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Page 1
Disclaimer
Certain statements made in this presentation may not be based on historical information or facts and may be forward looking statements, including those relating to general business plans and strategy of Welspun Corp. Limited (WCL"), its future outlook and growth prospects, and future developments in its businesses and its competitive and regulatory environment. Actual results may differ materially from these forward-looking statements due to a number of factors, inter alia including future changes or developments in WCL's business, its competitive environment, its ability to implement its strategies and initiatives and respond to technological changes and political, economic, regulatory and social conditions in India. This presentation does not constitute a prospectus, offering circular or offering memorandum or an offer invitation, or a solicitation of any offer, to purchase or sell, any shares of WCL and should not be considered or construed in any manner whatsoever as a recommendation that any person should subscribe for or purchase any of WCL's shares. Neither this presentation nor any other documentation or information (or any part thereof) delivered or supplied under or in relation thereto shall be deemed to constitute an offer of or an invitation by or on behalf of WCL to subscribe for or purchase any of its shares. WCL, as such, makes no representation or warranty, express or implied, as to, and does not accept any responsibility or liability with respect to, the fairness, accuracy, completeness or correctness of any information or opinions contained herein. The information contained in this presentation, unless otherwise specified is only current as of the date of this presentation. WCL assumes no responsibility to publicly amend, modify or revise any forward looking statements contained herein, on the basis of any subsequent development, information or events, or otherwise. Unless otherwise stated in this document, the information contained herein is based on management information and estimates. The information contained herein is subject to change without notice and past performance is not indicative of future results. WCL may alter, modify or otherwise change in any manner the content of this presentation, without obligation to notify any person of such revision or changes. This presentation may not be copied and disseminated in any manner. THE INFORMATION PRESENTED HERE IS NOT AN OFFER INVITATION OR SOLICITATION OF ANY OFFER TO PURCHASE OR SELL ANY EQUITY SHARES OR ANY OTHER SECURITY OF WCL. This presentation is not for publication or distribution, directly or indirectly, in or into the United States, Canada or Japan. These materials are not an offer or solicitation of any offer of securities for purchase or sale in or into the United States, Canada or Japan.
May 2011
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Welspun Group
Brief Synopsis One of the fastest emerging global groups, with multiple countries strategy and manufacturing facilities Group companies enjoys market leadership positions : Top 2 Large Diameter Pipe Company in World Financial Times, UK Globally renowned towel company
Welspun India Gold Trophy for Best Exporter Textile Promotion Council (TEXPROCIL) 2008 Welspun Corp
Global Recognitions
Welspun Corp
Star Performer Award for the year 2008-09 All India Export Excellence Awards - EEPC 2010 Economic Times Emerging Company of the Year Award for Corporate Excellence - 2008
Global relationship with marquee clients including Fortune 100 companies like Exxon Mobil (Golden Pass Pipeline), Chevron, Shell, Bechtel, Wal- Mart, Target etc Equity investment by renowned investors like ICICI Life, Temasek (Govt. of Singapore), 3i (UK), Genesis (UK) Excellent relationship with domestic and international lenders
Welspun Corp
2nd Largest (Large Diameter) Line Pipe Manufacturer in the World - Financial Times UK - 2008
Welspun India
Key Markets 80% export mainly to US, Europe, Latin America, Middle East etc
Welspun India Earth Care Awards Times of India and Jindal Steel Ltd - 2008
International Setup Christy, UK Sorema, Portugal Textile facility in Mexico Office in Manhattan-NY, Huston-US Pipe facility in Arkansas, US
Welspun India Welspun Corp One of the fastest growing large companies in India Business Today - 2007 Welspun India Sustainability Award - Walmart - 2007
4 Gold Trophies for Outstanding Export Performance Textile Promotion Council (TEXPROCIL) - 2007
May 2011
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WCL An Introduction
WCL, flagship company of Welspun Group, is one of the largest pipe manufacturing company in the world Incorporated in 1995, the Company offers a complete range of high grade line pipes ranging from inch to 100 inch used inter alia for transmission of oil & gas Partner of Choice for more than 50 Oil & Gas Giants across the globe with a geographically diverse client base including Chevron, Exxon Mobil (Golden Pass Pipeline), Saudi Aramco, British Gas , Kinder Morgan etc International footprint Accredited with ISO 9001, ISO 14001 and OHSAS 18001 certifications Strong order book of U.S. $ 1.5 Bn
26,834
39,945
2006-07
617
(2)
2007-08
991
(3)
2008-09
1,250
(4)
2009-10
1,637
(5)
9M 2010-11
1311
(6)
Gross Profit
(INR MM)
CAGR (07-10): 62%
4,768
2007-08
145
(3)
2008-09
104
(4)
2009-10
252(5)
9M 2010-11
211
(6)
23.10%
0.06%
Note 1. Net Debt at INR 7,349 MM as on 31 Mar, 2010 2. Average exchange rate of US$1 = Rs 43.51 from 01-Apr-06 till 31-Mar-07
Note 3. Average exchange rate of US$1 = Rs.40.29 from 01-Apr-07 till 31-Mar-08 4. Average exchange rate of US$1 = Rs.45.91 from 01-Apr-08 till 31-Mar-09 5. Average exchange rate of US$1 = Rs.44.90 from 01-Apr-09 till 31-Mar-10 May 2011 6. Exchange rate of US$1 = Rs. 44.7300 on May 09 2011 Page 4
WCL An Introduction
Promoters (41.07%)
WCL 100%
Corporate Structure
Welspun Plate and Coil Mill Division Manufacturer of state-of-art Plates and Coils
Welspun Natural Resources Pvt. Ltd. Oil & Gas Exploration Activities
Pipes Products - Longitudinal (LSAW) - Helical / Spiral (HSAW) - Electrical (ERW) Manufacturing Facilities
Anjar & Dahej Pipe Mills
Premier integrated set-up for manufacturing welded pipes. Installed state-of-the-art-technology and is completely geared to meet the requirements of the global industry. The Longitudinal Pipes division (LSAW) has a capacity of 350,000 metric ton per annum. The Spiral Pipes division (HSAW) has a capacity of 550,000 metric ton per annum. The ERW Pipes division has a capacity of 200,000 metric ton per annum. It also has Coating capabilities
Plate-cum-Coil Mill
This backward integration at Anjar, Kutch, Gujarat, India has annual capacity to produce 1.5 million tones of Plate and Coil with plates (up to 4.5 meters wide, 140 mm thickness) and Coil (up to 2.8 meters wide, 25 mm thickness) with strength of 120,000 PSI. This mill can cater to high end specialized product requirement of Line Pipe Industry (API grades), Shipping, Heavy construction, Bridges, Boiler plates, Wind blades etc.
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Growth at Infinity
Growth Revenue Rs. 58,604 mn. Rs. 73,503 mn. Rs. 57,395 mn. Rs. 39,945 mn. 9M FY 2010-11 - 100,000 tons HSAW Plant in Karnataka operational Investment in Middle East with HSAW capacity of 300,000 MT operational - 350,000 MT pipe capacity addition under implementation in India Foray into infra & pipe laying for O&G and water through MSK Projects India Ltd. 350,000 tons US Spiral Mill commissioned 150,000 MT Spiral Mill commissioned Commissioning of Plate Mill & 43 MW Power Plant Anjar Facility , A Key Contributor Approvals from O&G majors for new facility New Capacity at Anjar, Gujarat for HSAW & Coating Merger of coating J.V. with WCL Pipe Coating in JV with EUPEC, Germany Dahej, Gujarat LSAW, Dahej, Gujarat HSAW, Dahej, Gujarat 8
2010 2009
2008
Rs. 26,834 mn. Rs. 18,298 mn. Rs. 10,385 mn. Rs. 8,277 mn. Rs. 2,565 mn. Rs. 585 mn. Rs. 180 mn. 1998 1995 Embarked on a Growth Journey 2000 2001
Incorporated
May 2011
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Global Footprint & Pre Approved with Oil & Gas Majors
May 2011
Page 7
Australasia 9%
Global Demand
Business potential of around USD 69 Bn (3) - Simdex Replacement of the old pipelines in US New Gas is required to replace annual decline in existing gas supplies in North America, which shall enhance demand for new pipelines Shale Gas gradually increase its share in total gas requirement in US Alaska Pipeline project -another boost to the demand for pipes
Europe 18%
Domestic Demand
Low pipeline penetration in India provides huge potential Natural Gas as a source of energy is growing at a rapid pace and shall grow the demand for pipelines Formation of the Petroleum & Natural Gas Regulatory Board (PNGRB) to give boost to trunk pipelines City Gas Distribution set to take-off Liquefied Natural Gas (LNG) terminals projects to enhance pipe demand Water Infrastructure projects: A Key driver for HSAW pipes
Source: Industry Sources
GAIL
6,663
1,332
1.6
RGTIL
2,750
550
0.7
GSPL
5,675
1,135
1.4
Jagdishpur - Haldia Dabhol - Bangalore Kochi - Mangalore - Bangalore
Total
15,088
3,017
3.7
Welspun is well placed, with global clients and state-ofthe-art technology, to capitalise on this opportunity
Note 1. Conversion rate of 200 tonnes / km 2. Conversion rate of $1,200 / ton 3. As illustrated in the adjoining tables
May 2011
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Welspun serves several marquee customers like Exxon Mobil (Golden Pass Pipeline), Kinder Morgan, Ruby (El Paso) and GAIL because of its specialized offerings It has long term contracts with giants like TransCanada; and framework agreements with Chevron, Saudi Aramco, etc Successfully expanded into highly competitive North and Latin America to take advantage of higher realizations
350
1,800
Oil & Gas Co Approval Production ( '000 MT) Revenue (US$ MM)
36
501
717
814
1,850 1,500
350 350 1,300 200
HSAW ERW Total Pipe Plate Mill
571
1,250
1,637
36 Glob al 67%
47
136
LSAW
Global 76%
Global 77%
Existing Capacities
New Capacities
Production Growth
000 MT
900
800 700
600 500 400
718
814
100%
720
80% 60%
33%
17%
24%
23%
384
373
300 200
100 0
193
40% 20%
67%
83%
76%
77%
FY06
Pipes
FY07
FY08
FY09
FY10
9M FY11
0%
FY07 FY08 Do mestic
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FY09
FY1 0
Plates
Expo rt
May 2011
Process
Process
Process
Raw Steel
Steel Slab
(API Grade)
Pipes
(API Grade for O&G)
$ 1,000-1,050 /ton.
$ 1,300-1,400/ton.
Backward integration into plates provides critical value advantage Opportunity to service the high end steel category which is currently serviced through imports
Note 1. Indicative market prices May 2011
Page 10
$ 1.6 bn
$ 1.6 bn
$ 1.3 bn $ 1.6 bn
14%
$ 1.4 bn
Export
Domestic
$ 1.4 bn
$ 1.3 bn
$ 1.5 bn Some of the Top Clients for Pipes Client Enterprise Country USA Canada India India Middle-East
Transcanada Pipe Line Limited Gas Authority of India Ltd. Indian Oil Corporation of India Saudi Aramco
May 2011
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3. Global Footprint & Pre Approved with Oil & Gas Majors
Global Market Expansion
Worlds largest diameter steel pipe producers(1)
1.3
Welspun (India)
JFE (Japan) Sumitomo (Japan) Evraz** (Russia) Nippon Steel (Japan) Riva (Italy) PSL (India) JSW (India) ArcelorMittal (Luxembourg)
1.0
0.7 0.7 0.6 0.6 0.6 0.5 0.3 0.2 0.1 0.1 7.3
Bolivia
Peru
Egypt
Sudan
Columbia
What Sets WCL Apart From Competition Decade Long Experience All Solutions Under One Roof High Capacity Equipment to Meet Future Demand Backward Integration with In-house Plate-cum-Coil-Mill
WCL was rated 2nd largest Pipe Company in 2007 and has since added further capacity of 0.85 MTPA
Note 1. As reported by Financial Times on April 13, 2008 May 2011
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3. Global Footprint & Pre Approved with Oil & Gas Majors
AGIP BECHTEL BRITISH GAS BRITISH PETROLEUM CHINA NATIONAL PETROLEUM CORPORATION CPMEC, CHINA CHEVRON (Framework Agreement) DOW RUBY (ELPASO) EGYPTIAN GENERAL PETROLEUM CORPORATION ENTERPRISE EXXON-MOBIL (GOLDEN PASS PIPELINE) GAIL GASCO, ABUDHABI GASCO, EGYPT GAZPROM (STROYTRANSGAZ) KINDER MORGAN MOGE, MYANMER N.A.O.C. - NIGERIA NPCC, ABU DHABI NTPC ONGC PETRO CHINA PETRONAS, MALAYSIA PDO, OMAN PGN, INDONESIA QATAR PETROLEUM RELIANCE INDUSTRIES LIMITED SAIPEM, SNAM SAUDI ARAMCO (Framework Agreement) SHELL STOLT OFFSHORE Acergy SONATRACH TOTAL TECHNIP TRANSCANADA (Long Term Contract) UNOCAL PERU LNG (HUNT OIL) VIETSOPETRO
Approval from major domestic / international oil and gas companies Seeking API approval 1 year 2 3 years
3 - 5 years
May 2011
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Mr. R.R. Mandawewala is the Managing Director. He has been a key contributor in Welspuns journey. A Chartered Accountant by profession and with over 20 years of experience, he has cross-industry expertise varying from Textiles to SAW pipes.
Mr. L. T. Hotwani is Director, Supply Chain Management of Welspun Corp Limited. With a rich experience of over 36 years, Mr. Hotwani is instrumental in sourcing raw materials and managing supply chain with global players
Mr. M.L. Mittal serves as Executive Director. A Chartered Accountant by profession, Mr. Mittal has been instrumental in arranging Long Term Loans and Working Capital Facilities. During his tenure, the Company has successfully funded several expansions projects. Mr. Akhil Jindal serves as Director of Corporate Affairs. He graduated with an Engineering Degree and thereafter an MBA from Indian Institute of Management, Bangalore. Mr. Jindal is responsible for strategic inorganic/organic initiatives within the Group and has spearheaded large fund raisings, cross border acquisitions, private equity raisings and financial closure of projects exceeding over US$ 1 bn. Mr. David J. Delie serves as President Welspun Tubular LLC. A graduate in Science (Electrical Engineering) and a Masters Degree in Engineering Management from the University of Pittsburgh, he has an extensive 33-year background in the steel and pipe industry. Mr Delie has served on the Board of Directors of Berg Steel Pipe Corp., EB Pipe Coating, Inc., the American Iron & Steel Institute May 2011 (AISI).
Mr. B.R. Jaju serves as Director & CFO. A Chartered accountant by profession, member of Company Secretary (FCS), as well as a Law Degree (LL.B). He has a rich experience over 30 years in finance and global M&A activities. Mr. Jaju has been awarded 3 times as Best Performing CFO in the year 2003, 2005 and 2006, by the most credible nationally renowned jury. Mr. Prashant Mukherjee serves as Director of Welded Pipes. A Graduate in Science (Engineering, Mech) with over 24 years experience mostly in the Oil & Gas Pipe Industry, Mr. Mukherjee has been instrumental in implementing expansion projects in the Company
Mr. Vipul Mathur is the Director of Marketing & Sales (Pipes & Plates Division). A Science Graduate and Masters in Business Administration (MBA) in Marketing, he has a rich experience of over 16 years in the Oil & Gas Pipe Industry
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LSAW Pipes
ERW Pipes
HSAW Pipes
May 2011
Coating of Pipes
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Plates
Plates
US Plant
May 2011
Page 16
Rationale for US Plant Opportunity to locate closer to customers who were facing supply challenges Transportation cost becomes quite large for inter-continental shipment Existing capacity in the US was not able to serve the requirement of US clients State of the art facility at Little Rock, Arkansas. Commissioned in Feb-09 and has obtained all API approvals Key supplier for last 5 years in US with client list that includes Chevron, Exxon Mobil (Golden Pass Pipeline), Kinder-Morgan and Ruby (El Paso) Framework agreement with Chevron, making Welspun one of the three global preferred vendor for next 3-5 years Supplied pipes for worlds deepest pipe- line in Gulf of Mexico In 9M FY 2011 utilization levels ramp-up to 63%
May 2011
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695 640
(#)
75,000 57,395
356
(#)
73,503 58,604
387
(#)
39,945
154
2008-09
2009-10
9M -2010-11
2005-06
2006-07
2007-08
2008-09
(5)
2009-10
9M-2010-11
# Plates
US$ MM
413
(2)
617
(3)
991
(4)
1,250
1,637
(7)
1311
(9)
EBITDA (1)
(INR MM)
12,000 8,000 4,000 1,655 0
2005-06 2006-07 2007-08 2008-09 2009-10 9M-2010-11
(6)
10,493
6,555 3,384
6,348
1,425 614 0
2005-06 2006-07
2,135
1,500
2007-08
2008-09
2009-1 0
9M -201 1 0-1
US$ MM
37
(2)
78
(3)
163
(4)
138
(5)
294
(7)
235
(9)
US$ MM
14
(2)
33
(3)
85
(4)
47 (5)
136
(7)
115
(9)
Notes 1. Excluding Other Income 2. Using avg. exchange rate of US$1 = Rs.44.28 from 01-Apr-05 till 31-Mar-06 3. Using avg. exchange rate of US$1 = Rs.43.51 from 01-Apr-06 till 31-Mar-07 4. Using avg. exchange rate of US$1 = Rs.40.29 from 01-Apr-07 till 31-Mar-08
May 2011
Notes 5. Using avg. exchange rate of US$1 = Rs.45.91 from 01-Apr-08 till 31-Mar-09 6. Includes extraordinary items : forex provisioning of INR1,256MM, Inventory write-down of INR 385MM, ECB provisions of INR 178MM 7. Using avg. exchange rate of US$1 = Rs.44.90 from 01-Apr-09 till 31-Mar-10 8. Includes recovery of past forex provisioning ( in FY09) , which is reflected in better realization and cost of material 9. Exchange rate of US$1 = Rs.44..705 as at 31-Dec-10
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25% 20%
1 4.7% 1 7.3% 1 2.2%
21 .8% 1 % 9.1
21 .7%
R OC E
R OE 21 .0% 1 9.5%
15% 10% 5% 0%
1 3.7% 1 .4% 1
2005-06
2006-07
2007-08
2008-09
2009-10
May 2011
Page 19
Consolidated Balance Sheet (Rs. Mn.) Sources of Funds Shareholders' Funds Share Capital Reserves and Surplus Minority Interest Foreign Currency Monetary Item Translation Difference A/c Loan Funds Secured Loans Unsecured Loans Deferred Tax Liabilities (Net) Total
FY2009
FY2010
Change
May 2011
Page 20
FY2009
FY2010
Change
34,844 3,847 30,996 5,808 36,804 1,140 355 113 26,113 4,601 9,470 5,552 45,848 38,955 601 39,555 6,293 0 31 44,623
38,810 5,889 32,921 5,412 38,333 1,596 13 20,322 8,077 17,028 6,031 51,471 32,291 1,219 33,510 17,961 0 25 57,915
3,966 2,042 1,924 (396) 1,529 456 (355) (99) (5,791) 3,476 7,558 479 5,623 (6,663) 618 (6,045) 11,668 (0) (5) 13,292
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H1 FY 2011 As at 30.09.2010
Unaudited (Rs. Mn)
A 1 a b c d 2 3 4 B 1 2 3 4 5 a b c d Less 4 a b 5
Sources of Funds Shareholders Fund Share Capital Reserves and Surplus Share Application Money Minority Interest Loan Funds Foreign Currency Monetory Item Translation Difference Account Deferred Tax Liabilities-Net Total Application of Funds Fixed Assets Build Operate and Transfer Projects Expenditure Investments Foreign Currency Monetory Item Translation Difference Account Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Current Liabilities and Provisions Current Liabilities Provisions Miscellaneous Expenditure Total
May 2011
Status of Projects
Capacity of Pipes is being increased to 2.2 million MTPA: LSAW expansion of 350 K MTPA at Anjar in Q1 FY 2012. HSAW plant of 100K MTPA at Karnataka is now fully operational. Saudi Plant commences production in Q4 FY11
*Reported EBITDA and Profits for the quarter and nine months period ended 31st December 2009 includes Foreign Exchange realignment gain of Rs 590 million and Rs 1,260 million.
New Initiatives
The company successfully completed the investment in the Saudi plant, which has commenced production in Q4 FY11 Implementation of L-SAW plant at Anjar is on schedule, and is likely to be commissioned by the end of Q1 FY12 The Mandya plant in Karnataka has started production and is ramping up to achieve desired level of production. Welspun Middle East is establishing its presence in Dubai to cater to the bouyant markets of Middle East and Africa.
Sales Volume (in tons) Total Pipes Consolidated # Plates & Coils*
# Company recorded higher inventory of pipes in Q3 FY11due to delay in shipment of certain export orders. The above inventory of finished pipes is being dispatched in Q4 FY11 ensuring that the company achieves its annual sales target and records its highest ever sales in FY11. * Includes Internal Sales
May 2011
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Summary
Strong Industry Fundamentals Capital intensive, high barriers to entry North America expected to lead demand
Exponential Growth in Revenues & Margins Revenues have grown at a CAGR of 42% over the last five years PAT has grown at a CAGR of 78% in the same period
Robust Business Fundamentals & Healthy Order Book Strong volume growth Order Book in excess of US$ 1.5 Bn Capacities of global size Comprehensive product mix
Strong Management Team with Proven Execution Capabilities Recognized by the FT as the second largest steel pipe producer in the world in 2007 First Indian company to supply pipes for offshore projects in US
Global Footprint & Pre Approved with O&G Majors Presence across more than 25 countries Pre-approved with more than 50 O&G Majors
May 2011
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Scale Leadership
Cost Leadership
Produce world class products at the least cost and maintain competitive edge
Technology Leadership
Quality Leadership
Process Leadership
People Leadership
Page 25
During the previous year one of the customer reported defect in the pipes supplied alleging grade of steel used did not meet the specifications, the company replaced the defective pipes and also provided for the expected loss on this account. During the year the said customer initiated legal action against the company in the United States of America claiming loss / damages of $ 66 million on account of defects in the pipes supplied, consequently the company also initiated legal action against the steel supplier claiming corresponding loss / damages it may suffer on account of this claim of the customer. Hence the company does not expect any liability on account of the claim against it.
May 2011
Page 26
Thank You
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