Description
It describes talks about Industry Trends of aluminium industry, PEST Analysis of aluminium Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about Hindalco Industries, it's Finance performance, SWOT analysis and Various Strategies employed.
HINDALCO INDUSTRIES – COMPANY ANALYSIS
Aluminium Demand and Market: In CY 2010, the world aluminium consumption stood at around 41 Million tonnes, a sharp increase of over 20 % over 34 Million tones consumption in CY 2009. The CY10 production stood marginally higher at ~42 Million tones against production of 38 Million tonnes in CY 09. The sharp rise in demand was the result of strong recovery in the emerging market demand and primarily restocking led growth in developed markets. As in the past, China continued to be the driving force behind this demand growth, growing at ~ 21% and contributing to over 41% of global aluminium demand in CY10. Globally, Aluminium production too, increased as the producers restarted their capacities with the smart recovery in the aluminium LME. As a result the global markets continued to be in surplus. During the crisis as the aluminium prices fell sharply, many players with bullish view on aluminium, started building aluminium inventory. Low storage cost added by negligible financing cost and positive outlook on prices resulted into inventory getting locked as contango exceeded carrying cost. This trend still continues resulting in shortage of aluminium in the physical market and rising premiums. Today, the global inventory stands at historical peaks and has created an overhang leading to a paradox of relatively depressed prices and yet higher premium. Indian domestic demand continued to be robust on the back of strong industrial growth. Strong growth in the end user segments such as automobiles, Industrial and infrastructure; and thrust on power
sector growth , propelled the aluminium demand which grew at 14% despite of some moderation towards later part of the year. In FY11, LME average aluminium prices remained strong at around 2,250 $/tonne an increase of over 21% over previous year’s average prices. The appreciating rupee though negated some of the LME price gains as for every tonne of aluminium sold we realised fewer rupee. The aluminium prices continued to rise even as inventory levels remained at their historic highs.This was the result of tightness in the physical market, with most inventories as explained above tied up at various ware houses under financing deals. Across the globe, the cost of production of aluminium increased sharply as input costs such as alumina and power surged. Alumina costs increased as the aluminium prices recovered and bauxite quality deteriorated. Strong increase in aluminium production with dwindling supply of quality bauxite, coupled with rising crude related costs resulted in higher cost of alumina. The higher alumina cost has led to increased clamor for decoupling of alumina prices from aluminium prices. Alumina prices, which used to be around 11-5-12.5% of aluminium prices historically are today trading north of 16% and with a possible move to spot based pricing, are expected to increase further. For most producers power costs increased with sharp rise in coal/energy prices. The cost of other inputs such as CPC coke and anodes also increased in line with the rise in the crude prices. In the Indian context increase in coal prices further accentuated the cost pressure. Aluminium demand in India has been very strongIn the recent past growing at almost 14% CAGR.Unlike the western world the primary demanddriver for aluminium in India has been power sector which accounts for almost 48% demand.With government’s stated committed spending towards achieving 70,000 MW generationtarget, the spend on power infrastructure will be huge. As
1
HINDALCO INDUSTRIES – COMPANY ANALYSIS
far as the other aluminiumconsuming sectors are concerned with growing urbanisation the demand growth has picked upfrom packaging, automobile, construction (increased usage) electronics (cell phone,laptop bodies) etc. The per capita consumption at ~1.2 kg is still abysmally low as comparedwith even China ~10 Kg and the western world ~ 15-18 Kg. This offers significant potentialdemand upside. The Global demand outlook for FRP (Flat rolled products) is extremely bullish with rising demand from beverage cans; especially in the emergingmarkets, consumer electronics and automobile segment (with increased emphasis on weight reduction). Novelis is the global leader in this segment. Aluminium production is expected to increase in line with the demand. The market surplus is going to continue for a while. Strong prices have ledmany smelters to restart their production in last one year. In addition some new smelters are on the verge of delivering. The cost push has been felt in the recent times with rise in crude prices from the recent highs. Most input costs such as fuel oil, coal tar pitch, and caustic soda have increased along with the freight costs. Alumina costs for non integrated smelters have gone up and may increase further, notwithstanding new capacity additions, especially in the light of deteriorating bauxite quality, logistic related issues for new projects, increasing capital requirement and higher input costs. The prices are expected to continue to stay range bound over the short term with a large inventory overhang. Aluminium inventories across the globe are near all time high. But most of these inventories are reportedly bound in financing deals and are not expected to flood the market. The long term fundamentals are strong with the emergence of aluminium as an eminent metal with applications touching several aspects of human life. Competitor Analysis: The Indian aluminium sector is characterised by large integrated players like Hindalco and National Aluminium Company (Nalco). The other producers of primary aluminium include Indian Aluminium (Indal), now merged with Hindalco, and Sterlite Industries. Following table shows sales and profit of the peers for the FY-2010-11: Rs. In crores Hind Aluminium Mar '11
Hindalco Mar '11 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income
NALCO Mar '11
PG Foils Mar '11
Sacheta Met Mar '11
25,255.01 1,497.87 23,757.14 304.25
6,481.35 422.37 6,058.98 338.43
153.90 13.27 140.63 6.56
53.35 0.00 53.35 3.38
361.20 0.00 361.20 0.08 18.57 379.85 11.86 8.10 5.06
2
403.63 1.56 1.91 1.66 24,465.02 6,398.97 149.10 58.39 1,735.76 12.40 1,534.29 12.62 1,069.30 9.38 0.90 1.27 0.72
Operating Profit 3,559.44 Profit Before Tax 2,565.95 Reported Net Profit 2,136.92
Analysis of Aluminium Industry:
HINDALCO INDUSTRIES – COMPANY ANALYSIS
Supply Aluminum suppliers have significant power over the industry. If smelters cap supply, there may not be enough metal to meet global demand. This can drive prices up. However, there is currently a disconnect between inventory levels and the price of the metal; prices are rising despite relatively steady inventory levels. This implies some volatility in the aluminum industry, which makes it unique compared to other metal industries. Demand Aluminum prices have risen sharply due to increasing demand, especially from emerging markets. As with most metals, aluminum prices respond to changes in demand for the metal. Aluminum is in highest demand from the transportation, construction, beverage and packaging sectors. Threats and Risks Since aluminum is globally traded, changes to import or export laws can significantly affect the industry. In addition, environmental concerns such as energy use by smelters mean that people are watching the industry carefully for signs of irresponsible practices. However, aluminum is readily and easily recyclable, which positively impacts the industry as smelters can use recycled resources instead of always sourcing new metal. Hindalco Industries - Company Analysis Brief Description: The Hindustan Aluminum Corporation Limited was established in 1958 by the Aditya Birla Group. In 1962 the company began production in Renukoot in Uttar Pradesh making 20 billion metric tons per year of aluminum metal and 40 billion metric tons per year of alumina. In 1989 the company was restructured and renamed Hindalco. An industry leader in aluminium and copper, Hindalco Industries Limited, the metals flagship company of the Aditya Birla Group is the world's largest aluminium rolling company and one of the biggest producers of primary aluminium in Asia. Its copper smelter is the world’s largest custom smelter at a single location. • Aluminium
Hindalco's major products include standard and speciality grade alumina and hydrates, aluminum ingots, billets, wire rods, flat rolled products, extrusions and foil. The integrated facility at Renukoot houses an alumina refinery with facilities for the production of semi-fabricated products, products and extrusions. The plant is backed by a co-generation power plant at Renusagar to ensure the continuous supply operations. and an aluminium smelter, along namely, redraw rods, flat rolled power unit and a 742 MW captive of power for smelter and other
A strong presence across the value chain and synergies between operations has given the company a dominant share in the value-added products market. As a step towards expanding the market for value-added products and services, company has launched various brands in recent years — Everlast roofing sheets, Freshwrapp kitchen foil and Freshpakk semi-rigid containers. • Copper
Birla Copper, Hindalco’s copper unit, is located at Dahej in Gujarat, India. The unit has the unique distinction of being the largest single-location copper smelter in the world. The smelter uses stateof-the-art technology and has a capacity of 500,000 tpa.
3
HINDALCO INDUSTRIES – COMPANY ANALYSIS
Birla Copper also produces precious metals, fertilisers and sulphuric and phosphoric acid. The unit has captive power plants for continuous power generation and a captive jetty to facilitate logistics and transportation. Birla Copper upholds its longstanding reputation for quality copper cathodes and continuous cast copper rods by assuring its management processes meet the highest standards. It has acquired certifications such as ISO-9001:2000 (Quality Management Systems), ISO-14001:2004 (Environmental Management System) and OHSAS-18001:2007 (Occupational Health and Safety Management Systems). • Mines
Hindalco acquired two Australian copper mines, Nifty and Mt. Gordon, in 2003. The Birla Nifty copper mine consists of an underground mine, heap leach pads and a solvent extraction and electrowinning (SXEW) processing plant, which produces copper cathode. The Mt. Gordon copper operation consists of an underground mine and a copper concentrate plant. Until recently, the operation produced copper cathode through the ferric leach process. In 2004, a copper concentrator was commissioned to provide concentrate for use at Hindalco's operations in Dahej. Both Nifty and Mt. Gordon have a long-term life of mine off-take agreement with Hindalco for supply of copper concentrate to the copper smelter at Dahej. General information: a Group Name . b Address . Address of Registered Office Hindalco Industries Ltd, Century Bhavan, 3rd floor Dr. Annie Besant Road Worli Mumbai-400030 Tel:91-22-66626666 Fax: 91-22-2436 2516 / 2422 7586 Aditya Birla Centre, S. K. Ahire Marg Worli Mumbai 400 030 Tel: 91-22-6652 5000 / 2499 5000 Fax: 91-22-6652 5841 / 2499 5841 Public Limited Company 1958 Aditya Birla Group
Corporate Office
c. d.
Constitution Date of incorporation/ Establishment
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HINDALCO INDUSTRIES – COMPANY ANALYSIS
Shareholding pattern: Total Shareholding as a % of total Total No. of No. of Shares No. of Shares held in As a % of Category of ShareTotal NO. of Dematerialized (A+B) As a % Shareholder holders Shares Form of (A+B+C) (A) Shareholding of Promoter and Promoter Group (1) Indian Individuals / 6 2,398,696 2,398,696 0.14 Hindu Undivided Family Bodies 14 595,082,362 595,082,362 33.93 Corporate Any Others 1 16,316,130 16,316,130 0.93 (Specify) Trusts 1 16,316,130 16,316,130 0.93 Sub Total 21 613,797,188 613,797,188 35 (2) Foreign Total 21 shareholding of Promoter and Promoter Group (A) (1) Institutions Mutual Funds / UTI Financial Institutions / Banks Central Government / State Government(s) Insurance Companies Foreign Institutional Investors Sub Total (2) NonInstitutions Bodies Corporate Individuals Individual shareholders holding nominal share capital up to Rs. 1 lakh 208 122 1 613,797,188 613,797,188 35 Shares pledged otherwise encumbered Number shares As a of Total No. Shares 0.13 31.08 0.85 0.85 32.06 32.06 or of % of
55,205,320 76,928,146 287,480
55,176,470 76,838,706 -
3.15 4.39 0.02
2.88 4.02 0.02
10 486 827 3,866
153,519,115 514,065,053 800,005,114 126,797,076 148,689,017
153,512,895 514,036,833 799,564,904 126,019,818 131,810,322
8.75 29.31 45.62 7.23 8.48
8.02 26.85 41.79 6.62 7.77
370,085
5
HINDALCO INDUSTRIES – COMPANY ANALYSIS
Individual shareholders holding nominal share capital in excess of Rs. 1 lakh Any Others (Specify) Non Resident Indians Shares in transit Foreign Corporate Bodies Trusts Sub Total Total Public shareholding (B) Total (A)+(B) (C) Shares held by Custodians and against which Depository Receipts have been issued-m Total (A)+(B)+ (C)
9,424,704
8,347,263
0.54
0.49
39 8,882 8,474 358 9 41 382,872 383,699 383,720 1
55,081,214 11,001,276 10,032,536 32,555,710
19,725,606 8,201,378 10,032,536 -
3.14 0.63 0.57 1.86 0.09 19.39 65 100 -
2.88 0.57 0.52 1.7 0.08 17.76 59.54 91.6 8.4
1,491,692 1,491,692 339,992,011 285,903,009 1,139,997,125 1,085,467,913 1,753,794,313 1,699,265,101 160,747,995 160,720,165
383,721
1,914,542,308 1,859,985,266
-
100
Capital Market Perception: Listing Face Value Current Share Price (In Rs.) as on 22/07/2012 52 weeks High / Low (In Rs.) Market Capitalization 22/07/2012 Management: Hindalco’s management team consists of experienced individuals with strong credentials. Board of Directors Mr. Kumar Mangalam Birla, Chairman Mrs. Rajashree Birla Mr. C. M. Maniar Mr. M. M. Bhagat Mr. K. N. Bhandari Mr. A. K. Agarwala Mr. N. J. Jhaveri Mr. Ram Charan Mr. Jagdish Khattar
6
(Rs.
In
crores)
as
BSE 1.00 122.00 185.70/105.3 5 on 23363.34
NSE 1.00 122.20 185.90/105.40
HINDALCO INDUSTRIES – COMPANY ANALYSIS
Mr. D. Bhattacharya, Managing Director Mr. M. Damodaran Chief Financial Officer Mr. Praveen Maheshwari Head – Corporate Projects & Procurement Cell Mr. B.B Jha Company Secretary Mr. Anil Malik Chief People Officer Mr. Vineet Kaul Business / Unit Head Mr. Dilip Gaur, Group Executive President, Copper Mr. Sachin Satpute, Chief Marketing Officer, Aluminium Mr. Satish M Bhatia, President, Foil and Packaging Mr. R. S. Dhulkhed, Senior President, Operations Mr. Sanjay Sehgal, President, Chemicals & Intl. Trade Mr. D. K. Kohly, Chief Officer Operations, Renukoot Unit & Renusagar Units
Utkal Alumina International Ltd Mr. Suryakant Mishra, CEO Novelis Inc. Mr. Philip Martens, President and Chief Executive Officer Aditya Birla Minerals Limited Mr. D. Bhattacharya, Chairman Mr. Sunil Kulwal, CEO and MD Mr. Peter Torre, Company Secretary Total No. of Employees: 13675
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HINDALCO INDUSTRIES – COMPANY ANALYSIS
Financial Performance of Company: Balance Sheet Rs. crores Mar '11 Audited Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Mar '10 Audited Mar '09 Audited Income 191.46 191.46 4.47 0.00 29,504. 17 0.00 29,700. 10 5,170.3 1 2,101.1 9 7,271.5 0 36,971. 60 191.37 191.37 3.99 0.00 27,715. 61 0.00 27,910. 97 5,153.9 0 1,203.0 0 6,356.9 0 34,267. 87 170.46 170.05 3.17 0.41 23,584.69 0.00 23,758.32 5,713.23 2,611.06 8,324.29 32,082.61 Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure 16,435 Raw Materials .73 Power & Fuel 2,221. Cost 48 1,054. Employee Cost 39 Other Manufacturing Expenses 255.84 Selling and Admin Expenses 552.73 Miscellaneous Expenses 471.46 Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation 390.30 20,601 .33 3,559. 44 3,863. 69 610.26 3,253. 43 687.48 13,666. 78 1,938.0 0 904.90 200.32 535.63 386.50 -335.78 17,296. 35 2,926.5 0 3,501.1 2 613.78 2,887.3 4 671.36 10,855. 14 2,231.5 6 675.05 143.46 447.53 357.12 0.00 14,709. 86 2,912.1 4 3,624.8 0 336.93 3,287.8 7 644.34
8
Profit & Loss account In Mar '11 Audite d 25,255 .01 1,497. 87 23,757 .14 304.25 403.63 24,465 .02 Mar '10 Audited 20,516. 43 1,059.4 5 19,456. 98 574.62 765.87 20,797. 47 Rs. In Crores Mar '09 Audited 19,641. 40 1,481.5 9 18,159. 81 712.66 -537.81 18,334. 66
Application Of Funds 14,287. Gross Block 32 Less: Accum. 6,702.9 Depreciation 4 7,584.3 Net Block 8 Capital Work in 9,464.0 Progress 5 18,246. Investments 75 7,652.1 Inventories 9 1,268.9 Sundry Debtors 9 Cash and Bank Balance 111.12
13,793. 35 6,058.5 3 7,734.8 2 3,702.7 9 21,480. 83 5,921.4 1 1,311.8 7 139.96
13,393.07 5,506.10 7,886.97 1,389.63 19,148.84 4,070.14 1,201.22 213.48
HINDALCO INDUSTRIES – COMPANY ANALYSIS
Total Current Assets Loans and Advances
9,032.3 0 1,750.2 2
7,373.2 4 1,588.6 2 0.25 8,962.1 1 0.00 6,891.1 9 721.49 7,612.6 8 1,349.4 3 0.00 34,267. 87 18,607. 32 145.85
5,484.84 1,709.16 630.24 7,824.24 0.00 3,363.91 803.16 4,167.07 3,657.17 0.00 32,082.61 9,775.80 139.71
Fixed Deposits 122.27 Total CA, Loans 10,904. & Advances 79 Deffered Credit 0.00 8,583.6 Current Liabilities 9 Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 644.68 9,228.3 7 1,676.4 2 0.00 36,971. 60 11,333. 90 155.12
Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Profit
0.00 2,565. 95 39.63 2,605. 58
0.00 2,215.9 8 157.60 2,373.5 8 462.10 1,915.6 3
0.00 2,643.5 3 198.55 2,842.0 8 610.88 2,230.2 7
468.66 Net 2,136. 92
Comments on Financial indicators: Sales: Net Sale of the company has increased from Rs.19456.98 crores for the FY-2009-11 to Rs.23757.14 crores for the FY-2010-11 indicating increase of 22.10 %. Further, as per audited financials for the FY-2011-12, company achieved sale of Rs.26596.76 crores indicating an increase of 11.95 %. Operating Profit / PBT / PAT: Operating Profit: Operating profit of the company increased from Rs.2926.20 crores during the FY-2009-10 to Rs.3559.44 crores indicating increase of 21.64%. PBT: PBT of the company increased from Rs.2373.58 crores during the FY-2009-10 to Rs.2605.58 during the FY-2010-11 crores indicating increase of 9.77%. Further, company achieved PBT of Rs.2736.95 during the FY-2011-12.
9
HINDALCO INDUSTRIES – COMPANY ANALYSIS
PAT: PAT of the company increased from Rs.1915.63 crores during the FY-2009-10 to Rs.2136.92 during the FY-2010-11 crores indicating increase of 11.55%. Further, company achieved PBT of Rs.2237.20 during the FY-2011-12. SWOT Analysis STRENGTH
• • • • • • • • • •
Global brand image. Cost effective producer. Sound financial position. A high degree quality consciousness is the core competence of the company, ISO 9001 and ISO 14001 have added more prestige to the company. Integrated production facility at Renusagar power plant. Company has a well-established distribution network, covering a geographically wide and scattered market. A number of Brownfield & Greenfield projects. Industrial peace as, there has been no major strike in last 22 year. A well focused human resources development. Serve maximum customer satisfaction.
WEAKNESS
• •
Present production capacity is not adequate to meet the rising high demand. Technology is not upgraded to mark as compare to global giants in aluminium industry.
OPPORTUNITY
• • • • •
R & D collabratation with universities and another research organization. More emphasis on downstream production of value added products. Recycling should be adopted as routine production. Raising more finance from marketing for more acquisition and merger for consolidating position in the global market. Aluminium, continuous to be strong with a growth in transportation sector 16%, construction15%, passenger car 25%, two wheeler segments 14% respectively during FY07.
THREATS
• • • •
Strong domestic and global competitors, such as TATA, POSCO, MITTLE, ESSAR . Innovative revolution in plastic and steel industry. Reduce in Exide duty. Fall in price of Al. In neighbor country.
Strategy: Hindalco Industries Limited has long been a leading integrated producer of aluminium, among the industry’s top companies across Asia. The aluminium operation extends from mining of bauxite to the production of not only primary aluminium but also the value added downstream products such as flat rolled products (FRP), extrusions and also customised consumer products such as foils. Hindalco's upstream strategies for the aluminium industry focuses on continuing existing low cost operations and progressing on new greenfield projects; that will further improve cost
10
HINDALCO INDUSTRIES – COMPANY ANALYSIS
competitiveness through lowest production costs; by controlling key resources, such as bauxite mines, refineries, power plants and coal; and reaping benefits of economies of scale. Indian bauxite is of the highest quality — it is Gibbsitic bauxite with high alumina content, less than 2 per cent Boehmite content, a very low reactive silica content and negligible organic content. It has higher liquor purity and productivity, which is more cost efficient. Also, in India, large deposits of bauxite can be found in a single plateau, allowing for more efficient extraction. India also has abundant coal supplies, easy availability of labour and is located in close proximity to the fast-growing markets. Captive bauxite mines that provide the highest quality bauxite and a refinery located near the mine, state-of-the-art technology and economies of scale further enhance our cost advantage. Aluminium is a power intensive industry. One tonne of aluminium requires over 15,000 Kwh of power. Power constitutes almost 40 per cent of the total cost of production. Low cost, uninterrupted power is absolutely vital for the successful aluminium operations. Hindalco’s smelters fully backed by captive power plants located at the pitheads of the owned coal mines makes it one of the lowest cost producers globally. Various strategies employed by the company in the course of conducting business Novelis to build first manufacturing plant in China Novelis is a subsidiary of Hindalco Industries Limited (BSE: HINDALCO) Shanghai – Novelis Inc., the world’s leading producer of premium aluminium rolled products, has signed an agreement with the Changzhou National Hi-Tech district to build the company’s first automotive sheet manufacturing facility in China. The agreement, which includes land use rights to more than 160 acres, was signed at a formal ceremony in Changzhou city in the Jiangsu province of China. Novelis is the world’s leading producer of rolled aluminium for the global automotive market and the leading provider of aluminium sheet to the rapidly expanding Chinese automobile industry. The wholly-owned $100 million plant will have a capacity of 120,000 metric tonnes per year and is expected to be commissioned in late 2014. Located in the heart of the Changzhou National Hi-Tech district, the new site is close to vital rail lines, the Changzhou deep water port on the Yangtze river and other world-class businesses and commercial infrastructure. The company plans to ship rolled aluminium coils manufactured at its South Korean operations to the new facility in Changzhou for heat treatment and finishing before delivery to automotive customers within China as well as to export markets. Current Novelis auto sheet customers include Audi, BMW, Chrysler, Ferrari, Ford, GM, Hyundai, Jaguar, Land Rover, Mercedes-Benz, Porsche and Volvo, among others.
11
doc_393129777.doc
It describes talks about Industry Trends of aluminium industry, PEST Analysis of aluminium Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about Hindalco Industries, it's Finance performance, SWOT analysis and Various Strategies employed.
HINDALCO INDUSTRIES – COMPANY ANALYSIS
Aluminium Demand and Market: In CY 2010, the world aluminium consumption stood at around 41 Million tonnes, a sharp increase of over 20 % over 34 Million tones consumption in CY 2009. The CY10 production stood marginally higher at ~42 Million tones against production of 38 Million tonnes in CY 09. The sharp rise in demand was the result of strong recovery in the emerging market demand and primarily restocking led growth in developed markets. As in the past, China continued to be the driving force behind this demand growth, growing at ~ 21% and contributing to over 41% of global aluminium demand in CY10. Globally, Aluminium production too, increased as the producers restarted their capacities with the smart recovery in the aluminium LME. As a result the global markets continued to be in surplus. During the crisis as the aluminium prices fell sharply, many players with bullish view on aluminium, started building aluminium inventory. Low storage cost added by negligible financing cost and positive outlook on prices resulted into inventory getting locked as contango exceeded carrying cost. This trend still continues resulting in shortage of aluminium in the physical market and rising premiums. Today, the global inventory stands at historical peaks and has created an overhang leading to a paradox of relatively depressed prices and yet higher premium. Indian domestic demand continued to be robust on the back of strong industrial growth. Strong growth in the end user segments such as automobiles, Industrial and infrastructure; and thrust on power
sector growth , propelled the aluminium demand which grew at 14% despite of some moderation towards later part of the year. In FY11, LME average aluminium prices remained strong at around 2,250 $/tonne an increase of over 21% over previous year’s average prices. The appreciating rupee though negated some of the LME price gains as for every tonne of aluminium sold we realised fewer rupee. The aluminium prices continued to rise even as inventory levels remained at their historic highs.This was the result of tightness in the physical market, with most inventories as explained above tied up at various ware houses under financing deals. Across the globe, the cost of production of aluminium increased sharply as input costs such as alumina and power surged. Alumina costs increased as the aluminium prices recovered and bauxite quality deteriorated. Strong increase in aluminium production with dwindling supply of quality bauxite, coupled with rising crude related costs resulted in higher cost of alumina. The higher alumina cost has led to increased clamor for decoupling of alumina prices from aluminium prices. Alumina prices, which used to be around 11-5-12.5% of aluminium prices historically are today trading north of 16% and with a possible move to spot based pricing, are expected to increase further. For most producers power costs increased with sharp rise in coal/energy prices. The cost of other inputs such as CPC coke and anodes also increased in line with the rise in the crude prices. In the Indian context increase in coal prices further accentuated the cost pressure. Aluminium demand in India has been very strongIn the recent past growing at almost 14% CAGR.Unlike the western world the primary demanddriver for aluminium in India has been power sector which accounts for almost 48% demand.With government’s stated committed spending towards achieving 70,000 MW generationtarget, the spend on power infrastructure will be huge. As
1
HINDALCO INDUSTRIES – COMPANY ANALYSIS
far as the other aluminiumconsuming sectors are concerned with growing urbanisation the demand growth has picked upfrom packaging, automobile, construction (increased usage) electronics (cell phone,laptop bodies) etc. The per capita consumption at ~1.2 kg is still abysmally low as comparedwith even China ~10 Kg and the western world ~ 15-18 Kg. This offers significant potentialdemand upside. The Global demand outlook for FRP (Flat rolled products) is extremely bullish with rising demand from beverage cans; especially in the emergingmarkets, consumer electronics and automobile segment (with increased emphasis on weight reduction). Novelis is the global leader in this segment. Aluminium production is expected to increase in line with the demand. The market surplus is going to continue for a while. Strong prices have ledmany smelters to restart their production in last one year. In addition some new smelters are on the verge of delivering. The cost push has been felt in the recent times with rise in crude prices from the recent highs. Most input costs such as fuel oil, coal tar pitch, and caustic soda have increased along with the freight costs. Alumina costs for non integrated smelters have gone up and may increase further, notwithstanding new capacity additions, especially in the light of deteriorating bauxite quality, logistic related issues for new projects, increasing capital requirement and higher input costs. The prices are expected to continue to stay range bound over the short term with a large inventory overhang. Aluminium inventories across the globe are near all time high. But most of these inventories are reportedly bound in financing deals and are not expected to flood the market. The long term fundamentals are strong with the emergence of aluminium as an eminent metal with applications touching several aspects of human life. Competitor Analysis: The Indian aluminium sector is characterised by large integrated players like Hindalco and National Aluminium Company (Nalco). The other producers of primary aluminium include Indian Aluminium (Indal), now merged with Hindalco, and Sterlite Industries. Following table shows sales and profit of the peers for the FY-2010-11: Rs. In crores Hind Aluminium Mar '11
Hindalco Mar '11 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income
NALCO Mar '11
PG Foils Mar '11
Sacheta Met Mar '11
25,255.01 1,497.87 23,757.14 304.25
6,481.35 422.37 6,058.98 338.43
153.90 13.27 140.63 6.56
53.35 0.00 53.35 3.38
361.20 0.00 361.20 0.08 18.57 379.85 11.86 8.10 5.06
2
403.63 1.56 1.91 1.66 24,465.02 6,398.97 149.10 58.39 1,735.76 12.40 1,534.29 12.62 1,069.30 9.38 0.90 1.27 0.72
Operating Profit 3,559.44 Profit Before Tax 2,565.95 Reported Net Profit 2,136.92
Analysis of Aluminium Industry:
HINDALCO INDUSTRIES – COMPANY ANALYSIS
Supply Aluminum suppliers have significant power over the industry. If smelters cap supply, there may not be enough metal to meet global demand. This can drive prices up. However, there is currently a disconnect between inventory levels and the price of the metal; prices are rising despite relatively steady inventory levels. This implies some volatility in the aluminum industry, which makes it unique compared to other metal industries. Demand Aluminum prices have risen sharply due to increasing demand, especially from emerging markets. As with most metals, aluminum prices respond to changes in demand for the metal. Aluminum is in highest demand from the transportation, construction, beverage and packaging sectors. Threats and Risks Since aluminum is globally traded, changes to import or export laws can significantly affect the industry. In addition, environmental concerns such as energy use by smelters mean that people are watching the industry carefully for signs of irresponsible practices. However, aluminum is readily and easily recyclable, which positively impacts the industry as smelters can use recycled resources instead of always sourcing new metal. Hindalco Industries - Company Analysis Brief Description: The Hindustan Aluminum Corporation Limited was established in 1958 by the Aditya Birla Group. In 1962 the company began production in Renukoot in Uttar Pradesh making 20 billion metric tons per year of aluminum metal and 40 billion metric tons per year of alumina. In 1989 the company was restructured and renamed Hindalco. An industry leader in aluminium and copper, Hindalco Industries Limited, the metals flagship company of the Aditya Birla Group is the world's largest aluminium rolling company and one of the biggest producers of primary aluminium in Asia. Its copper smelter is the world’s largest custom smelter at a single location. • Aluminium
Hindalco's major products include standard and speciality grade alumina and hydrates, aluminum ingots, billets, wire rods, flat rolled products, extrusions and foil. The integrated facility at Renukoot houses an alumina refinery with facilities for the production of semi-fabricated products, products and extrusions. The plant is backed by a co-generation power plant at Renusagar to ensure the continuous supply operations. and an aluminium smelter, along namely, redraw rods, flat rolled power unit and a 742 MW captive of power for smelter and other
A strong presence across the value chain and synergies between operations has given the company a dominant share in the value-added products market. As a step towards expanding the market for value-added products and services, company has launched various brands in recent years — Everlast roofing sheets, Freshwrapp kitchen foil and Freshpakk semi-rigid containers. • Copper
Birla Copper, Hindalco’s copper unit, is located at Dahej in Gujarat, India. The unit has the unique distinction of being the largest single-location copper smelter in the world. The smelter uses stateof-the-art technology and has a capacity of 500,000 tpa.
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HINDALCO INDUSTRIES – COMPANY ANALYSIS
Birla Copper also produces precious metals, fertilisers and sulphuric and phosphoric acid. The unit has captive power plants for continuous power generation and a captive jetty to facilitate logistics and transportation. Birla Copper upholds its longstanding reputation for quality copper cathodes and continuous cast copper rods by assuring its management processes meet the highest standards. It has acquired certifications such as ISO-9001:2000 (Quality Management Systems), ISO-14001:2004 (Environmental Management System) and OHSAS-18001:2007 (Occupational Health and Safety Management Systems). • Mines
Hindalco acquired two Australian copper mines, Nifty and Mt. Gordon, in 2003. The Birla Nifty copper mine consists of an underground mine, heap leach pads and a solvent extraction and electrowinning (SXEW) processing plant, which produces copper cathode. The Mt. Gordon copper operation consists of an underground mine and a copper concentrate plant. Until recently, the operation produced copper cathode through the ferric leach process. In 2004, a copper concentrator was commissioned to provide concentrate for use at Hindalco's operations in Dahej. Both Nifty and Mt. Gordon have a long-term life of mine off-take agreement with Hindalco for supply of copper concentrate to the copper smelter at Dahej. General information: a Group Name . b Address . Address of Registered Office Hindalco Industries Ltd, Century Bhavan, 3rd floor Dr. Annie Besant Road Worli Mumbai-400030 Tel:91-22-66626666 Fax: 91-22-2436 2516 / 2422 7586 Aditya Birla Centre, S. K. Ahire Marg Worli Mumbai 400 030 Tel: 91-22-6652 5000 / 2499 5000 Fax: 91-22-6652 5841 / 2499 5841 Public Limited Company 1958 Aditya Birla Group
Corporate Office
c. d.
Constitution Date of incorporation/ Establishment
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HINDALCO INDUSTRIES – COMPANY ANALYSIS
Shareholding pattern: Total Shareholding as a % of total Total No. of No. of Shares No. of Shares held in As a % of Category of ShareTotal NO. of Dematerialized (A+B) As a % Shareholder holders Shares Form of (A+B+C) (A) Shareholding of Promoter and Promoter Group (1) Indian Individuals / 6 2,398,696 2,398,696 0.14 Hindu Undivided Family Bodies 14 595,082,362 595,082,362 33.93 Corporate Any Others 1 16,316,130 16,316,130 0.93 (Specify) Trusts 1 16,316,130 16,316,130 0.93 Sub Total 21 613,797,188 613,797,188 35 (2) Foreign Total 21 shareholding of Promoter and Promoter Group (A) (1) Institutions Mutual Funds / UTI Financial Institutions / Banks Central Government / State Government(s) Insurance Companies Foreign Institutional Investors Sub Total (2) NonInstitutions Bodies Corporate Individuals Individual shareholders holding nominal share capital up to Rs. 1 lakh 208 122 1 613,797,188 613,797,188 35 Shares pledged otherwise encumbered Number shares As a of Total No. Shares 0.13 31.08 0.85 0.85 32.06 32.06 or of % of
55,205,320 76,928,146 287,480
55,176,470 76,838,706 -
3.15 4.39 0.02
2.88 4.02 0.02
10 486 827 3,866
153,519,115 514,065,053 800,005,114 126,797,076 148,689,017
153,512,895 514,036,833 799,564,904 126,019,818 131,810,322
8.75 29.31 45.62 7.23 8.48
8.02 26.85 41.79 6.62 7.77
370,085
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HINDALCO INDUSTRIES – COMPANY ANALYSIS
Individual shareholders holding nominal share capital in excess of Rs. 1 lakh Any Others (Specify) Non Resident Indians Shares in transit Foreign Corporate Bodies Trusts Sub Total Total Public shareholding (B) Total (A)+(B) (C) Shares held by Custodians and against which Depository Receipts have been issued-m Total (A)+(B)+ (C)
9,424,704
8,347,263
0.54
0.49
39 8,882 8,474 358 9 41 382,872 383,699 383,720 1
55,081,214 11,001,276 10,032,536 32,555,710
19,725,606 8,201,378 10,032,536 -
3.14 0.63 0.57 1.86 0.09 19.39 65 100 -
2.88 0.57 0.52 1.7 0.08 17.76 59.54 91.6 8.4
1,491,692 1,491,692 339,992,011 285,903,009 1,139,997,125 1,085,467,913 1,753,794,313 1,699,265,101 160,747,995 160,720,165
383,721
1,914,542,308 1,859,985,266
-
100
Capital Market Perception: Listing Face Value Current Share Price (In Rs.) as on 22/07/2012 52 weeks High / Low (In Rs.) Market Capitalization 22/07/2012 Management: Hindalco’s management team consists of experienced individuals with strong credentials. Board of Directors Mr. Kumar Mangalam Birla, Chairman Mrs. Rajashree Birla Mr. C. M. Maniar Mr. M. M. Bhagat Mr. K. N. Bhandari Mr. A. K. Agarwala Mr. N. J. Jhaveri Mr. Ram Charan Mr. Jagdish Khattar
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(Rs.
In
crores)
as
BSE 1.00 122.00 185.70/105.3 5 on 23363.34
NSE 1.00 122.20 185.90/105.40
HINDALCO INDUSTRIES – COMPANY ANALYSIS
Mr. D. Bhattacharya, Managing Director Mr. M. Damodaran Chief Financial Officer Mr. Praveen Maheshwari Head – Corporate Projects & Procurement Cell Mr. B.B Jha Company Secretary Mr. Anil Malik Chief People Officer Mr. Vineet Kaul Business / Unit Head Mr. Dilip Gaur, Group Executive President, Copper Mr. Sachin Satpute, Chief Marketing Officer, Aluminium Mr. Satish M Bhatia, President, Foil and Packaging Mr. R. S. Dhulkhed, Senior President, Operations Mr. Sanjay Sehgal, President, Chemicals & Intl. Trade Mr. D. K. Kohly, Chief Officer Operations, Renukoot Unit & Renusagar Units
Utkal Alumina International Ltd Mr. Suryakant Mishra, CEO Novelis Inc. Mr. Philip Martens, President and Chief Executive Officer Aditya Birla Minerals Limited Mr. D. Bhattacharya, Chairman Mr. Sunil Kulwal, CEO and MD Mr. Peter Torre, Company Secretary Total No. of Employees: 13675
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HINDALCO INDUSTRIES – COMPANY ANALYSIS
Financial Performance of Company: Balance Sheet Rs. crores Mar '11 Audited Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Mar '10 Audited Mar '09 Audited Income 191.46 191.46 4.47 0.00 29,504. 17 0.00 29,700. 10 5,170.3 1 2,101.1 9 7,271.5 0 36,971. 60 191.37 191.37 3.99 0.00 27,715. 61 0.00 27,910. 97 5,153.9 0 1,203.0 0 6,356.9 0 34,267. 87 170.46 170.05 3.17 0.41 23,584.69 0.00 23,758.32 5,713.23 2,611.06 8,324.29 32,082.61 Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure 16,435 Raw Materials .73 Power & Fuel 2,221. Cost 48 1,054. Employee Cost 39 Other Manufacturing Expenses 255.84 Selling and Admin Expenses 552.73 Miscellaneous Expenses 471.46 Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation 390.30 20,601 .33 3,559. 44 3,863. 69 610.26 3,253. 43 687.48 13,666. 78 1,938.0 0 904.90 200.32 535.63 386.50 -335.78 17,296. 35 2,926.5 0 3,501.1 2 613.78 2,887.3 4 671.36 10,855. 14 2,231.5 6 675.05 143.46 447.53 357.12 0.00 14,709. 86 2,912.1 4 3,624.8 0 336.93 3,287.8 7 644.34
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Profit & Loss account In Mar '11 Audite d 25,255 .01 1,497. 87 23,757 .14 304.25 403.63 24,465 .02 Mar '10 Audited 20,516. 43 1,059.4 5 19,456. 98 574.62 765.87 20,797. 47 Rs. In Crores Mar '09 Audited 19,641. 40 1,481.5 9 18,159. 81 712.66 -537.81 18,334. 66
Application Of Funds 14,287. Gross Block 32 Less: Accum. 6,702.9 Depreciation 4 7,584.3 Net Block 8 Capital Work in 9,464.0 Progress 5 18,246. Investments 75 7,652.1 Inventories 9 1,268.9 Sundry Debtors 9 Cash and Bank Balance 111.12
13,793. 35 6,058.5 3 7,734.8 2 3,702.7 9 21,480. 83 5,921.4 1 1,311.8 7 139.96
13,393.07 5,506.10 7,886.97 1,389.63 19,148.84 4,070.14 1,201.22 213.48
HINDALCO INDUSTRIES – COMPANY ANALYSIS
Total Current Assets Loans and Advances
9,032.3 0 1,750.2 2
7,373.2 4 1,588.6 2 0.25 8,962.1 1 0.00 6,891.1 9 721.49 7,612.6 8 1,349.4 3 0.00 34,267. 87 18,607. 32 145.85
5,484.84 1,709.16 630.24 7,824.24 0.00 3,363.91 803.16 4,167.07 3,657.17 0.00 32,082.61 9,775.80 139.71
Fixed Deposits 122.27 Total CA, Loans 10,904. & Advances 79 Deffered Credit 0.00 8,583.6 Current Liabilities 9 Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 644.68 9,228.3 7 1,676.4 2 0.00 36,971. 60 11,333. 90 155.12
Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Profit
0.00 2,565. 95 39.63 2,605. 58
0.00 2,215.9 8 157.60 2,373.5 8 462.10 1,915.6 3
0.00 2,643.5 3 198.55 2,842.0 8 610.88 2,230.2 7
468.66 Net 2,136. 92
Comments on Financial indicators: Sales: Net Sale of the company has increased from Rs.19456.98 crores for the FY-2009-11 to Rs.23757.14 crores for the FY-2010-11 indicating increase of 22.10 %. Further, as per audited financials for the FY-2011-12, company achieved sale of Rs.26596.76 crores indicating an increase of 11.95 %. Operating Profit / PBT / PAT: Operating Profit: Operating profit of the company increased from Rs.2926.20 crores during the FY-2009-10 to Rs.3559.44 crores indicating increase of 21.64%. PBT: PBT of the company increased from Rs.2373.58 crores during the FY-2009-10 to Rs.2605.58 during the FY-2010-11 crores indicating increase of 9.77%. Further, company achieved PBT of Rs.2736.95 during the FY-2011-12.
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HINDALCO INDUSTRIES – COMPANY ANALYSIS
PAT: PAT of the company increased from Rs.1915.63 crores during the FY-2009-10 to Rs.2136.92 during the FY-2010-11 crores indicating increase of 11.55%. Further, company achieved PBT of Rs.2237.20 during the FY-2011-12. SWOT Analysis STRENGTH
• • • • • • • • • •
Global brand image. Cost effective producer. Sound financial position. A high degree quality consciousness is the core competence of the company, ISO 9001 and ISO 14001 have added more prestige to the company. Integrated production facility at Renusagar power plant. Company has a well-established distribution network, covering a geographically wide and scattered market. A number of Brownfield & Greenfield projects. Industrial peace as, there has been no major strike in last 22 year. A well focused human resources development. Serve maximum customer satisfaction.
WEAKNESS
• •
Present production capacity is not adequate to meet the rising high demand. Technology is not upgraded to mark as compare to global giants in aluminium industry.
OPPORTUNITY
• • • • •
R & D collabratation with universities and another research organization. More emphasis on downstream production of value added products. Recycling should be adopted as routine production. Raising more finance from marketing for more acquisition and merger for consolidating position in the global market. Aluminium, continuous to be strong with a growth in transportation sector 16%, construction15%, passenger car 25%, two wheeler segments 14% respectively during FY07.
THREATS
• • • •
Strong domestic and global competitors, such as TATA, POSCO, MITTLE, ESSAR . Innovative revolution in plastic and steel industry. Reduce in Exide duty. Fall in price of Al. In neighbor country.
Strategy: Hindalco Industries Limited has long been a leading integrated producer of aluminium, among the industry’s top companies across Asia. The aluminium operation extends from mining of bauxite to the production of not only primary aluminium but also the value added downstream products such as flat rolled products (FRP), extrusions and also customised consumer products such as foils. Hindalco's upstream strategies for the aluminium industry focuses on continuing existing low cost operations and progressing on new greenfield projects; that will further improve cost
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HINDALCO INDUSTRIES – COMPANY ANALYSIS
competitiveness through lowest production costs; by controlling key resources, such as bauxite mines, refineries, power plants and coal; and reaping benefits of economies of scale. Indian bauxite is of the highest quality — it is Gibbsitic bauxite with high alumina content, less than 2 per cent Boehmite content, a very low reactive silica content and negligible organic content. It has higher liquor purity and productivity, which is more cost efficient. Also, in India, large deposits of bauxite can be found in a single plateau, allowing for more efficient extraction. India also has abundant coal supplies, easy availability of labour and is located in close proximity to the fast-growing markets. Captive bauxite mines that provide the highest quality bauxite and a refinery located near the mine, state-of-the-art technology and economies of scale further enhance our cost advantage. Aluminium is a power intensive industry. One tonne of aluminium requires over 15,000 Kwh of power. Power constitutes almost 40 per cent of the total cost of production. Low cost, uninterrupted power is absolutely vital for the successful aluminium operations. Hindalco’s smelters fully backed by captive power plants located at the pitheads of the owned coal mines makes it one of the lowest cost producers globally. Various strategies employed by the company in the course of conducting business Novelis to build first manufacturing plant in China Novelis is a subsidiary of Hindalco Industries Limited (BSE: HINDALCO) Shanghai – Novelis Inc., the world’s leading producer of premium aluminium rolled products, has signed an agreement with the Changzhou National Hi-Tech district to build the company’s first automotive sheet manufacturing facility in China. The agreement, which includes land use rights to more than 160 acres, was signed at a formal ceremony in Changzhou city in the Jiangsu province of China. Novelis is the world’s leading producer of rolled aluminium for the global automotive market and the leading provider of aluminium sheet to the rapidly expanding Chinese automobile industry. The wholly-owned $100 million plant will have a capacity of 120,000 metric tonnes per year and is expected to be commissioned in late 2014. Located in the heart of the Changzhou National Hi-Tech district, the new site is close to vital rail lines, the Changzhou deep water port on the Yangtze river and other world-class businesses and commercial infrastructure. The company plans to ship rolled aluminium coils manufactured at its South Korean operations to the new facility in Changzhou for heat treatment and finishing before delivery to automotive customers within China as well as to export markets. Current Novelis auto sheet customers include Audi, BMW, Chrysler, Ferrari, Ford, GM, Hyundai, Jaguar, Land Rover, Mercedes-Benz, Porsche and Volvo, among others.
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doc_393129777.doc