ACL Investor Presentation

Onne van der Weijde

New Delhi , February 10 2011 1

Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprint ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

Indian Economy
India is growing at about 8+% and Government targets a GDP growth of 9+%. High GDP growth would translate into double-digit cement demand growth annually. Favourable Demographics - India will contribute significantly to the world incremental Working Age Population between 2010 to 2020, leading to higher disposable income. Empowered Rural India - Rural masses, expanding Consumer class. The rural Indian economy is showing impressive growth in consumption, with a number of factors supporting this growth. These factors include increasing incomes due to good monsoons and Government initiatives and schemes like, (National Rural Employment Guarantee Scheme) employment opportunities in infrastructure and industry projects across the country and; emphasis on local employability. Rising Saving Rate - Bulk of Indias savings come from households rather than corporate, makes it a stable source of funds for Infrastructure Creation. A Stable Government at the Centre with Strong focus on growth and infrastructure development - Infrastructure Investment will be doubled in 12th Plan @ US$ 1 trillion (9.5% of GDP). India at the cusp of take-off into an exponential growth phase with GDP per capita crossing the ~$1000 threshold
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GDP Growth likely to sustain at over 8%

GDP: Growth Trend and Composition CY06 Primary Share % Industry Share % Mfg Const Services Share % GDP 3.8 17.3 11.9 28.5 13.5 11.4 10.8 54.3 9.8 CY07 5.4 16.6 11.0 28.9 12.2 11.0 10.1 54.5 9.5 CY08 1.3 15.7 5.3 28.3 5.2 6.2 10.4 56.0 7.4 CY09 0.9 14.8 6.4 28.4 6.8
120
14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 CY06 CY07 CY08 CY09

Trend in growth

Primary

Industry

Services

GDP

Composition of GDP
100 80 54 55 56 57 60 40 20 0 28 17 CY06 29 17 CY07 28 16 CY08 28 15 CY09

7.0 8.5 56.8 6.7

Primary

Industry

Services

GDP growth is likely to be driven by Services and Industry

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Source: Ministry of Statistics and Programme Implementation (MOSPI)

Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprints ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

Indian Cement Industry At a Glance CY 2010

Y-o-Y Growth Cement Capacity 295 Mio tons Clinker Production 159.26 Mio Tons Cement Production 207.39 Mio Tons Cement Dispatches 206.26 Mio Tons GDP at factor Cost over $1.2 trillion
*Estimate

13.5%

7.2%

5.8%

5.7%

*7.5 - 8%
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Source: CMA, Research Reports & Ministry of Statistics & Programme Implementation

Indian Cement Industry

Capacity Growth - Transition from Control to Decontrol

11.1% 12.0% 10.3%

9.0%

7.4% 6.6%

7.2%

6.7%

6.0%

3.0%

0.0% 1979-80 to 1984-85* 1994-95 to 1999-00 1984-85 to 1989-90 1999-00 to 2004-05 1989-90 to 1994-95 2004-05 to 2009-10

Installed Capacity of the Industry has reached approximately 270 Mio tons by September 2010 Double digit capacity growth in 5 year cycle after 30 years
*

Growth based on Installed Capacity at the end of year Source: CMA and Research Reports

Limestone Density and Various Capacity Clusters

Area Legend Color Area Legend Color 2 2 Reserves Tonnes/Km Reserves Tonnes/Km lgdXArCol1 0 to 5000 5001 to5,000 25000 lgdXArCol2 lgdXArCol1 < 25001 to 50000 lgdXArCol3 5,001 to lgdXArCol2 50001 25,000 to 100000 lgdXArCol4 to 2000000 lgdXArCol5 lgdXArCol3 25,001 to 100001 50,000 50,001 to 100,000 lgdXArCol4 lgdXArCol5 > 100,000

L im e S to n e R e s e rv e s e (m il.t.) S ta te K a rn a ta k a A n d h ra P ra d e sh G u ja ra t R a ja s th a n M e g h a la y a C h h a ttis g a rh M a d h y a P ra d e s h H im a c h a l P ra d e s h A ll In d ia R e s e rv e s 5 1 ,8 8 6 3 5 ,1 7 9 2 0 ,0 1 2 1 9 ,4 8 6 1 6 ,0 5 4 9 ,0 3 8 5 ,9 2 1 4 ,7 6 2 1 7 5 ,3 4 5 %

C u rre n t C lin k e r C a p a c ity (m il.t.)

30% 20% 11% 11% 9% 5% 3% 3%

100%

1 2 .0 3 3 .0 1 5 .0 3 0 .0 1 .5 1 1 .0 2 0 .0 7 .0 1 4 5 .0

8 Source: Government of India

Indian Cement Industry A Local & Regional Industry

Growth (%) Growth (%) 6 14 10
North

-2

11

4
Central

20

10

10

CAGR 9.5%

50 40 30 20 10 0 2005 2006 2007 2008 26 29 32 34

CAGR 10.5%
38 41

40 30 20 10 0 2005 2006 2007 2008 20 22 23 25

30

33

2009

2010

2009

2010

Growth (%)

15

15

11

11

Growth (%)

10

13

14

South 80 60 40 20 0 2005
Growth (%) 15 5 5 9 19 13 CAGR 10.4%

West 50 40 30 20 10 0 41

CAGR 9.6%

38

43

48

54

56

60

25

28

31

34

36

2006

2007

2008

2009

2010
Growth (%)

2005
8

2006
11

2007
9

2008
9

2009
11

2010
10

East 40
CAGR 10.3%

All India

30 20 10 0

22

24

25

27

32

36
CAGR 10.1%

250 200 150 100 50 0

131

146

160

174

193

212

2005

2006

2007

2008

2009

2010

2005

2006

2007

2008

2009

2010

*Figures are CY basis

Source: CMA, Research Reports, ACL Market Study

Price Trends

All India Price Map (Retail Prices*)

Jun10

Dec10

10 * Price realization to cement producer is lower by Rs. 20~25/- per bag

Cement Growth Drivers

Low per capita consumption at 176 kg reflects potential for future growth. Rising housing affordability due to Increasing income level. Individual Housing Builders (IHB) segment - the major contributor of demand. As per 11th Five Year Plan (2008-12), 74 Million housing units required. Agricultural growth to boost rural demand. Infrastructure Investment for 11th plan is pegged at US$500 bn (7.6% of projected GDP growth), while for the 12th plan it projected to be US$1 trillion (9.5% of GDP). On the back of the above factors cement demand is expected to grow double digits for the next five years.
Housing & Infrastructure Development are the major growth drivers for Cement Demand
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Cement Sector Outlook

India second largest cement market in the World. Low per capita consumption at 176 kg reflects potential for future growth. Healthy CAGR of 10% over the last 5 years (2005-2010) and a CAGR of 8% over the last 20 yrs (1990-2010) Domestic cement consumption grew by 10% in CY09 and continued in the same pace also in CY 10* despite a prolonged monsoon season. Cement demand expected to grow in double-digit in the next five years on the back of housing and infrastructure development. The top 5 groups are having a market share of 53%, the rest of the market is quite fragmented. Prices expected to remain under pressure in the short-term due to oversupply situation, but in the long-term expected to remain stable. Cost pressure would continue, on account of surging energy prices and inflationary pressures. Good cement demand, coupled with a potential over supply and increasing cost pressures, makes the industry outlook more challenging
*including non-CMA producers data

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All India Capacity Utilization

500 400 300 200 100 0 75 72 295 212 2010 233 2011 72 322 256 2012 74 345 283 2013 79 358 312 83 375 100 80 60 40 20 2009 2014

195

259

Total Demand

Installed Capacity

Installed Capacity Utilization

87 358 312

500 400 300 200 100 0

86

81

80

80 320 256 2012 Supply Potential

83 342 283

100 80 60 40 20

195

227

262 212 2010

291 233 2011

2009

2013

2014 Utilization

Total Demand

Increased capacity expansion in 2010-2011, utilization rate is expected to remain low in the near term, would gradually improve with the growth of the industry. Pressures are likely to be felt across all regions, the south and west could remain weaker as compared to the other regions.
2010 onwards demand is estimated to grow by 10%

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Source: CMA and Research Reports

Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprints ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

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Ambuja Cements Limited (ACL)

Vision & Mission / Philosophy

GIVE A MAN ORDERS and he will do the task reasonably well. But let him set his own targets, give him freedom and authority and his task becomes a personal mission:

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Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprint ACL- Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

16

ACL Asset Footprint

Nalagarh Ropar Bhatinda

Darlaghat Roorkee New Delhi Dadri

North: 10.4 Mio Tons

Rabriyawa s Farakka Sankrail Kodinar Magdalla MC W Panvel Bhatapara Kolkata

Mumbai

East : 4.3 Mio Tons

Grinding Unit Integrated Unit

8 5

West : 10.3 Mio Tons

Terminal

Captive Power Plant 9

Chennai

Total Capacity = 25 Mio Tons

Cochin

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Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprints ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

18

ACL Growth Story

Capacity built up from 0.7 Mio Tons in 1986 to 25 Mio Tons - CAGR of 16.8% through organic and inorganic growth. 2006 Founder promoters sold part of their holding in ACL in favor of Holcim. ACL had many first to its credit Pioneers in sea transportation. Brand - Ambuja perceived as a Market Leader ACL is a Holcim Group company since May 2006 A Market Capitalization of over USD 4 Bn

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Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprints ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

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ACL Long Term Strategy / Competitive Edge

Premium Brand AMBUJA CEMENT
Premium Value Delivery to Customers

Extensive & loyal distribution network -Over 7000 dealers and 25,000 retailers
Provides access to growing Individual Housing Builders Markets.

Hub & Spoke Strategy Logistics advantage coupled catering fresh cement to the consumer
Benefits of catering fresh cement to the markets

Sea Transportation Cement Terminals

Cost Efficient means of transportation and ability to cater to the vast coastal region, ~14% despatches via Sea mode thru 8 specially designed vessels

Captive Power Plants (410 MW)

Lower Cost, Consistent & Regular supply of Power, ~80% captive use

High proportion of blended cement

Lower production cost, reduction in CO2 emissions

Strong presence in growing stable markets of North, West and East

Reduce volatility in Earning

Use of Alternative Fuel & Raw Materials (AFR)

Conservation of non renewable resources, reduces pollution and cost
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Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprints ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

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Financial Performance
2008 Rs Mn Sales EBITDA PBT PAT Cash EPS (Rs.) EPS (Rs.)* 62350 19540 16617 14020 12.62 7.41 US $ Mn 1354 424 361 304 Rs Mn 70770 21220 18030 12180 13.78 7.99
Exchange Rate Rs. 45.63 from RBI

2009 US $ Mn 1536 461 391 264

2010 Rs Mn 73902 19510 16619 12636 13.39 8.26 US $ Mn 1620 428 364 277

*Excluding extraordinary income Source: Companys Annual Report

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Recent Q4 Financial Performance

Rs. Mio
Particulars Quarter ended Dec-09 Sales Volume Net Sales Other Op. Income Raw Materials Employee Cost Power & Fuel Freight Outwards Others Operating EBITDA Other Income Depreciation PBIT Interest PBT Tax PAT EBITDA Margin (%)
Qtr4 results derived Source: Companys Financials (standalone)

Twelve Months Dec-10 5.01 17885 389 1476 775 4461 4079 3770 3535 379 1086 2449 209 2684 102 2581 20 change 4% 1% -3% -31% -1% 36% 976% 0% -21% -7% 26% -33% 210% -32% -34% 7% 2009 18.8 70769 1046 9640 2730 14230 13470 11530 19720 1512 2970 16745 224 18033 5849 12184 28 2010 19.97 73902 1273 5963 3437 16973 16101 13735 19510 1203 3872 15638 487 16619 3983 12636 26 change 6% 4% 22% -38% 26% 19% 20% 19% -1% -20% 30% -7% 117% -8% -32% 4% -

4.8 17710 400 2130 780 3270 379 3780 4500 408 860 3640 67 3970 156 2410 25

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Financial Ratios
Rs. Cr. Net Cash from Operating Activities Gearing % Dividend % Dividend Payout Ratio% EBITDA Margin (%) ROACE (%) ROE (%) 2008 966 5 110 24 31 34* 27* 2009 2129 3 120 30 30 27 20 2010 1874 1 130 31 26 23 18

* : Includes extra ordinary income Source: Companys Financials

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Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprints ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

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Increasing Cost Pressures

Major Portion of Cost linked to Energy Prices Increasing Cost of Imported Coal : The Cost of Imported Coal has increased over 40% y-o-y basis. The lack of logistics infrastructure at port, limits economical movement of imported coals to hinterland. Domestic Linkage Coal materialization is declining including the quality of coal, increasing the cost of purchasing coal through open market purchases. Distribution Cost a major cost for the Industry. Diesel prices have increased substantially in the past eight years and is now linked to the international crude prices. Lack of Logistics Infrastructure in form of Wagon / Rakes Availability , increase the cost of distribution. Inflationary pressure on Support Process Costs.

Rising Costs a Concern

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Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprints ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

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Capacity Expansion
Completed expansions : Clinker line of 2.2 mio tons each at Rauri (HP) and Bhatapara (Chhattisgarh) commissioned in December 2009. Grinding facilities of 1.5 mio tons each at Dadri (UP) and Nalagarh (HP) commissioned in March 2010. The ramp up of the plants have been as per schedule. Additional Expansions : Grinding capacity of 1.0 mio tons at Bhatapara and 1.0 mio tons at Maratha, would be completed by Q1 2011. With these expansions ACLs installed capacity would be 27 mio tons by Q1 2011.

The Company is evaluating projects for the next round of capacity expansion
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Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprints ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

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Our Shareholders

Public, 10.20 Insurance Co's, Mutual Funds & Financial Institions/Banks, 14.72

GDR, 1.13

Holcim, 45.45

Foreign Institutional Investors, 27.71

Founder family, 0.79

As on 31st December 2010

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Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprints ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

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Ambuja Cement Foundation (ACF)

ACL is committed towards Sustainability, both on environment and social performance. The Corporate Social Responsibility is carried out through ACF.

Livelihood Skill Based - ACF Sponsors vocational training to unemployed youth in trades like electric house wiring and motor winding, refrigeration and airconditioning, wielding and fabrication and radio and TV repairing. Young men who have completed their training have started their own enterprises.

Women Development - Promoted over 700 Self Help Group (SHGs) with 9,000 members. Specific skills that the women felt the need for, are offered to them. The groups are engaged in a range of income generating activities based on agriculture produce, livestock rearing, tailoring and embroidery, food processing and handicrafts.
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Ambuja Cement Foundation (ACF)

Changing cropping pattern from high water intensive to less water intensive and short duration crops. Promotion of water efficient devices like drip and sprinkler irrigation (Over 1841 acre) Promotion of horticulture crops (14800 acre), animal husbandry, vegetable crops - Integrated farming. Conservation and Management of existing sources of water like Ponds and Baudies ( Over 1200 MCFT water harvested) Constructing Water Harvesting Structures like Check-dams (200), Ponds deepened (420), Tanks and Khadins (8)
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Content
Indian Economy Indian Cement Industry Cement Sector Outlook Ambuja Cements Limited
a. b. c. d. e. f. g. h. Vision, Mission and Philosophy Asset Footprints ACL Growth Story Long Term Strategy / Competitive Edge Financial Performance Cost Drivers Expansion Projects Shareholding

Corporate Social Responsibility Conclusion

35

Conclusion
Solid market position built within a period of time through organic growth and acquisitions. Strong brand image and positioning built over a period of time in the minds of the consumers. Pin-pointed positioning tied to substantial captive infrastructure to cater to markets both domestic and overseas. High use of alternative raw materials in production of blended cements. Capex plan - Both greenfield and brownfield projects are being evaluated that would enhance companys market share and maintain its position in the industry.

Industry would go through a challenging period due to over-supply situation - Ambuja is well poised and geared up to meet the challenges
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Disclaimer
Cautionary statement regarding forward-looking statements This presentation may contain certain forward-looking statements relating to the Groups future business, development and economic performance. Such statements may be subject to a number of risks, uncertainties and other important factors, such as but not limited to (1) competitive pressures; (2) legislative and regulatory developments; (3) global, macroeconomic and political trends; (4) fluctuations in currency exchange rates and general financial market conditions; (5) delay or inability in obtaining approvals from authorities; (6) technical developments; (7) litigation; (8) adverse publicity and news coverage, which could cause actual development and results to differ materially from the statements made in this presentation. Ambuja assumes no obligation to update or alter forward-looking statements whether as a result of new information, future events or otherwise.

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