Tata Steel Towards Growth & Globalisation
Tata Steel Group Towards Growth & Globalisation
Analyst Meet – Mumbai June 26, 2008
1
Agenda
Key Highlights Performance of Indian & South East Asian Operations Performance of the UK & European Operations Financial Performance & Financing Integration & Long Term Strategy External Environment & Market Outlook
2
Key Highlights
Key Highlights Group Vision Launched Integration synergies of US $450 mn to be exceeded Acquisition Financing completed Raw Material Initiatives Strong Performance Improvement
4
Performance of Indian & South East Asian Operations
Operating Highlights - Indian Operations FY08
FY07
Crude Steel Production (mt)
Specific energy consumption (Gcal/tss)
On time in full deliveries (OTIF)(%)
Power Consumption (kwhr/tss)
388
400
Fuel Rate (kg/thm)
577
578
Labour productivity (tcs/man/yr)
370
363
5.01
5.05
6.66
6.72
77
77
6
Tata Steel – Deliveries & Turnover Flat Products US$ 2401 mn
Long Products US$ 2168 mn
3181
US$ 1070 mn
3108
Deliveries
US$ 936 mn
1686
1601
In „ 000 tons
Deliveries 7
Operating Highlights - Indian Operations
Steel Division – Jamshedpur Cold Rolling Mill -Best ever annual saleable production of 1.54 mt Hot Strip Mill - Best ever annual production of 3.27 mt LD2 & Slab Caster Unit - Best ever annual production of 3.36 mt Long New Bar Bill - Best ever performance of 0.55 mt and improved upon its mill speed for various product categories G BF - Best ever annual production of 2.05 mt Highest ever usage of melting scrap at LD shop at 0.43 mt, an increase of 26.47% Reduction in dust emission to 0.86 kg per ton, decrease by 10.42 % y-o-y
Major reasons for lower production in FY 08 (5.01 mt) as compared to FY 07 (5.05 mt) Shutdowns related to 1.8 mt steel expansion Outages of Blast Furnace led to lower Hot Metal availability Refurbishment of coke oven batteries & power breakdown in Q1 FY 08 8
Operating Highlights – Indian Operations STEEL DIVISION
In mn tonnes
9
Market share in Auto Sector TOTAL AUTOMOTIVE 900
43%
750 600
41%
GALVANISED AUTO
44%
41%
FY07
FY08
41%
450 300 150 0 FY04
FY05
FY06
'000 Tonnes
CR AUTO
M arket Share (%)
HR AUTO
10
Continued focus on High Value Added Products TISCON
TATA SHAKTEE
SPECIALITY WIRE RODS (HC+LC)
TATA STEELIUM ( % segment )
11
Operating Highlights- Profit Centres
Bearings Division
Developed bearings for Tata Motors – Nano Project Product Mix enrichment – 29 new bearings developed
Tubes Division
Signed up with Tata Motors for supply of critical Tubular components for the Nano Project - Hydroformed
12
Market Initiatives in India Introduction of TISCON Fe 500 grade was highly successful with 100% conversion of project customers from Fe 415 to Fe 500
Regional Customisation : Super Ductile Tiscon launched for earthquake prone NE India Segment Customisation : Retail Identity Programme (RIP) launched Tata Steelium launched in Sri Lanka and Tata Agrico in Dubai & Qatar
13
Key Performance Improvements – Indian Operations
Critical Chain Project Management ( TOC)
Solution for Sales (TOC)
Reduction in duration of shutdowns in 33 projects Savings realised $ 9.25 mn Pull based replenishment process with stock buffers put in place to ensure no stock out at Distributors Vendor Managed Inventory (VMI) offers stabilized Savings realised $ 23.25 mn
TOC in Mining
Improving quality of ore while increasing mine life at OMQ w.r.t Alumina Increase in raw coal production at West Bokaro using same resources Savings realised $ 5.5 mn 14
Key Performance Improvements – Indian Operations ASPIRE PROJECTS
Increase in Clean Coal yield at 13% ash at West Bokaro Savings $ 7.25 mn Reduction of overall sinter return fines at G BF from 32% to 20% Savings $ 3.32 mn Improvement in gross yield of New Bar Mill Savings $ 0.68 mn
In addition to the above ~ 270 projects were implemented in FY 08 which are expected to result in savings of $ 49.75 mn 15
Market Share of Branded Products Sale of Branded Products USD mn
16
New Projects commissioned H Blast Furnace – “Blown in” on 31st May 2008
Capacity 2.5 mtpa Production of 7200 t of hot metal per day with a coke rate of 380 kg/thm and coal injection rate of 160 kg/thm Energy recovery from the BF Gas through an expansion turbine (TRT) 3rd Billet Caster scheduled to be commissioned by Aug‟08 at LD1
17
Operating Highlights South East Asian Operations – NatSteel Asia Finished Steel Production
1.75
1.68
MnMn tonnes tonnes
Record annual billet production in Singapore at 0.75mt Record annual Bar/Wire Rod production in Singapore at 0.74 mt
0.41
ANNUAL FY 2007-08
0.29
Q4
Increase in sales of 12.90% y-o-y at 2.5 mt in FY 08 TOP initiative at Singapore resulted in savings of US$ 11.2 mn in FY 08
FY 2006-07
18
Operating Highlights South East Asian Operations – Tata Steel Thailand Finished Steel Production
Increase of 26% in annual liquid steel production at 1.39 mt
Mn tonnes
Increase of 21% in annual finished Steel production at 1.38 mt
1.40 1.14
Increase of 29% in sales volume over FY 07 at 1.43 mt 0.36
ANNUAL
FY 2007-08
0.33
Q4
New Products launched include SD 50 High Tensile and Cut & Bend rebars, Tyre Bead wire rods and RB26 electrode quality wire rods
FY 2006-07
19
Key Performance Improvements – South East Asian Operations
Cost reduction
TOP initiative : US $11 mn savings identified Energy consumption has decreased by 9% in Singapore, Vietnam and Xiamen
Oxygen Lancing Project to reduce power. US $ 1.5 Mn benefit
Maximized production volumes by 21% in Tata Steel
Productivity improvement
Thailand
Increased hot charging from 66% to 80%. Decreased sectional changes. 20
Key Performance Improvements – South East Asian Operations Containerized scrap : Benefit : 2.7 $ Mn Better quality of scrap at lower prices
Strategic procurement
Billet sourcing increased in Xiamen : From Transactional to Relationship with 2-3 suppliers
Supplier confidence has increased with stability of supply
Integrated sourcing of ferro-alloy, graphite, coke Improvement in service charges by 5$-10$/ton
Revenue maximization
Reduction in Inventory days Project sales contracts reduced from 18 months to less than 12 months to capture higher price realisation 21
CSR Highlights
Improve the economic and social status of the community
Sustainable livelihood
Health & Environment
Land & Water Management Rural Enterprise Development Vocational Training Conduct HIV/AIDS Awareness Programs Maternal & Child Health Care Programs Lifeline Express
Educative & Affirmative action
Early child education centre Camp School Adult Literacy Financial assistance to SC/ST
Our CSR covers over 800 villages in Jharkhand, Orissa & Chattisgarh and touches the lives of over 8 lakh people 22
Performance of Tata Steel UK (Corus)
Operating Highlights – Tata Steel UK (Corus) 2007-08
2006
Liquid Steel production(mt)
20.3
18.8
Deliveries (mt)
23.1
21.6
On time in full deliveries (OTIF)(%)
84
85
Energy consumption (GJ/t)
17.6
18.1
Environment -CO2 Emissions (t/tls)
1.84
1.85
Safety - Lost Time Injury Freq.(LTIF) (per mn hrs worked)
1.8
2.5
2006 figures used for comparison as that is the last full financial year for Corus
24
Tata Steel UK – Operating Bridge
1600
1100
US $ mn
592
98
1553
Volume & Sales Mix
Other
FY 08
820 Net Price/Cost =43
600
100
FY 07
Price
Cost
25 25
Performance Improvements year on year movement – US$mn Target
576
>600
376
2006
2007-08
2008 - 09
26
Performance Improvements Strip Products “ Project 2010” at Ijmuiden Ijmuiden production at 7.5mt, target of 8mt Port Talbot production at 4.4mt, target 5mt
Port Talbot BOS Gas Recovery Project Volume Growth at Colors
27
“Project 2010” at Ijmuiden on schedule
Strategy 2010 comprises of several projects which include
Galvanising line No.3 Capacity expansion +530ktpa expected to be commissioned by Nov 2008
Cold Mill 22 Capacity expansion +800ktpa expected to be commissioned by June 2008
Heavy bending Hot Strip Mill 2 Capacity expansion 170ktpa expected to be commissioned in April 2009
Ladle Furnace BOS plant Capacity expansion +260ktpa expected to be commissioned in Aug 2009
28
New Initiatives 2008-09 - Product Launches Strip Products:
Advanced High Strength Steels DP600 DP800 Hot Rolled Steel Substrate – Ympress S700
Organic Coating – HPS200 Ultra
Metallic Coating – Magizinc
Ymagine
Ymvit
Magizinc
29
Performance Improvements Long Products
Project “Starsign” at Scunthorpe
Scunthorpe production at 4.2mt, target of 4.5mt
Corus Engineering Steels - Restructuring benefits through de-bottlenecking and development
Scunthorpe – selective selling of premium rods & UK sections
CI supported improvements in volume and manufacturing 30
Long Products – Major Capex Initiative £153m “Starsign” – already commissioned in FY 08 Rail: Establishing a world class rail production facility at the existing MSM and an on-site service centre to improve customer service and offer rail lengths up to 120 m
Rods: Developing the Rod Mill & MSM to enhance rolling capability, flexibility and quality of premium quality rod for tyre cord
Structural sections for T5
Sections: increased capacity, product quality (tolerances) and flexibility
31
New Initiatives 2008-09 - Product Launches Long Products:
Long Rails 120mm
Rod Freecutting Steels
Engineering Steels for drill collar sector
Pipeplate for sour applications
Interstitial free steel for safety critical
EH46 plate grade for Aircraft Carrier contract
32
Performance Improvements Distribution & Building Systems
Mainland European volumes increase at Maastricht, Blume shipyard plate, Namascor packaging line
UK initiatives - Integration with upstream
Kalzip installer network and focus on Middle East & India
Kalzip® Solar Systems
33
Corporate Responsibility Health, Safety and Environment Health & Safety
Environment
Remains our first priority with a 3-year plan launched in February 2008, supported by local initiatives Our LTIF has fallen year-on-year since 2000 and is now at 1.8
We have a climate change vision and strategy - goal is to reduce CO2 emissions by at least 20% by 2020 compared to 1990 investing £60m in a BOS gas recovery scheme at Port Talbot to reduce annual CO2 emissions by 279,000 tonnes Other initiatives to reduce particulate emissions include a $18 million dust control project at C&I in Scunthorpe
We have launched a climate change communication campaign to create employee awareness Developing innovative products to help reduce our customers CO2 emissions - e.g. advanced high strength steel, carbon neutral housing, products for renewable energy market etc
LTIF
2.500
CO2 Emissions
2.000 1.500 1.000 0.500 0.000 200 5 200 6
34
Financial Performance & Financing
Tata Steel Standalone US $ mn FY08
FY07
Change %
Deliveries ( mt)
4.78
4.79
(0.2%)
Turnover
5,005
4,494
11%
EBIDTA
2,139
1,851
16%
EBIDTA margin
43%
41%
2%
36
Tata Steel PBT bridge
(Figs in US $ mn)
Financial numbers are as per Indian GAAP. 37
Tata Steel UK ( Corus) Financial Performance US $ mn FY08
FY 07
Deliveries (mt)
23.08
21.55
Turnover
23,935
20,919
EBIDTA
2,190
1,553
9%
7%
EBIDTA margin
The nos. are in IFRS
38
Consolidated Financial Performance 2007 - 08
Tata Steel
US $ mn
TSUK (Corus)
NSA
TSTH
Tata Steel Group (*)
Deliveries (mt )
4.78
23.08
2.49
1.43
31.99
Turnover
5,005
25,098
1,915
1,020
33,011
EBIDTA
2,139
2,274
57
126
4,640
EBIDTA margin
43%
9%
3%
12%
14%
PBT
4,091
PBT margin
12%
PAT
3,086
PAT margin
9%
ROIC ( pretax )
19 %
Fully Diluted EPS
4.07
(*) Includes other JVs, Subsidiaries & share of profit of Associates of the Tata Steel Group
39
NatSteel Asia Group Financial Performance US $ mn FY08
FY07
Change %
Deliveries (mt)
2.49
2.21
13%
Turnover
1,915
1,100
74%
EBIDTA
57
49
16%
EBIDTA margin
3%
4%
(1%)
40
Tata Steel Thailand Financial Performance US $ mn FY08
FY07
Change %
Deliveries (mt)
1.43
1.12
27%
Turnover
1,020
646
58%
EBIDTA
126
72
75%
EBIDTA margin
12%
11%
1%
41
Key Group Ratios FY08
FY07
Change %
EBIDTA Margin
14.08 %
31.14 %
(54.78 %)
Asset Turnover
108.61 %
77.02 %
41 %
ROIC (pretax)
19.1 %
42 %
36 %
EPS ( Diluted)-INR
162.96
64.66
152 %
1.36
0.71
91.55%
Net Debt / Equity
42
Funding for the acquisition Group raised USD 10 billion in 2007 Cash from TSL US$1.09 bn Long Term Debt
April 2, 2007
US$ 1.66 bn
USD Bn
Tenor
Cost p.a.
a.
Total Own Cash Contribution from TSL
1.96
-
-
b.
ECB Proceeds (drawn between April‟06 and Jan‟07)
1.68
5.61 Yrs
L+0.45%
Long Term Debt
c.
Long term Rupee Loan
0.61
5.5 Yrs
10.5%
US$ 2.29 bn
d.
CARS Proceeds
0.875
5 Yrs
1%
e.
Rights and CCPS Issue
2.34
-
-
f.
Non-Recourse Leveraged Debt
6.21
4.93 Yrs
L+2.07%
Bridge Funding for Acquisition US$10.56 bn
Cash from TSL US$1.96 bn
Current
All Bridge funding for the acquisition has now been termed out/ repaid
Term Debt in Corus US$ 6.21 bn
Equity/Quasi Equity in TSL US$ 3.21 bn
43
Financing focus for the future
Strong Internal Generation through Continuous Improvement, Working Capital Management & Synergies
Sustenance capex and Brownfield expansion financed through Internal Generation
Raise Structured Equity for Greenfield Projects in the next 18 months
Re-organise Group Structure to unlock value in the next 6 – 12 months for planned growth in raw material assets and new market entry 44
Integration
& Synergies
Synergies Indentified at time of Acquisition Synergies
Manufacturing
Procurement
Increase BF productivity Reduced coke consumption Strengthening of CIP
Combined buying Rationalisation of Suppliers
Financing & Corporate
Restructuring of organisation Refinancing
Total
57 %
11 %
32 % US $450 mn 46
Integration Process
Strategic & Integration Committee (SIC) Review
Focused integration teams setup in manufacturing departments of both entities
Integration Program Office setup
Synergy implementation review undertaken by business heads periodically
Engagement of external auditors to review the process for identifying benefits 47
Long Term Strategy
Long Term Strategy Strong Base in India • Multi Location • Rank 6th in the world • Strong Brands • Raw Material security 22%
Primary steel making in countries rich in Iron Ore and / or Coal / Gas
Overseas acquisitions in growing & mature markets
• Global company • Dominant in 4 continents • Amongst top 3 • Auto & Packaging & Construction led.
Ownership of strategic raw materials
2008 • 24 MTPA • Dominant in selected domestic markets
2015 More from Steel and Branding Control over Logistics Participation in Alternate Technology
• > 50 MTPA capacity • De-integrated production • EVA +
World Class Organization / Structure
49
Coal Project - Mozambique
35% JV stake with Riversdale Mining Ltd. in 25000 hectares Benga and Tete Tenement in Moatize region Inferred coal resource ~ 1.94 billion tonnes in Benga Tenement Offtake Agreement for 40% of coking coal on commercial terms. Feasibility study & discussions on logistics with Govt of Mozambique underway Production expected to commence from 2010
Riversdale
50
Iron Ore Project - Ivory Coast
JV with State owned company Sodemi for exploring & developing Mt Nimba iron ore mine 75% stake in JV company Tata Steel Cote d‟Ivoire S.A. Resource : > 750 mn tonnes of Itabirite Iron ore Issue of Exploration license to SODEMI being considered by Ministry Project envisages exploration & mine development at Nimba.
51
Limestone Project – Oman
Entered into 70:30 JV with Al Bahja Group by participating in its existing mining company, Al Rimal Mining LLC Scope of JV : Mining of metallurgical grade limestone from Uyun Mine in Salalah, in Southern Oman Estimated resource of ~ greater than 250 mn tonnes Feasibility study & exploration to commence
52
Growth Strategy – New Projects 2.9 mtpa expansion at Jamshedpur
6.0 mtpa greenfield project at Orissa 0.5 MTPA Mini Blast Furnace Project at Thailand
53
2.9 mtpa expansion - Jamshedpur
Capacity Increase : HRC – 2.34 mtpa & Slab – 0.5 mtpa Broad Facilities :
Upgradation of existing Blast Furnaces Thin Slab Casting & Rolling Mill , 2.34 mtpa Setting up a Pelletising Plant, 6mtpa
Contracts signed for supply of major equipments Civil work for LD 3 commenced Commissioning of 1st strand in Oct 2010 The project is on schedule
54
Orissa Project - Kalinganagar
6 mtpa integrated steel making facility to be completed in two phases of 3mtpa each Orders placed for Steel Melting Shop, Blast Furnace, Sinter Plant, Coke Plant and structural drawings for over 22,000 t have been released for fabrication Orders for Hot Strip Mill, Raw Material Handling System, Water System, Oxygen Plant (on BOO basis) in advanced stages of negotiation Mines plan, Rapid EIA, Forest De-reservation proposal, pre-feasibility study, topography survey of proposed lease area completed
55
Thailand - 0.5 mtpa Mini Blast Furnace Project
Tentative completion Sep 2009
Signed contract for machinery supply and contractor employment with Huatian Engineering & Technology Corpn.
Entitlement of tax incentives from Board of Investments, Thailand
56
Analyst Meet – Mumbai June 26, 2008
1
Agenda
Key Highlights Performance of Indian & South East Asian Operations Performance of the UK & European Operations Financial Performance & Financing Integration & Long Term Strategy External Environment & Market Outlook
2
Key Highlights
Key Highlights Group Vision Launched Integration synergies of US $450 mn to be exceeded Acquisition Financing completed Raw Material Initiatives Strong Performance Improvement
4
Performance of Indian & South East Asian Operations
Operating Highlights - Indian Operations FY08
FY07
Crude Steel Production (mt)
Specific energy consumption (Gcal/tss)
On time in full deliveries (OTIF)(%)
Power Consumption (kwhr/tss)
388
400
Fuel Rate (kg/thm)
577
578
Labour productivity (tcs/man/yr)
370
363
5.01
5.05
6.66
6.72
77
77
6
Tata Steel – Deliveries & Turnover Flat Products US$ 2401 mn
Long Products US$ 2168 mn
3181
US$ 1070 mn
3108
Deliveries
US$ 936 mn
1686
1601
In „ 000 tons
Deliveries 7
Operating Highlights - Indian Operations
Steel Division – Jamshedpur Cold Rolling Mill -Best ever annual saleable production of 1.54 mt Hot Strip Mill - Best ever annual production of 3.27 mt LD2 & Slab Caster Unit - Best ever annual production of 3.36 mt Long New Bar Bill - Best ever performance of 0.55 mt and improved upon its mill speed for various product categories G BF - Best ever annual production of 2.05 mt Highest ever usage of melting scrap at LD shop at 0.43 mt, an increase of 26.47% Reduction in dust emission to 0.86 kg per ton, decrease by 10.42 % y-o-y
Major reasons for lower production in FY 08 (5.01 mt) as compared to FY 07 (5.05 mt) Shutdowns related to 1.8 mt steel expansion Outages of Blast Furnace led to lower Hot Metal availability Refurbishment of coke oven batteries & power breakdown in Q1 FY 08 8
Operating Highlights – Indian Operations STEEL DIVISION
In mn tonnes
9
Market share in Auto Sector TOTAL AUTOMOTIVE 900
43%
750 600
41%
GALVANISED AUTO
44%
41%
FY07
FY08
41%
450 300 150 0 FY04
FY05
FY06
'000 Tonnes
CR AUTO
M arket Share (%)
HR AUTO
10
Continued focus on High Value Added Products TISCON
TATA SHAKTEE
SPECIALITY WIRE RODS (HC+LC)
TATA STEELIUM ( % segment )
11
Operating Highlights- Profit Centres
Bearings Division
Developed bearings for Tata Motors – Nano Project Product Mix enrichment – 29 new bearings developed
Tubes Division
Signed up with Tata Motors for supply of critical Tubular components for the Nano Project - Hydroformed
12
Market Initiatives in India Introduction of TISCON Fe 500 grade was highly successful with 100% conversion of project customers from Fe 415 to Fe 500
Regional Customisation : Super Ductile Tiscon launched for earthquake prone NE India Segment Customisation : Retail Identity Programme (RIP) launched Tata Steelium launched in Sri Lanka and Tata Agrico in Dubai & Qatar
13
Key Performance Improvements – Indian Operations
Critical Chain Project Management ( TOC)
Solution for Sales (TOC)
Reduction in duration of shutdowns in 33 projects Savings realised $ 9.25 mn Pull based replenishment process with stock buffers put in place to ensure no stock out at Distributors Vendor Managed Inventory (VMI) offers stabilized Savings realised $ 23.25 mn
TOC in Mining
Improving quality of ore while increasing mine life at OMQ w.r.t Alumina Increase in raw coal production at West Bokaro using same resources Savings realised $ 5.5 mn 14
Key Performance Improvements – Indian Operations ASPIRE PROJECTS
Increase in Clean Coal yield at 13% ash at West Bokaro Savings $ 7.25 mn Reduction of overall sinter return fines at G BF from 32% to 20% Savings $ 3.32 mn Improvement in gross yield of New Bar Mill Savings $ 0.68 mn
In addition to the above ~ 270 projects were implemented in FY 08 which are expected to result in savings of $ 49.75 mn 15
Market Share of Branded Products Sale of Branded Products USD mn
16
New Projects commissioned H Blast Furnace – “Blown in” on 31st May 2008
Capacity 2.5 mtpa Production of 7200 t of hot metal per day with a coke rate of 380 kg/thm and coal injection rate of 160 kg/thm Energy recovery from the BF Gas through an expansion turbine (TRT) 3rd Billet Caster scheduled to be commissioned by Aug‟08 at LD1
17
Operating Highlights South East Asian Operations – NatSteel Asia Finished Steel Production
1.75
1.68
MnMn tonnes tonnes
Record annual billet production in Singapore at 0.75mt Record annual Bar/Wire Rod production in Singapore at 0.74 mt
0.41
ANNUAL FY 2007-08
0.29
Q4
Increase in sales of 12.90% y-o-y at 2.5 mt in FY 08 TOP initiative at Singapore resulted in savings of US$ 11.2 mn in FY 08
FY 2006-07
18
Operating Highlights South East Asian Operations – Tata Steel Thailand Finished Steel Production
Increase of 26% in annual liquid steel production at 1.39 mt
Mn tonnes
Increase of 21% in annual finished Steel production at 1.38 mt
1.40 1.14
Increase of 29% in sales volume over FY 07 at 1.43 mt 0.36
ANNUAL
FY 2007-08
0.33
Q4
New Products launched include SD 50 High Tensile and Cut & Bend rebars, Tyre Bead wire rods and RB26 electrode quality wire rods
FY 2006-07
19
Key Performance Improvements – South East Asian Operations
Cost reduction
TOP initiative : US $11 mn savings identified Energy consumption has decreased by 9% in Singapore, Vietnam and Xiamen
Oxygen Lancing Project to reduce power. US $ 1.5 Mn benefit
Maximized production volumes by 21% in Tata Steel
Productivity improvement
Thailand
Increased hot charging from 66% to 80%. Decreased sectional changes. 20
Key Performance Improvements – South East Asian Operations Containerized scrap : Benefit : 2.7 $ Mn Better quality of scrap at lower prices
Strategic procurement
Billet sourcing increased in Xiamen : From Transactional to Relationship with 2-3 suppliers
Supplier confidence has increased with stability of supply
Integrated sourcing of ferro-alloy, graphite, coke Improvement in service charges by 5$-10$/ton
Revenue maximization
Reduction in Inventory days Project sales contracts reduced from 18 months to less than 12 months to capture higher price realisation 21
CSR Highlights
Improve the economic and social status of the community
Sustainable livelihood
Health & Environment
Land & Water Management Rural Enterprise Development Vocational Training Conduct HIV/AIDS Awareness Programs Maternal & Child Health Care Programs Lifeline Express
Educative & Affirmative action
Early child education centre Camp School Adult Literacy Financial assistance to SC/ST
Our CSR covers over 800 villages in Jharkhand, Orissa & Chattisgarh and touches the lives of over 8 lakh people 22
Performance of Tata Steel UK (Corus)
Operating Highlights – Tata Steel UK (Corus) 2007-08
2006
Liquid Steel production(mt)
20.3
18.8
Deliveries (mt)
23.1
21.6
On time in full deliveries (OTIF)(%)
84
85
Energy consumption (GJ/t)
17.6
18.1
Environment -CO2 Emissions (t/tls)
1.84
1.85
Safety - Lost Time Injury Freq.(LTIF) (per mn hrs worked)
1.8
2.5
2006 figures used for comparison as that is the last full financial year for Corus
24
Tata Steel UK – Operating Bridge
1600
1100
US $ mn
592
98
1553
Volume & Sales Mix
Other
FY 08
820 Net Price/Cost =43
600
100
FY 07
Price
Cost
25 25
Performance Improvements year on year movement – US$mn Target
576
>600
376
2006
2007-08
2008 - 09
26
Performance Improvements Strip Products “ Project 2010” at Ijmuiden Ijmuiden production at 7.5mt, target of 8mt Port Talbot production at 4.4mt, target 5mt
Port Talbot BOS Gas Recovery Project Volume Growth at Colors
27
“Project 2010” at Ijmuiden on schedule
Strategy 2010 comprises of several projects which include
Galvanising line No.3 Capacity expansion +530ktpa expected to be commissioned by Nov 2008
Cold Mill 22 Capacity expansion +800ktpa expected to be commissioned by June 2008
Heavy bending Hot Strip Mill 2 Capacity expansion 170ktpa expected to be commissioned in April 2009
Ladle Furnace BOS plant Capacity expansion +260ktpa expected to be commissioned in Aug 2009
28
New Initiatives 2008-09 - Product Launches Strip Products:
Advanced High Strength Steels DP600 DP800 Hot Rolled Steel Substrate – Ympress S700
Organic Coating – HPS200 Ultra
Metallic Coating – Magizinc
Ymagine
Ymvit
Magizinc
29
Performance Improvements Long Products
Project “Starsign” at Scunthorpe
Scunthorpe production at 4.2mt, target of 4.5mt
Corus Engineering Steels - Restructuring benefits through de-bottlenecking and development
Scunthorpe – selective selling of premium rods & UK sections
CI supported improvements in volume and manufacturing 30
Long Products – Major Capex Initiative £153m “Starsign” – already commissioned in FY 08 Rail: Establishing a world class rail production facility at the existing MSM and an on-site service centre to improve customer service and offer rail lengths up to 120 m
Rods: Developing the Rod Mill & MSM to enhance rolling capability, flexibility and quality of premium quality rod for tyre cord
Structural sections for T5
Sections: increased capacity, product quality (tolerances) and flexibility
31
New Initiatives 2008-09 - Product Launches Long Products:
Long Rails 120mm
Rod Freecutting Steels
Engineering Steels for drill collar sector
Pipeplate for sour applications
Interstitial free steel for safety critical
EH46 plate grade for Aircraft Carrier contract
32
Performance Improvements Distribution & Building Systems
Mainland European volumes increase at Maastricht, Blume shipyard plate, Namascor packaging line
UK initiatives - Integration with upstream
Kalzip installer network and focus on Middle East & India
Kalzip® Solar Systems
33
Corporate Responsibility Health, Safety and Environment Health & Safety
Environment
Remains our first priority with a 3-year plan launched in February 2008, supported by local initiatives Our LTIF has fallen year-on-year since 2000 and is now at 1.8
We have a climate change vision and strategy - goal is to reduce CO2 emissions by at least 20% by 2020 compared to 1990 investing £60m in a BOS gas recovery scheme at Port Talbot to reduce annual CO2 emissions by 279,000 tonnes Other initiatives to reduce particulate emissions include a $18 million dust control project at C&I in Scunthorpe
We have launched a climate change communication campaign to create employee awareness Developing innovative products to help reduce our customers CO2 emissions - e.g. advanced high strength steel, carbon neutral housing, products for renewable energy market etc
LTIF
2.500
CO2 Emissions
2.000 1.500 1.000 0.500 0.000 200 5 200 6
34
Financial Performance & Financing
Tata Steel Standalone US $ mn FY08
FY07
Change %
Deliveries ( mt)
4.78
4.79
(0.2%)
Turnover
5,005
4,494
11%
EBIDTA
2,139
1,851
16%
EBIDTA margin
43%
41%
2%
36
Tata Steel PBT bridge
(Figs in US $ mn)
Financial numbers are as per Indian GAAP. 37
Tata Steel UK ( Corus) Financial Performance US $ mn FY08
FY 07
Deliveries (mt)
23.08
21.55
Turnover
23,935
20,919
EBIDTA
2,190
1,553
9%
7%
EBIDTA margin
The nos. are in IFRS
38
Consolidated Financial Performance 2007 - 08
Tata Steel
US $ mn
TSUK (Corus)
NSA
TSTH
Tata Steel Group (*)
Deliveries (mt )
4.78
23.08
2.49
1.43
31.99
Turnover
5,005
25,098
1,915
1,020
33,011
EBIDTA
2,139
2,274
57
126
4,640
EBIDTA margin
43%
9%
3%
12%
14%
PBT
4,091
PBT margin
12%
PAT
3,086
PAT margin
9%
ROIC ( pretax )
19 %
Fully Diluted EPS
4.07
(*) Includes other JVs, Subsidiaries & share of profit of Associates of the Tata Steel Group
39
NatSteel Asia Group Financial Performance US $ mn FY08
FY07
Change %
Deliveries (mt)
2.49
2.21
13%
Turnover
1,915
1,100
74%
EBIDTA
57
49
16%
EBIDTA margin
3%
4%
(1%)
40
Tata Steel Thailand Financial Performance US $ mn FY08
FY07
Change %
Deliveries (mt)
1.43
1.12
27%
Turnover
1,020
646
58%
EBIDTA
126
72
75%
EBIDTA margin
12%
11%
1%
41
Key Group Ratios FY08
FY07
Change %
EBIDTA Margin
14.08 %
31.14 %
(54.78 %)
Asset Turnover
108.61 %
77.02 %
41 %
ROIC (pretax)
19.1 %
42 %
36 %
EPS ( Diluted)-INR
162.96
64.66
152 %
1.36
0.71
91.55%
Net Debt / Equity
42
Funding for the acquisition Group raised USD 10 billion in 2007 Cash from TSL US$1.09 bn Long Term Debt
April 2, 2007
US$ 1.66 bn
USD Bn
Tenor
Cost p.a.
a.
Total Own Cash Contribution from TSL
1.96
-
-
b.
ECB Proceeds (drawn between April‟06 and Jan‟07)
1.68
5.61 Yrs
L+0.45%
Long Term Debt
c.
Long term Rupee Loan
0.61
5.5 Yrs
10.5%
US$ 2.29 bn
d.
CARS Proceeds
0.875
5 Yrs
1%
e.
Rights and CCPS Issue
2.34
-
-
f.
Non-Recourse Leveraged Debt
6.21
4.93 Yrs
L+2.07%
Bridge Funding for Acquisition US$10.56 bn
Cash from TSL US$1.96 bn
Current
All Bridge funding for the acquisition has now been termed out/ repaid
Term Debt in Corus US$ 6.21 bn
Equity/Quasi Equity in TSL US$ 3.21 bn
43
Financing focus for the future
Strong Internal Generation through Continuous Improvement, Working Capital Management & Synergies
Sustenance capex and Brownfield expansion financed through Internal Generation
Raise Structured Equity for Greenfield Projects in the next 18 months
Re-organise Group Structure to unlock value in the next 6 – 12 months for planned growth in raw material assets and new market entry 44
Integration
& Synergies
Synergies Indentified at time of Acquisition Synergies
Manufacturing
Procurement
Increase BF productivity Reduced coke consumption Strengthening of CIP
Combined buying Rationalisation of Suppliers
Financing & Corporate
Restructuring of organisation Refinancing
Total
57 %
11 %
32 % US $450 mn 46
Integration Process
Strategic & Integration Committee (SIC) Review
Focused integration teams setup in manufacturing departments of both entities
Integration Program Office setup
Synergy implementation review undertaken by business heads periodically
Engagement of external auditors to review the process for identifying benefits 47
Long Term Strategy
Long Term Strategy Strong Base in India • Multi Location • Rank 6th in the world • Strong Brands • Raw Material security 22%
Primary steel making in countries rich in Iron Ore and / or Coal / Gas
Overseas acquisitions in growing & mature markets
• Global company • Dominant in 4 continents • Amongst top 3 • Auto & Packaging & Construction led.
Ownership of strategic raw materials
2008 • 24 MTPA • Dominant in selected domestic markets
2015 More from Steel and Branding Control over Logistics Participation in Alternate Technology
• > 50 MTPA capacity • De-integrated production • EVA +
World Class Organization / Structure
49
Coal Project - Mozambique
35% JV stake with Riversdale Mining Ltd. in 25000 hectares Benga and Tete Tenement in Moatize region Inferred coal resource ~ 1.94 billion tonnes in Benga Tenement Offtake Agreement for 40% of coking coal on commercial terms. Feasibility study & discussions on logistics with Govt of Mozambique underway Production expected to commence from 2010
Riversdale
50
Iron Ore Project - Ivory Coast
JV with State owned company Sodemi for exploring & developing Mt Nimba iron ore mine 75% stake in JV company Tata Steel Cote d‟Ivoire S.A. Resource : > 750 mn tonnes of Itabirite Iron ore Issue of Exploration license to SODEMI being considered by Ministry Project envisages exploration & mine development at Nimba.
51
Limestone Project – Oman
Entered into 70:30 JV with Al Bahja Group by participating in its existing mining company, Al Rimal Mining LLC Scope of JV : Mining of metallurgical grade limestone from Uyun Mine in Salalah, in Southern Oman Estimated resource of ~ greater than 250 mn tonnes Feasibility study & exploration to commence
52
Growth Strategy – New Projects 2.9 mtpa expansion at Jamshedpur
6.0 mtpa greenfield project at Orissa 0.5 MTPA Mini Blast Furnace Project at Thailand
53
2.9 mtpa expansion - Jamshedpur
Capacity Increase : HRC – 2.34 mtpa & Slab – 0.5 mtpa Broad Facilities :
Upgradation of existing Blast Furnaces Thin Slab Casting & Rolling Mill , 2.34 mtpa Setting up a Pelletising Plant, 6mtpa
Contracts signed for supply of major equipments Civil work for LD 3 commenced Commissioning of 1st strand in Oct 2010 The project is on schedule
54
Orissa Project - Kalinganagar
6 mtpa integrated steel making facility to be completed in two phases of 3mtpa each Orders placed for Steel Melting Shop, Blast Furnace, Sinter Plant, Coke Plant and structural drawings for over 22,000 t have been released for fabrication Orders for Hot Strip Mill, Raw Material Handling System, Water System, Oxygen Plant (on BOO basis) in advanced stages of negotiation Mines plan, Rapid EIA, Forest De-reservation proposal, pre-feasibility study, topography survey of proposed lease area completed
55
Thailand - 0.5 mtpa Mini Blast Furnace Project
Tentative completion Sep 2009
Signed contract for machinery supply and contractor employment with Huatian Engineering & Technology Corpn.
Entitlement of tax incentives from Board of Investments, Thailand
56
