#1ADITYA BIRLA INDIA'S LARGEST CEMENT COMPANY Quarterly update, Q4 FY 19 UltraTech Stock code: BSE: 532538 | NSE: ULTRACEMCO | Reuters: UTCL.NS | Bloomberg: UTCEM IS/UTCEM LX#2CONTENTS Macro and Sector updates Key Company updates Performance Sectoral guidance GLOSSARY MNT - Million metric tons LMT - Lac metric tons MTPA - Million tons per annum Q1-April-June Q2 - July-September Q3 - October-December Q4 - January-March 9M - April-December CY - Current year period LY - Corresponding period last year FY - Financial year (April-March)#3Macro indicators ₹ Mi % Q3 GDP contracted to 6.6% v/s 7.7% in LY IIP growth for April-February 2019 period: 4% (LY: 4.4%) Average crude prices for the quarter lowered -8% v/s Q3 FY19, but up 21% in FY19 Appreciation in INR v/s US$ of ~2% over Q3 FY19 WIP stood at 3.0% v/s 4.5% during Q3 FY19 UltraTech Cement Limited 3#43% Sector updates The industry in it's upcycle with double-digit volume for full-year, the first time since FY10 Industry demand growth and capacity utilization trend Cap.Utilisation ~15% Industry growth trend ~14% ~14% ~12% ~12% ~ 10% 75% 78% 74% ~6% 70% ~67% 66% 66% 60% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Capacity utilisation for Q4 reached its highest level in the last 28 quarters Annual industry capacity utilisation rate increased to ~71%, about 5% improvement over the previous year (Source: Published results and internal estimates) Annual Growth estimated at ~ 12% 2 UltraTech Cement Limited | 4#5Sector updates Key cement industry growth drivers Q4 FY19 Growth Growth drivers Infrastructure Low-cost housing Housing Industrial & commercial ~22% ~12% ~54% ~12% Key contributors Road execution speed now at ~ 30 kms/day Double digit growth in bank lending for Infrastructure Ports development on full swing (Source: RBI, Research reports and internal estimates) 食食食 Major construction projects in Madhya Pradesh, Uttar Pradesh, West Bengal, Odisha and Andhra Pradesh High double digit growth in housing bank credits Consistent demand from rural housing consumption Office space demand improvement Increasing trends in manufacturing capacity utilization UltraTech Cement Limited | 5#6Sector updates State/region-wise performance State/Region Haryana Delhi + NCR Punjab Himachal Pradesh Vol. I LCH RH UH C Key drivers Gr. Urban Housing and Infrastructure Infrastructure Panchayat elections and sand availability Heavy rains & snow Infrastructure Infrastructure and IHB Rajasthan North ↑ Madhya Pradesh ↑ IHB and PMAY Uttar Pradesh ↑ Central ↑ Maharashtra ↑ Gujarat West Rural IHB and Infrastructure IHB and PMAY Infrastructure and Affordable Housing Weak rural demand Infrastructure and Affordable Housing Key growth driver: Infrastructure Spending and Rural Housing I: Infrastructure, LCH: Low-cost housing, RH: Rural housing, UH: Urban housing, C: Commercial, IHB: Individual Home Builder, PMAY: Pradhan Mantri Awas Yojana. UltraTech Cement Limited | 6#7Sector updates State/region-wise performance State/Region Vol. Gr. LCH RH UH C Key Drivers West Bengal • Bihar . Jharkhand Odisha Chhattisgarh East ↑ Andhra Pradesh ↑ / Telangana Karnataka Tamil Nadu ↑ Kerala South IHB Infrastructure and IHB Infrastructure and PMAY Infrastructure and IHB Heavy rains and shortage of funds Infrastructure, IHB and PMAY Amaravati Development, Polavaram Dam and IHB Commercial Infrastructure and Rural Housing Post floods rehabilitation work Infrastructure and Housing Key growth driver: Infrastructure Spending & PMAY I: Infrastructure, LCH: Low-cost housing, RH: Rural housing, UH: Urban housing, C: Commercial, IHB: Individual Home Builder, PMAY: Pradhan Mantri Awas Yojana. UltraTech Cement Limited | 7#8Price Change* Demand Region Growth * QoQ Change in price Sector updates Buoyant demand-supply environment supported price hikes in majority of the markets Average cement prices improved ~1-2 % over Q3 Eastern India Western India Northern India Southern India Central India Flat +2% Flat + 4 to 5% + 1% UltraTech Cement Limited | 8#9UltraTech updates Key steps for integration of UltraTech Nathdwara (UNCL) Emerged as a sector benchmark by turning around the asset within a quarter Stabilised operations with plant capacity utilization at 72% in March 2019 Improved pet coke usage from Zero to ~ 40% during the quarter Carried out routine maintenance activity in February 2019 Achieved a cost reduction 2 of Rs. 200/t since acquisition Benchmarked norms to emulate Ultra Tech's quality standards Started realizing UltraTech brand premium Achieved an EBIDTA of Rs. 830/t (excluding one-offs), an improvement of ~ Rs. 740/t UltraTech Cement Limited | 6#10UltraTech updates The next steps for integration of UNCL 11 首 店 Benchmark safety norms to emulate UltraTech standards Step-by-step capacity ramp-up to take utilisation to 80%+ level Kick-start a cost reduction program in order to improve efficiency norms and achieve further cost reduction -Rs. 50/t Strengthen dealer network to create 1,000+ strong sales network with increased Synergize logistics and procurement costs productivity PBT breakeven target: Q4 FY20 UltraTech Cement Limited 10#11UltraTech updates Acquisition of Century's cement assets National Company Law Tribunal hearing scheduled on 3rd May 2019, following the admission of the petition Final order from National Company Law Tribunal likely in May / June 2019 Transfer of limestone mines to be concluded after the final order comes in from the National Company Law Tribunal Likely completion in Q2 FY20 UltraTech CEMENT The Engineer's Choice IIII III Ready with integration plan O UltraTech Cement Limited 11#12At UltraTech, We deliver what we promise 江 ₹ Focus on Deleveraging the Balance Sheet EBITDA-to cash conversion ratio improved at 93% Achieved a Rs. 900 Crs reduction in working capital Reduced leverage by 0.73x in the quarter Generated free cash flow of ~ Rs. 2180 crore during the quarter UltraTech Cement Limited 12#13At UltraTech, We deliver what we promise 89.0* 98.8@ 98.8 89.0 3.44 70.3 2.36 2.09 (0.04) Mar'17 2.71 Sep'17 Mar'18 Dec'18 Mar'19 Consolidated Net Debt EBDITA Consolidated Capacity (mtpa) India Operations : 2.50x * Acquisition of 21.2 mtpa capacity Jun'17 @ Acquisition of 6.25 mtpa capacity in Nov'18 Crs Mar'17 Sep'17 Mar'18 Dec'18 Mar'19 Gross Borrowings 8474 20824 19480 24169 22818** Treasury Surplus (8690) (5034) (5419) (2371) (3226) Net Debt (215) 15790 14062 21798 19593 **Including overseas debt of Rs. 2000 crores at an interest rate of 1.6% Reduction of net debt by Rs. 2205 crore in Q4 v/s Q3 FY19 UltraTech Cement Limited 13#14UltraTech Performance - India Operations All-round performance Domestic Volume (million tonnes) Turnover (Rs Crs) +18% 17.64 17.33 20.47 +21% 57.75 69.70 + 18% 8750 8742 10299 + 21% 28930 35128 Q4 18 Q3 19 Q4 19 FY 18 FY 19 Q4'18 Q3'19 Q4'19 FY 18 FY 19 Operating EBITDA (Rs Crs) 1703 + 63% 1398 + 12% 5883 2282 6597 Q4'18 Q3'19 Q4'19 FY 18 FY 19 PAT (Rs Crs) 148% + 488 398 988 %9 + 2231 2376 Q4'18 Q3'19 Q4'19 FY 18 FY 19 Q4: Operating EBITDA improved at Rs. 1072/t; ~ 40% up over Q3 UltraTech Cement Limited 14#15UltraTech Performance Key factors behind Q4 performance וחווה CEMENT ₹ Increased penetration deeper into the retail Increased sales volumes of blended segment cement +200 bps over Q3 FY19 +100 bps over Q3 FY19 ₹ Opened ~110 Improved sales volumes of Enhanced contribution of value- USB outlets ready-mix added during the quarter concrete products in terms of 10% over Q3 FY19 overall sales + 30% over Q3 FY19 contributed over 7% in terms of overall sales Price improvement of 1-2% over Q3 FY19 Optimised costs on the back of a reduction in fuel prices, improved consumption rates and no major shutdowns UltraTech Cement Limited 15#16Q4 sales performance - India Operations We deliver what we promise MnT Q4 Annual Particulars CY LY ▲% CY LY % Capacity (mtpa) 94.8 85.0 12 94.8 85.0 12 Domestic sales 20.47 17.64 16 69.70 57.75 21 Exports and others 0.83 0.82 1 3.00 2.90 4 Total 21.30 18.47 15 72.70 60.65 20 20 A year of robust volume growth UltraTech Cement Limited 16#17Operating costs 34% of total cost 31% of total cost 14% of total cost Logistics costs : Lower 2% y-o-y to Rs. 1146/t Energy Costs: up 7 % y-o-y to Rs. 1057/t Raw material costs remained flat y-o-y to Rs. 472/t: Lower diesel prices Improved lead distance Currency depreciation of 10% impacted the landed cost of imported fuels Comparatively poor consumption norms for UNCL Improved blending ratio Increased production of composite cement Total costs reduced 7% over Q3 and increase 1% YoY Note: Performance represents India operations - Grey Cement UltraTech Cement Limited 17#18100 Logistics cost trends Logistics Costs (Rs/t) 1,166 1,169 (-) 2% 1146 Sequential costs decrease 2% due to: Full benefit from axle load relaxation Reduction in diesel prices 7% (Gain: Rs.15/t) Increased movement through railways Costs increased somewhat owing to: A marginal increase in lead distances while servicing far-flung markets Q4 18 Q3 19 Logistics Costs v/s Diesel Prices Q1 17 Crude Prices Q4 19 149 137 138 126 108 106 Q4 Q3 Q4 18 19 19 Diesel Prices (index) -Logistics Cost (index) Note: Performance represents India operations - Grey Cement Y-o-Y costs drop 2%...benefit from: Optimisation of lead distances 4 % Benefits of axle load relaxation norms: 2% Cost benefits were partly negated due to: - Increased diesel prices: 4% UltraTech Cement Limited 18#19Energy cost trends 987 Energy Costs (Rs/t) 1,105 (-) 4% 1057 Q-o-Q costs decrease 4% due to: Reduction in blended price of (imports/domestic) pet coke by 7% Share of renewable energy in overall power mix increased 100 bps Consistent improvement in auxiliary consumption norms of thermal power plant Q4 18 Q3 19 Q4 19 Energy cost v/s Pet coke Prices 194 207 174 162 155 145 100 Q1 17 Q4 18 Q3 19 Q4 19 Pet coke Price (Index) Energy Cost (Index) Note: Performance represents India operations - Grey Cement Y-o-Y costs increase 7% due to: 10% depreciation in currency against USD Focus on renewable energy yielded cost savings: - Increased usage of industrial waste as fuel to 3.5% - Higher share of WHRS and solar power to 9% - Reduction in power consumption: 100 bps UltraTech Cement Limited 19#20Raw materials cost trends Raw Materials Costs (Rs/t) 473 491 (-) 4% 472 Q-o-Q costs decrease 4% due to: ◉ Savings resulting from a growing share of value-added products Increasing usage of low-cost materials Q4 18 Q3 19 Q4 19 Y-o-Y costs remain flat due to: Impact of additional limestone royalties negated by savings from usage of low cost additives Note: Performance represents India operations - Grey Cement UltraTech Cement Limited 20#21Other costs trends Other Costs (Rs/t) 679 595 (-) 15% 575 Q-o-Q costs decrease due to: Last quarter included impact of one-time plant improvement cost and annual maintenance cost in some plants Cost synergies with the acquired capacities Q4 18 Q3 19 Q4 19 Note: Performance represents blended cost for India Operations UltraTech Cement Limited 21#22Income statement Q4 (Domestic) Rs. Crs. Standalone India Operations* Particulars CY LY % CY LY % Revenues (net of taxes) 10334 8750 18 10299 8750 18 EBITDA 2353 1814 30 2406 1814 33 Margin (%) 23% 21% 2 23% 21% 2 Finance costs 371 340 (9) 426 340 (25) Depreciation 499 481 (4) 526 481 (9) PBT 1483 767 93 1454 767 90 Tax expenses 465 279 (67) 465 279 (67) PAT 1017 488 109 988 488 103 EPS (Rs.) 37.1 17.8 109 36.0 17.8 103 * After Elimination of Inter-company transactions between UTCL & UNCL Q4: India Operations - Operating EBITDA increased 63% over Q3 FY19 Operating margin at 23%; + 600 bps over Q3 FY19 UltraTech Cement Limited 22#23Income statement- Consolidated Rs. Crs. Q4 FY Particulars CY LY % CY LY % Revenues (net of taxes) 10739 9168 17 36775 30541 20 EBITDA 2459 1892 30 7227 6734 7 Margin (%) 23% 21% 2 20% 22% (2) Finance costs 434 349 (24) 1549 1238 (25) Depreciation & Impairment 547 590 7 2140 1968 (9) PBT 1477 727 103 3538 3301 7 Tax expenses 463 280 (65) 1107 1077 (3) Minority interest 1.4 0.0 (3) 2 PAT 1013 446 127 2435 2222 10 EPS (Rs.) 36.9 16.2 127 88.7 80.9 10 Q4: EBITDA improved 30% YoY; FY: PAT improved 10% UltraTech Cement Limited 23#24Operating EBITDA PMT BRIDGE 769 25 25 68 141 880 68 Rs. Per ton 1072 Q3FY19 Realisation Logistics Costs Energy Costs Raw Materials & Q4FY19 Other Costs Operating EBITDA improved ~ 40% over Q3 FY19 Note: Performance represents India operations at blended level UltraTech Cement Limited 24#25Financial Position Rs. Crs. Consolidated Standalone Particulars 31.03.19 31.03.18 31.03.19 31.03.18 28401 26397 Shareholders funds 27948 25923 22818 19480 Loans 18118 17420 3542 3173 Deferred tax liabilities 3544 3174 54761 49051 Sources of funds 49610 46517 46243 42296 Fixed assets 40193 40782 2847 1036 Goodwill 3269 5453 Investments 9212 6163 548 Assets held for Sale 1854 265 Net working capital & Loans 205 (428) 54761 49051 Total application of funds 49610 46517 19593 14062 Net debt 14894 12007 UltraTech Cement Limited 25#26Free Cash Flow- FY19 Consolidated Rs. Crs Particulars Operating Cash Profit (Net of Tax) Standalone 4852 4978 (817) Change in Working Capital 4161 Cash Flow from Operations (I) (1660) 2501 Capex (II) Cash Surplus (I+II) (686) 4167 (1511) 2656 UltraTech Cement Limited 26#27Sectoral outlook Demand expected to move above the national GDP rate Demand drivers Infrastructural development Low-cost housing programme - Plan to construct 18.5 mln houses in 2nd phase ■ Rising rural housing demand Price drivers ■ Improvement in utilisation rates ■ Incremental demand exceeding incremental supply Key things to watch out for ■ Outcome of General Elections 2019 ■ Monsoon intensity ■ Demand growth in urban areas UltraTech Cement Limited 27#28Disclaimer Statements in this 'presentation' describing the Company's objectives, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Company's operations include global and Indian demand supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Company's principal markets, changes in governmental regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development, information or events, or otherwise. UltraTech Cement Limited Regd. Office: 2nd Floor, 'B' Wing, Ahura Centre, MIDC, Andheri (E), Mumbai - 400 093 +91 8291048644 [Corporate Identity Number L26940MH2000PLC128420] www.ultratechcement.com or www.adityabirla.com ◉[email protected]