#1ADITYA BIRLA UltraTech INDIA'S LARGEST CEMENT COMPANY Earnings, Q2 FY20 Stock code: BSE: 532538 | NSE: ULTRACEMCO | Reuters: UTCL.NS | Bloomberg: UTCEM IS/UTCEM LX#2Macro and industry update Key company updates and highlights Contents Sector guidance Performance GLOSSARY MNT - Million metric tonnes, LMT - Lac metric tonnes, MTPA - Million tonnes per annum, Q1 - April-June, Q2 - July-September, H1-April-September, H2 - October-March, CY - Current year period, LY - Corresponding period last year, FY - Financial year (April-March)#3Macro indicators Q1 FY20 GDP growth rate slipped to 5.0% Rupee depreciated 1% against Key indicators USD Average crude price dropped -10% v/s Q1 FY20 Key Government initiatives to boost up consumption and growth in economy: Corporate Tax rate cut and incentives for new manufacturing units with lower tax rate Easing of funding norms for the affordable housing segment and additional income tax benefit for interest on housing loans Credit enhancement for infrastructure & housing projects Additional liquidity infusion by National Housing Board ($ 3 bn) UltraTech Cement Limited 3#4Key contributors Sectoral Update: Key growth drivers Q2 FY20 Heavy monsoons impacted cement demand growth.... Good monsoons to drive future consumption Infrastructure Low-cost housing Housing Industrial and commercial Growth Growth drivers 20% 13% 55% 12% Monsoon floods resulted in a slowdown in construction activities Slow release of Government funds Amaravati project Central government spending increased ~ 6% over LY on Low cost housing projects Marginal decline in overall housing demand halted Cement demand expected to accelerate in H2 Weak demand UltraTech Cement Limited 4#5Demand Outlook H2 FY20 Infrastructure Low Cost Housing Key demand Drivers Rural Housing Infrastructure demand to pick up : Samruddhi Expressway and Bharatmala road projects Mumbai and Delhi International Airports expected to commence work by Q4 FY20 Polavaram irrigation project retendered - work to resume soon 337 Kms metro rail construction is underway in Mumbai Increased Dearness Allowance for government employees (Benefiting > 1.1 mn employees) will support housing demand 2 Demand drivers having ~ 65% share in total cement consumption to support demand pick up UltraTech Cement Limited 5#6Sectoral Update Q2 FY20 State/Region wise performance Vol. State/Region I LCH RH UH C Gr. Haryana ↑ Delhi + NCR Punjab ↑ Himachal Pradesh ↑ Rajasthan North Madhya Pradesh Uttar Pradesh Central Maharashtra Gujarat West Key drivers Pre-election spending Government spends on low cost housing IHB and improvement in sand availability Infrastructure Change in State Government and rains Lack of Government funding and rains LCH and IHB Floods and weak IHB Heavy rains Low cost housing emerged as key cement consumption driver UltraTech Cement Limited 6 I: Infrastructure, LCH: Low-cost housing, RH: Rural housing, UH: Urban housing, C: Commercial, IHB: Individual House Builder#7Sectoral Update Q2 FY20 State/Region wise performance State/Region Vol. Gr. West Bengal Bihar Jharkhand Odisha Chhattisgarh LCH RH UH C Key Drivers Lack of Government funding and rains Rains Lack of Government funding LCH and IHB Lack of Government funding East Andhra Pradesh • Complete halt in Amaravati Telangana Lack of Government funding Karnataka Tamil Nadu Kerala South Lack of Government funding and rains LCH and Infrastructure Post floods rehabilitation work Heavy rains restricted cement dispatches UltraTech Cement Limited 7 I: Infrastructure, LCH: Low-cost housing, RH: Rural housing, UH: Urban housing, C: Commercial, IHB: Individual House Builder#8UltraTech Nathdwara- integration update Assets consistently generating healthy EBITDA Continuing PAT positive performance in a Cost improvement seasonally weak quarter program in place - Capex initiated for 10.5 MW WHRS Disposal of non-core assets to improve returns Assets generated free cashflows of ~ Rs. 100 crores in - the first half of FY20 Assets fully integrated .... No negative surprises UltraTech Cement Limited 8#9Century Cement assets- completed the merger process Scheme effective from 1st October following the completion of mines transfer Consolidated capacity in India crossed 100 mtpa. Total capacity in India at 109.4 mtpa UltraTech 3rd Largest Cement Player Globally (excluding China) Post acquisition, Ultra Tech's position is strengthened in Eastern markets and a deeper penetration in Central & Western markets. 2 Added 5000 dealers, increasing total network size to > 27000 Over 2200 employees are now part of the UltraTech Team Capacity and network spread wider across attractive markets UltraTech Cement Limited 9#10Century Cement assets- completed the merger process Continued NCLT approved the Scheme with Appointed Date of 20th May 2018 Ultra Tech's results restated for previous period w.e.f. the Appointed Date Took over borrowings of Rs. 3000 crores as on 20th May 2018 Allotted 1.396 crores share to the shareholders of Century Textiles Ultra Tech's Share Capital expanded to Rs. 288.61 crores (dilution of 5%) Acquisition will be value accretive from the first year UltraTech Cement Limited 10#11Century Cement assets- Integration Steps Integration of People and overall internal control processes To undertake quality improvement programs to match UltraTech standards To switch to the 'Ultra Tech' brand in a phased manner Cost improvement programs to achieve UltraTech benchmark Dealer network integration around UltraTech practices Capacity utilization ramp-up with 'UltraTech' brand Introduce synergies in the logistics and procurement areas Implementation of UltraTech safety and sustainability norms Capex evaluation for cost and quality improvements UltraTech's proven capability to reflect in seamless integration UltraTech Cement Limited 11#12Other development- Change in the Corporate Tax rate New Income tax Provision Maximum Marginal Tax Rate to reduce from 34.94%¹ to 25.17%¹ with No tax incentives & MAT Effective MAT Tax rate to reduce from 21.55% to 17.47%1 New Tax Rate Option: ✓ 25.17% with No MAT and No tax incentives MAT rate of 17.47%1 with existing tax rate of 34.94%1 Tax Rate of New Manufacturing Co: 17.16%¹ Tax optimization strategy : ✓ Cash outflow as against charge to P&L ✓ Availability of current & likely exemption and incentives to a Company ✓ Applicability of MAT and unused MAT Credit UltraTech Position FY19 Tax Rate: Current Tax Deferred Tax Effective Tax Rate FY19 21% 11% 31% ■ FY19 Actual Cash outflow @ 21% ■ In the new regime cashflow @ 17.5%1 due to lower MAT, resulting saving - of 4% cashflow. Effective charge in P&L to continue @ 31% Likely higher cash outflow with new lower tax rate. Company has over Rs. 1400 crores unused MAT credit as on March'19 Continuous evaluation of both the option factoring cash outflow benefit Including Surcharge (12% on existing rate and 10% on new rate) + Cess (4%) UltraTech Cement Limited 12#13Q2 FY20 Performance Turnover (Rs. crores) Operating EBITDA (Rs. crores) 10825 8710 9098 +4% Q2 19 Q1 20 Q2 20 Operating Margin (%) 16% 27% +5% 21% Q2 19 Q1 20 Q2 20 1403 2895 + 35% 1900 Q2 19 Q1 20 Q2 20 PAT (Rs. crores) 371 1255 + 65% 612 Q2 19 Q1 20 Q2 20 Average Operating EBITDA per ton of Rs. 1055/t v/s Q2 FY19 Rs. 776/t UltraTech Cement Limited 13 Above nos. are India performance inclusive of acquired Century Cement Capacities with restatement of previous period performance.#14Q2 FY20 Highlights Increased sales through the retail channel 2% v/s Q1 FY20 YoY retail sales volume growth ~ 5.6% Key performance drivers Enhanced share of blended products volume 1% v/s Q1 FY20 Number of UBS outlets crossed 2000 YoY volume growth from UBS stores ~ 6.0% Premium products volume growth: > 30% YoY Contributes 10% of trade sales volume > > YoY reduction in variable cost ~ 5% UltraTech Cement Limited 14#15Consistent reduction in Net debt Consolidated Net Debt (Rs crores) 22111 ❖ Systematic reduction in working capital Rs 1492 Crs 20619 March'19 Sept'19 Optimal Capex spends ܀ EBITDA to Cash Conversion Ratio at 63% Consolidated Net Debt/EBTIDA reduced : 2.16 v/s March'19: 2.831 Post Century Cement Merger, India Net Debt / EBIDTA as at Sep-19 : 2.0x Target of less than 2.0x by Mar-20 1On the basis of trailing 12 months including the debt taken over for Century Cement assets UltraTech Cement Limited 15#16Sales performance: Q2 FY20 Q2 H1 Particulars CY LY % CY LY % India Capacity (mtpa) 109.4 103.1 6 109.4 103.1 6 Domestic sales 17.19 17.40 (1) 37.07 35.70 4 Exports and others 0.57 0.68 1.18 1.33 Total India Operations 17.77 18.07 (2) 38.24 37.02 3 Consolidated Sales 18.69 18.88 (1) 40.11 38.66 4 Volume (Incl. Overseas) Monsoon quarter results in lower volumes and Healthy monsoons to support Rural demand in future months Above nos. are inclusive of acquired Century Cement Capacities with restatement of previous period data. MnT UltraTech Cement Limited 16#17Operating costs 31% Logistics Cost Declined YoY 4% to Rs.1111/t 28% 14% Energy Cost Declined YoY 9% to Rs.1003/t Raw Materials Cost Declined YoY 2% to Rs. 495/t ✰ Lower diesel prices Revised Axle load norms benefit ✰ Fuel price reduction benefit Higher share of low- cost fuel Increase in production of composite cement Optimized raw mix ܀ usage Favorable Cost Trends UltraTech Cement Limited 17 Above nos. are for Grey Cement of UTCL & UNCL excluding Century Cement#18Logistics cost trends Logistics Costs (Rs/t) 1155 1140 4% 1111 Q2 19 Q1 20 Q2 20 Logistics Costs v/s Diesel Prices 100 87 Q1 17 YoY Cost reduced: 4% ✰ Benefit from axle load relaxation: ~ 1.5% Gain due to reduction in diesel prices ~ 1.5% Plant and market mix alignment Cost benefit partially offset with reduced rail movement Cost reduced 2% over Q1FY20 Benefit due to exemption of busy season surcharge during Q2 FY20 ✰ Steady diesel prices 149 138 126 127 105 103 មន Q2 19 Q1 Q2 20 20 -Crude Prices Diesel Prices (index) Logistics Cost (index) Above nos. are for Grey Cement of UTCL & UNCL excluding Century Cement UltraTech Cement Limited 18#19Energy cost trends Energy Costs (Rs/t) 1099 1011 9% 1003 Q2 19 Q1 20 Q2 20 Energy cost v/s Pet coke Prices 100 Q1 17 204 170 163 161 148 147 Q2 19 Q1 Q2 20 220 20 Pet coke Price (Index) Energy Cost (Index) Above nos. are for Grey Cement of UTCL & UNCL excluding Century Cement Sequentially Costs declined marginally Savings due to reduction in average pet coke prices: ~ 4% Average pet coke price during the quarter USD 91/t v/s Q1 FY20 USD 95/t Benefit in price gain partially negated with annual plant shutdown impacting consumption norms YoY Costs reduced: 9% ❖ Reduction in average fuel prices : ~ 7% Increased contribution of 'green power' in overall power requirement : 10.5% v/s 8.4% in Q2 FY19 Reduced power consumption : 1% ✰ Benefit of power plant efficiencies UltraTech Cement Limited 19#20Raw Material costs Raw Materials Costs (Rs/t) 503 489 495 Q2 19 Q1 20 Q2 20 Conversion Ratio and Fly ash Prices Trends 107 105 108 101 102 101 FY17 Q2 19 Q1 20 Q2 20 Conversion Ratio (Clinker to cement) Flyash Price Index QoQ costs increased : 1% Increased costs due to higher share of premium products Increase in prices of Fly Ash YoY costs reduced : 2% *Reduction in slag consumption due to higher share of composite cement Above nos. are for Grey Cement of UTCL & UNCL excluding Century Cement UltraTech Cement Limited 20#21FY17 Other cost trends Q2 19 Other Costs (Rs/t) 668 661 PP Granules Price Trend (+) 16% Q1 20 Q2 20 120 Q2 19 PP Granules Cost Index 768 115 112 109 Q1 20 Q2 20 QoQ costs increased: 16% Impact of operating leverage due to lower sales volume: Rs. 75/t ✰ Higher numbers of kilns under shutdown resulted in increased maintenance costs ✓ No. of kiln shutdown 14 v/s 10 kilns in Q1 FY20 Above nos. are for Grey Cement of UTCL & UNCL excluding Century Cement UltraTech Cement Limited 21#22Building a Sustainable future CO₂ Decarbonization (CO2 Management) Target 25% CO2 reduction by FY25 vs FY06 Water Management Water Positive Score: 2.18 across plants Green Power Capacity by FY21 WHRS: 142 MW Renewable : > 500 MW Circular Economy Plastic Negative Consumption: 1.58x Waste Management Alternate Fuel Rate : 3.5% Alternate RM Rate: 16.2% UltraTech Cement Limited Amongst the top 10 in the DJSI Index for Global Construction Material Segment 22 22#23Income statement Q2 Particulars (UTCL + Century) Published* Rs. crores (UTCL + Century) + UNCL CY LY ▲% CY LY ▲% Revenues (Net of Taxes) ^ 9129 8710 5 9098 8710 4 Operating Income 125 159 (22) 126 159 (21) Other Income 182 142 28 159 142 12 Total Income 9436 9011 5 9383 9011 4 Expenses : Raw Materials Consumed 1129 1215 7 1198 1215 1 Purchase of Traded Goods 566 276 (105) 200 276 28 Changes in Inventory (72) (238) (70) (58) (238) (76) Employee Costs 593 574 (3) 607 574 (6) Power and Fuel 1794 2159 17 1887 2159 13 Logistics Cost 2090 2270 8 2099 2270 8 Other Expenses 1342 1210 (11) 1392 1210 (15) EBITDA 1995 1544 29 2059 1544 33 ^ After elimination of inter company clinker sales India Operations EBITDA higher 33% YoY UltraTech Cement Limited 23 *Above nos. are inclusive of acquired Century Cement Capacities with restatement of previous period financials.#24Income statement Q2 Q2 FY19 Q2 FY20 Rs. crores (UTCL+ Particulars UTCL + UTCL + Century Century)+ Century (UTCL+ Century) + UNCL UNCL UNCL UNCL 7732 977 8710 Revenues (Net of Taxes) 8352 746 9098 124 35 159 Operating Income 114 12 126 134 8 142 Other Income 148 11 159 7991 1020 9011 Total Income 8614 769 9383 Expenses : 1097 118 1215 Raw Materials Consumed 1118 80 1198 276 276 Purchase of Traded Goods 200 200 (204) (34) (238) Changes in Inventory (33) (25) (58) 503 71 574 Employee Costs 538 69 607 1886 273 2159 Power and Fuel 1650 237 1887 1952 318 2270 Logistics Cost 1863 235 2099 1053 157 1210 1427 117 1544 Other Expenses EBITDA 1230 162 1392 2048 10 2059 Century performance was depressed due to major annual plant shut down and heavy monsoons in its key markets UltraTech Cement Limited 24#25Income statement Q2 Consolidated Rs. crores UTCL + Century Particulars CY LY ▲% CY LY ▲% 9491 9088 4 Revenues (net of taxes) 9129 8710 5 154 143 8 Other Income 182 142 28 2072 1564 32 EBITDA 1995 1544 29 22% 17% 5 Margin (%) 22% 18% 4 507 416 (22) Finance costs 437 405 (8) 675 624 (8) Depreciation & Amortization 606 602 (1) 890 524 70 PBT 951 538 77 311 168 Tax expenses 312 167 (0.6) (1.1) Minority interest 579 357 62 PAT 639 371 72 20.1 12.5 61 EPS (Rupees) 22.2 13.0 71 Consolidated PAT higher 62% YoY Above nos. are inclusive of acquired Century Cement Capacities with restatement of previous period performance. UltraTech Cement Limited 25#26EBITDA Trends 1463^ 65 Rs. PMT 1145^ 1122 1051 1067 1036 992 131 951 89 53 1397 925 98 98 855 81 42 42 798 57 1055 990 1013 939 953 911 909 78 868 58 776 741 FY15 FY16 FY17 FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 FY19 Q1FY20 Q2FY20 Operating Profit Other Income Total EBITDA ^ Excluding impact of Lease Accounting Standard YOY EBITDA pmt increased 34% UltraTech Cement Limited 26 Above nos. are inclusive of acquired Century Cement Capacities with restatement of previous period performance from Q1 FY19 onwards.#27Financial position Consolidated Particulars Rs. crores (UTCL+ Century) +UNCL 30.09.19 31.03.19 30.09.19 31.03.19 53753 53307 Net Fixed Assets incl. CWIP 51934 51676 2941 2047 NWC+ Loans+ Derivative Assets 2599 1519 35186 33761 Shareholders Fund 34690 33218 26417 25337 Total Debt 24515 23336 69511 65471 Capital Employed 66857 62936 20619 22111 Net debt Above nos. are inclusive of acquired Century Cement Capacities with restatement of previous period performance. 18719 20112 UltraTech Cement Limited 27#28Sectoral Outlook Demand expected to grow in line with GDP rate Demand drivers Good monsoons Government is taking steps to boost growth Declining Interest rates Thrust on infrastructure development with Plan spending of over USD 1500 bn in the next 5 years Increased plans for social housing programs in Phase 2 Rural housing demand Key things to watch Urban housing demand pick-up Liquidity improvement Improvement in overall economic growth. UltraTech Cement Limited 28#29Disclaimer 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, due to any subsequent development, information or events, or otherwise. UltraTech Cement Limited Regd. Office: Ahura Centre, Mahakali Caves Road, Andheri (E), Mumbai - 400 093 [Corporate Identity Number L26940MH2000PLC128420] www.ultratechcement.com or www.adityabirla.com @ [email protected]