#1HEG HEG/SECTT/2016 10th November, 2016 FROUB PROUD TO BE INDIAN PRIVILEGED TO BE GLOBAL 1 BSE Limited 2 National Stock Exchange of India Limited 25th Floor, PJ Towers Exchange Plaza, 5th Floor Dalal Street MUMBAI 400 001. Scrip Code: 509631 MUMBAI 400 051. Scrip Code: HEG Plot No.C/1, G Block, Bandra - Kurla Complex Bandra (E), Sub: Investors presentation on the Unaudited Financial Results of the Company for the quarter and six months period ended 30th September, 2016 Dear Sir, Please find enclosed a copy of Investors presentation on the unaudited financial results of the Company for the quarter and six months period ended 30th September, 2016 for your information and record please. Kindly take the same on record. Thanking you, Yours faithfully, For HEG Limited * (Ashish Sabharwal) Company Secretary [email protected] Encl: as above. ISO 9001 BUREAU VERITAS Certification EAD VERIT 7828 HEG LIMITED Corporate Office : Bhilwara Towers, A-12, Sector-1 Noida - 201 301 (NCR-Delhi), India Tel.: +91-120-4390300 (EPABX) Fax: +91-120-4277841 Website: www.Injbhilwara.com Regd. Office: Mandideep (Near Bhopal) Distt. Raisen - 462046 (Madhya Pradesh), India Tel.: +91-7480-405500, 233524 to 233527 Fax: +91-7480-233522 Website: www.hegltd.com Corporate Identification No.: L23109MP1972PLC008290 VERIT ISO 14001 AU BUREAU VERITAS Certification 7828#212-241 HEG A HEG HEG HEG Limited World Winning Quality Q2 & H1 of FY17 Investor Update Presentation#32 HEG Limited - Profile HEG HEG Limited World Winning Quality ✰ HEG Limited is a leading graphite electrode manufacturer & exporter Globally. HEG produces two grades of graphite electrodes - Ultra High Power (UHP) & High Power (HP) - used in manufacturing steel through the Electric Arc Furnace (EAF) route. ✰ Exports approximately 65% of its production to about 30 countries around the world. ✰ Diversified customer portfolio - ArcelorMittal, Nucor, POSCO, Dongkuk Steel, Hyundai Steel, Saudi Basic Industries, Emirates Steel Industries, Severstal, SAIL, Tata Steel, Jindal Group etc. Graphite electrodes manufacturing plant (capacity of 80,000 tons per annum) located at Mandideep in Madhya Pradesh - is the largest single-site facility in the world ❖ Captive power generation capacity of around 76.5 mw (2 thermal power plants & 1 hydro power plant)#43 Global Steel Industry HEG HEG Limited World Winning Quality IMF downgraded Global growth to slow down to 3.1 percent in 2016 before recovering to 3.4 percent in 2017. World Steel Association (WSA), reported a declined of 0.5 % in world crude steel production to 1197 million tons for Jan - Sept'16. ❖ Almost all major steel producing regions registered a negative growth - EU(28) (-4.8%), North America (-1.4 %), South America (-11.4%), Asia (-0.6%), Middle East (-0.8%), Africa (-11.6%), CIS (-0.1%) etc. Chinese production registered a positive growth of 0.4% to 604 million tons in 9M of 2016. ❖ India's steel production increased by 5.9% to 71 million tons. Chinese steel export in first 9 months were up 2.4 percent year on year at 85.1 million tons, the highest ever for the period#54 Indian Steel Industry HEG HEG Limited World Winning Quality ❖ India registered a growth of 7.6% in Crude steel production during H1 compared to the same period of last year. Total Crude steel production for H1 is 48 million tons. ❖ MIP helped domestic industry to improve their realizations and extend their reach to segments which were mainly captured by low priced imports. ❖ Imports during Jan/June 16 were 3.60 mmt compared to 5.50 mmt last year, lower by 37 % ❖ As per WSA, Indian steel demand is expected to report show a solid growth in 2016-2017 backed by consumption-boosting reforms and infrastructure investment, but its sustainability is under question as key levels of investment are being provided by the government while private investment remains weak.#65 Financial Snapshot (under Ind.AS) HEG HEG Limited World Winning Quality in Rs. Crore (except EPS) Q2 FY17 Q1 FY17 H1 FY17 Net Operating Income 199.77 170.85 370.63 EBITDA* 22.24 4.25 26.49 EBITDA Margin 11.13% 2.49% 7.15% EBIT 3.97 (14.87) (10.90) EBIT Margin 1.99% (8.70%) (2.94%) PAT (13.47) (28.92) (42.40) PAT Margin (6.74%) (16.93%) (11.44%) EPS (3.37) (7.27) (10.61) * EBITDA includes Other Income#7Segmental Performance-Graphite Electrodes HEG HEG Limited in Rs. Crore World Winning Quality Q2 FY17 Q1 FY17 H1 FY17 Net Sales 192.70 161.45 361.84 Export (% of sales) 53.21% 59.28% 56.00% EBITDA Margin (2.00%) (9.90%) (5.70%) EBIT Margin (10.11%) (19.58%) (14.53%) 6 Capacity utilisation at around 65% and expected to go up in the forthcoming quarters, reflected by healthier order book. Graphite electrode prices seems to have bottomed out and have flattened since past 2 qtrs. Part impact of the cheaper raw material contracted during 2016, realized in Q2.#87 HEG HEG Limited World Winning Quality Segmental Performance - Power in Rs. Crore Q2 FY17 Q1 FY17 H1 FY17 Net Sales 58.14 36.33 94.47 EBITDA Margin 44.32% 52.34% 47.42% EBIT Margin 38.72% 43.34% 40.50% ■ Power margins have been adversely impacted as the electricity duty exemption available to one of the two thermal units, expired in June 2016. ■Revenue is higher as hydro power plant started power generation during the quarter. It runs full capacity during the 3rd Qtr.#98 Future Outlook - Steel HEG HEG Limited World Winning Quality World Steel Association forecasts global steel demand to increase by merely 0.2% to 1,501 Mt in 2016 vs (-) 3.0% in 2015. In 2017, demand could grow by 0.5% to reach 1,510 Mt. ❖ Steel Demand in emerging & developing economies (excluding China) to expand by 2.0% in 2016 and 4.0% in 2017. In developed economies demand to increase by 0.20% in 2016 and 1.10% in 2017 Demand in Brazil will start a moderate recovery in 2017. Minor rebound in oil prices helped to stabilise decline in Russia, prevent further deterioration of the Mexican, South American and GCC economies. Lower, unstable oil prices & geopolitical instability undermine outlook for the MENA region. ❖ Steel demand in China is projected to decline by -1.0% in 2016 and by 2.0% in 2017 -#109 Future Outlook- Graphite Electrode HEG HEG Limited World Winning Quality The graphite electrode business of SGL Carbon, one of the industry leaders, have been acquired by SDK, Japan which is expected to be a major positive for the industry. ❖ Favourable impact of industry consolidation is expected in short to medium term, once the acquisition process is complete for SDK. ◆ HEG order book for H2 is healthier compared to first half. Imported needle coke prices showing signs of increase and is in turn expected to jack up the graphite electrode prices in 2017.#1110 For investor enquiries, please contact: HEG HEG Limited Thank You World Winning Quality Mr. Raju Rustogi - CFO & COO HEG Limited Ph: +91 120 244 4541 Fax: +91 120 254 1575 Email: [email protected]