JKSL cement division financials pre-acquisition and Company financials post-acquisition


Download ppt "Housing Road Bridges June 2006."

Similar presentations


Ads by Google