SVIPS Steel Limited 2007 1 Forw ard Looking and Cautionary Statem - - PowerPoint PPT Presentation

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Steel Limited SVIPS 2007

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Forw ard Looking and Cautionary Statem ent

Certain statements in this report 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 risk and uncertainties relating to these statements include, but are not limited to risks and uncertainties regarding fluctuations in earnings, out ability to manager growth, intense competition within Steel industry including those factors which may affect

• ur cost advantage, wage increases in India, our ability to attract and retain

highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our internal operations, reduced demand for steel, our ability to successfully completes and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which the Company has made strategic investments, withdrawal of fiscal government incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, unauthorised use of our intellectual property and general economic conditions affecting our industry.

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JSW Steel today Key strategic initiatives Industry dynamics Corporate social responsibility Benchmarks

Agenda

4 Goa port Chennai port

416kms 540kms

Mumbai port Vasind and Tarapur

80 & 120kms

Vijayanagar

JSW Steel - Today

• Well located with proximity to source of raw

material & growing domestic market Blend of Technology - optimising synergies Well integrated production facilities Diversified product profile – presence across value chain

Crude steel production CAGR – 28%

0.78 1.43 1.61 1.88 2.25 2.70

• 0.50

1.00 1.50 2.00 2.50 3.00 FY' 02 FY' 03 FY' 04 FY' 05 FY' 06 FY' 07E million ton

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Raw materials Steelmaking & rolling Logistics / Utilities / Sales

VMPL -Mining (Iron ore) Iron ore production: 1.5 - 2 mt Meeting 25% - 30% requirements SWML – Mining ( Dolomite , Limestone ) Limestone production : 0.2 mtpa Meeting 60% - 75% of requirement Dolomite production : 0.5 mtpa Meeting 85% - 100% of requirement

Power

Captive Power Capacity: 230 MW Production: 190 MW Meeting 80% of requirement JSW Energy Limited Capacity: 260 MW Generation: 240 MW Longterm PPA Meeting 20% of requirement Production facility at Vijayanagar Pellets : 5 mtpa Crude steel: 3.8 mtpa Slabs: 3.8 mtpa HR Coils : 2.5 mtpa Production facility at Vasind HR Plate : 0.28 mtpa CR : 0.43 mtpa Galvanised : 0.4 mtpa Production facility at Tarapur CR : 0.57 mtpa Galvanised : 0.5 mtpa Pre-painted : 0.1 mtpa SWPL (Port) Cargo Handling Capacity – 5 mtpa

• Max. vessel size : 90,000 DWT

JPOCL – Industrial Gases Capacity : 5000 tpd Meeting 85% of requirement BOC - Industrial Gases Capacity : 750 tpd Meeting 15% of requirement Branches Overseas offices at China, Australia, USA & UK Wide domestic presence with branches and strong dealer networks

JSW Steel – Today (Cont .)

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Leading position in World market

Largest exporter of Galvanised products from India Largest market share of flat products in South India

Geographical Sales distribution - 9M FY 2007

USA 4% Middle East 8% South America 3% Europe 17% Central America 1% Asia 9% Africa 2% Domestic Market 56%

Product mix - 9M FY 2007

HR Plates 6% CR Coils 3% HR Coils 48% Slabs 15% Colour Coated 2% GPGC 26%

* *

* Tonnage basis

Consolidated Revenue Share - 9M FY 2007

HR Plate 5% CR products 2% Others 8% Colour Coated 2% Galva products 32% H.R. Coils 41% Slabs 10%

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Rich experience in project execution

1.6 mtpa greenfield project 0.9 mtpa brownfield expansion 1.3 mtpa integrated expansion

Integrated project commissioning delayed due to delay in financial closure & start-up issues

• f Corex plant

Setting up of blast furnace State-of-art non recovery coke oven plant Captive power plant utilising waste gases Units set up in record time & at a low cost Implementation of integrated plant with

Blast Furnace, Coke Ovens & Sinter facility

Individual units set up in good time & with

low investment

Experienced team for setting up integrated steel plants Implement projects within time Leverage existing infrastructure to set up projects at low investments

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Low specific investment cost Specific investment cost comparable with best in industry Efficient cost structure due to low fixed cost

Expansion - Low investment cost

Capacity Investment/ton*

*

* Specific investment cost considered upto HR Coil stage only

1.6 6.8 3.8 2.5 923 551 550 682 1 2 3 4 5 6 7 8 Stage 1 Stage 2 Stage 3 Stage 4 E million ton

• 100

200 300 400 500 600 700 800 900 1,000 US$ / ton

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Stringent operating cost management

HR Coil production cost trend

Consolidated cash cost breakdown - 9M FY 2007

Overheads

Low cost of production despite partial backward linkage to key raw materials

Labour

5%

3% Other raw material 20% Utility 7% Power 4% Coal 45% Iron ore 16% 206 232 353 316 285

• 50

100 150 200 250 300 350 400 FY 03 FY 04 FY 05 FY 06 9M FY07

$/ton

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Low conversion cost High plant utilisation factor

Refractory relining life comparable with best in the world

Higher yields

Caster yield at 98.8% amongst best in the world

Zero utilisation of petro fuels

Corex gas used for in-house heating

High degree of plant integration Low specific energy consumption Over 85% solid waste utilisation Lower water consumption per ton High labour productivity

An efficient & low cost steel producer

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Financials highlights

Historical performance FY 2003 – FY 2006

Turnover CAGR – 34% EBIDTA CAGR – 44% Average net cash accurals – Rs.11.54 bn Average ROCE – 18.73%

Turnover EBIDTA Financial highlights – 9M FY 2007

Sales revenue of Rs. 60.91 bn EBIDTA OF Rs. 20.22 bn, margin of 33% Net cash accruals – Rs.15.14 bn Net income of Rs. 8.79 bn ROCE – 22.31%

• Figures for FY03 are on standalone basis and for all other years figures

adjusted, wherever necessary, to reflect merger. 70.4 67.7 46.8 27.9 60.91

10 20 30 40 50 60 70 80

• Rs. bn

FY 03 * FY 04 FY 05 FY 06 9M FY 07

• Rs. bn

20.22 21.3 23.7 7.1 15

5 10 15 20 25

FY 03 * FY 04 FY 05 FY 06 9M FY 07

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JSW steel : Leading player in Indian steel Industry

Leading steel producer

One of the most modern plant with state-

• f-art technology

Amongst companies with best EBITDA margins in the world

Robust business model

Efficient operating cost structure Varied product basket

Consistent performer

Fast implementation of projects

Sound corporate governance practice

13 member board with 8 independent directors

0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50% ROIC EBITDA margin

NLMK Evraz Severstal Nucor Mechel Blue scope Smorgon AK Steel Usinimas Tenaris Steel Dynamics Maanshan Ryerson Worthington Commercial Metals Angang US Steel Carpenter

JSW Steel

Tata Steel Source: JP Morgan, company

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Agenda

JSW Steel today

Key strategic initiatives

Industry dynamics Corporate social responsibility Benchmarks

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Sustainable Growth Strategy Strategic Objectives:

Consolidate position in domestic steel industry with focus on enhancing basic steel making capacity Expand global presence with value addition closer to markets

Key elements

Grow market share Improve vertical integration Diversify product profile Maintain robust financial profile

CREATE WORLD CLASS STEEL COMPANY

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Competitive advantages:

Leverage existing infrastructure Low specific investment cost Enhance capacity to 6.8 mtpa by March 2009

Increase in Crude Steel production:

Total investments: Rs. 54.50 bn Growth of production: 3.0 mtpa

Grow market share

Current market Share 8% Targeted market Share 12%

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BF – 1 Upgradation

Upgradation of blast to increase production from 0.9 mtpa to 1.2 mtpa Improve fuel efficiency with lower coke consumption

2.8 mtpa expansion

Integrated steel production through BF- BOF route Grow market share (Key Projects )

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Existing

RAW MATERIAL

Iron ore : 25%-30% Coal : 0% Fluxes : 60%-85%

PRODUCTS

Slabs : 26% HR : 48% Value added : 26%

Backward Integration Downstream

Target

Iron ore: 50%– 60% Coal : 50% – 70% Fluxes : 85%-100%

Target

Longs : 22% HR : 50% Value added: 28%

Striving for end – to – end integration Increase vertical integration

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Total investments: Rs. 31.09 bn Enhance rolled product output Establish presence in long products

Objective – Build presence across flat products and long products to improve realisation & de-risk business model

Crude steel – 6.8 mtpa Crude steel – 6.8 mtpa

HR products 3.4 mtpa CR products 0.9 mtpa Coated products 0.9 mtpa Long products 1.5 mtpa

Diversify market share

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Cold rolling mill complex

Production of auto grade CRCA products Manufacture of value added HR products

Hot Strip Mill

State-of-art HSM of 2200 mm width high quality products Ability to expand to 5 mtpa

Galvalume facility

Conversion of 4 galvanising lines into galvalume Entry to premium product segment Diversify market share – Key projects

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Maintain sound financial profile

Maintain gearing below 1 Healthy mix of foreign currency and rupee debt Reduce interest cost.

Debt / EBIDTA Debt / equity

5.47 0.81 0.96 1.33 2.32

1 2 3 4 5 6

F Y 3 * F Y 4 F Y 5 F Y 6 9M FY 07

times

8.29 3.15 1.51 1.82 1.57

• 2.00

4.00 6.00 8.00 10.00 times

F Y 3 * F Y 4 F Y 5 F Y 6 9M FY 07

• Figures for FY03 are on standalone basis and for all other years figures

adjusted, wherever necessary, to reflect merger.

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Project Capacity (mtpa) Expected Date of Completion Cost (Rs. bn) Debt (Rs. bn) CRM 1.00 Q2, FY 08 10.00 6.00 2.8 mtpa 2.80 March ‘09 53.00 30.00 New HSM 2.00 Sep ‘09 20.00 12.00 BF-1 Upgradation 0.30 FY ‘09 1.50

• HSM- Phase II

0.70 FY ‘08 0.75

• Galvalume
• 31/03/08

1.09 1.25 CPP-30 30 MW 31/03/08 0.97 Total 87.31 49.25

Projects under implementation – A summary

Financial closure achieved Earmarked cash accruals No dilution of equity

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Dominant position in domestic steel industry

10 mtpa by 2010 at existing location Develop greenfield projects in West Bengal &

Jharkhand

Scan opportunities for inorganic growth

Acquire value added facilities abroad Expand geographical footprint

Secure key raw materials

Vision

Achieve leadership position in steel industry

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JSW Steel today Key strategic initiatives 2008-2011

Industry dynamics Corporate social responsibility Benchmarks

Agenda

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High degree of regional consolidation

Consolidation – A global phenomena

Greater discipline amongst industry players

Region Players Market Share

USA Arcelor-Mittal, Nucor & US Steel (3) 71% EU-15 Arcelor-Mittal,Riva, Thyssen, Corus (4) 70% Latin America Usinimas, Gerdau, Technit (3) 74% Japan Nippon, JFE, Sumitomo (3) 67% Russia Evraz, Severstal, MMK, NLMK (4) 80% India SAIL, Tata Steel, JSW Steel, Essar, Ispat(5) 60% China Baosteel, TISCO, Anhang, Wuhan (4) 17%

Source: UBS

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Steel Cycles

Better positioned to withstand cyclicality

Note: 1 Includes Algoma, AK Steel, Chaparral Steel, Dofasco, IPSCO, Mittal Steel, Nucor, Oregon Steel, Steel Dynamics, US Steel, Wheeling-Pittsburgh, CSN, CST, Gerdau SA, Ternium, Usimina, Arcelor, Corus Group, Rautaruuki, Salzgitter, SSAB, Thyssenkrupp, Voestalpine, Baosteel, China Steel, JFE, Kobe Steel, Nippon Steel, POSCO and Sumitomo

• Steel cycles have become shorter due to quick supply side response
• Periods of upturn longer than downturn
• Previous troughs not visited in subsequent cycles

Global Steel Index

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JSW Steel today Key strategic initiatives 2008-2011 Industry dynamics

Corporate social responsibility Benchmarks

Agenda

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Beyond business

Making steel is our profession Generating smiles, our passion

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Our pledge to build enduring value for society has inspired us to setup the JSW Foundation which is working towards creating a caring culture to improve the quality

• f life of people who live around our plants.

Wherever JSW Foundation sets up base, it supports the aspirations of the neighboring communities especially in the areas of Health, Education, Community, Sports, Art, Culture and Heritage

• Health Initiatives : State-Of –The- Art health infrastructure
• Educational Initiatives : Runs schools, Computer Aided Training Centres, Balwadis, Mobile

Libraries, Vocational Training Centres .

• Women Empowerment Initiatives : Mahila Dairy Development, Rural BPO, Pay loader
• perational training, Shramasadhana, Nari Vikas Kendra etc
• Sports Initiatives : Badminton, Squash and Swimming Academies, offer opportunities for young

and rural youth to excel in sports

• Art, Culture and Heritage Initiatives : Promotion of arts and artists through series of workshops,

restoration of Sir JJ School of arts, Conservation of the world heritage site at Hampi

The socially responsible citizen

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Agenda

JSW Steel today Key strategic initiatives 2008-2011 Industry dynamics Corporate social responsibility

Benchmarks

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Valuations- EV / ton

Source: Bloomberg, Macquarie Research

EV / ton - Asian companies

1434 675 681 719 747 933 1046 1059 1063 1344 200 400 600 800 1000 1200 1400 1600 J F E N i p p

• n

S t e e l C h i n a S t e e l T a t a S t e e l B a

• s

t e e l P O S C O S A I L W u h a n i r

• n

& S t e e l J S W S t e e l A n g a n g N e w S t e e l US$/ton

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Valuations- PE multiple

Source: Bloomberg, Macquarie Research

PE multiple FY 07E - Asian companies 12.5 11.3 10.8 9.8 9.7 8.2 7.2 6.5 6.1 5.5 2 4 6 8 10 12 14 N i p p

• n

S t e e l K

• b

e S t e e l B a

• s

t e e l S u m i t

• m
• M

e t a l s J F E C h i n a S t e e l S A I L P O S C O J S W S t e e l T a t a S t e e l

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Merger - Valuations

Recent merger - Valuations

9 7.3 13.1 5.8 8.1 2.9 7.9

121 671 864 706 476 607 625

2 4 6 8 10 12 14 Tata-Corus Evraz-Oregon Esmark- Wheeling Pittsburgh Mittal-Arcelor Arcelore-Dofasco Mittal- Kryvorizhstal Techint- Hylsamex times 100 200 300 400 500 600 700 800 900 1,000 US $/t EV/EBITDA EV/Ton

Source: Citigroup

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Well positioned with:

Improving cost structure Ability to scale capacities at low specific investment cost Diverse range of products on offer Established and deep knowledge of customer base Aggressive growth plans with financial discipline

Deliver returns on sustainable basis

Conclusion