Ambuja Cement Limited

By Manish Agarwal

November 14, 2007

Content
Brief History
Positioning in Indian Cement Industry Financial Performance

Cost drivers
Expansion Project Financing of expansion projects Conclusion

Brief History -- a growth story

Capacity built up from 0.7 Mio t in 1986 to 18.0

Mio t as of today at CAGR of 18%

Organic

growth acquisitions

and

growth

through

2001 - Private equity investors (American

International Group & Government Singapore) invested in ACIL with Holcim

of

2005 - ACIL restructured as a joint venture 2006 - Founder promoters sold part of their

holding in ACL in favour of Holcim

ACL is a Holcim Group company since May

2006
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Content

Brief History Positioning in Indian Cement Industry Financial Performance Cost drivers Expansion Project

Financing of expansion projects

Conclusion

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Positioning - ACL
North Central Region
Cement Capacity 7.0 Mio t

Eastern Region
Cement Capacity 3.0 Mio t

South-West Region
Cement Capacity 8.0 Mio t Cement Plant Grinding Station Terminal Port

Overseas: Cement receiving station at Galle (Sri lanka), which is not indicated in the map above

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Strategy
Strong presence in growing markets of North &

West
Largest exporter of cement Grinding close to market Premium brand Extensive & primarily exclusive distribution network

Over 6,600 dealers and 20,500 retailers Captive Infrastructure Port, Receiving Terminals and Power Plants (230 MW) Sea Transportation Seven vessels

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Export
Cement and clinker export volumes
[Mio t]
1.4 2.0 2.0 1.5

Comments

ACL exports

1.8

10

Gujarat provides around 80% of Indian cement exports. Exports markets are mainly in the Middle East but also in Sri Lanka (0.8 million t)
Export flows from Gujarat are expected to decline from 20082009, due to strong demand and better realization in the local market.

6
9.9
9.2 9.7 9.5

4
6.5

0
2002 2003 2004 2005 2006

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Asset footprint South West

Ahmadabad Ambujanagar
Asset Cement capacity [million t] 5.0 3.0 1.0 1.5 2007 2009 Add. cem capacity [million t] Year

Surat Maratha

Ambujanagar Maratha Surat

Panvel

Ahmadabad

Total

8.0

2.5

Optimised logistics costs through

use of sea transportation to serve the key Mumbai market

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Asset footprint North Central

Asset Cement capacity [million t] 2.0 2.2 2.0 2.5 0.5 1.0 1.5 1.5 7.0 4.0 2.8 2007 2009 2009 0.6 2009 2007 Add. cem capacity [million t] Add. clk capacity [million t] Year

Darlaghat
Rauri

Darlaghat Rauri

Ropar

Nalagarh

Rabriyawas Ropar Bathinda

Roorkee

Bathinda

Roorkee Dadri Nalagarh Total

Dadri

Pioneered the concept of

split grinding units to optimise logistics costs.

Rabriyawas

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Asset footprint East

Asset Cement capacity [mt] 1.0 1.0 1.0 3.0 2.2 2007 Add. clk capacity [mt] 2.2 Year

Bhatapara Sankrail Farakka Total Farakka

2009

Entry into the eastern

Sankrail

Bhatapara

market through acquisition of Bhatapara cement plant in 1997

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ACL sales evolution all India

By Region
In %
9 10

Comments
ACL Market Share in %
10 10 10

Sales up from 10.9 million t

100 12 80 40 60 40 20 0 2002 2003 2004 12 37 40 15 14

10

11

in 2002 to 16.3 million t in 2006

Consistent regional

42

41

distribution
12 12

11

10

36

37

36

36

36

2005

2006

South West Region North Central region

Eastern Region Exports

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Sales and market share: South West

Market share
Top 3* [%] 100
80
4.0
5.0 6.0 12.0

Sales development
54 52

39
27.0

37

36

ACL Market Share in %

8
8 9 9 8 8

27.0

30.0

31.0

32.0

[Mio t]

4.0
5.0 6.0 11.0 15 11.0 11.0 9.0

4.0
5.0 6.0 11.0 15 10.0 10.0 9.0

4.0
5.0 6.0 12.0 14 10.0 10.0 8.0

4.0
5.0 7.0 12.0 13 10.0 9.0 8.0

60

40

17

4 4.9 5.1 5.2 6.0

11.0

20
11.0 8.0

4.0

2002

2003

2004

2005

2006

0 2002 2003 2004 2005 2006

Comments Top three players represent around 52% of the market share* Dominance of regional players in the southern market

ACC Madras ICL

ACL Kesoram Zuari

UltraTech Grasim Others

* In 2005 and 2006, Top 3 are: ACL+ACC; Grasim + Ultratech, ICL

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Sales and market share: North Central

Market share
Top 3* [%]
100

Sales development
55
17.0 7.0 8.0
9.0 11.0 5.0 2 13.0

39
18.0

40
17.0 7.0 8.0
9.0 11.0 6.0 2 13.0

41
17.0 7.0 8.0
8.0 11.0 6.0 3 13.0

53
16.0 9.0 8.0
10.0 10.0 5.0 1 13.0

ACL Market Share in %

8
[Mio t]
11 12 13 14 13

80

7.0 8.0

60

9.0 11.0

40

6.0 2 12.0

20

15.0 11.0

15.0 12.0

16.0

16.0

16.0

4
5.0 5.8 6.3 6.6

13.0

14.0

13.0

0
2002 2003 2004 2005 2006

4.4

0 2002 2003 2004 2005 2006

ACC Grasim Century JK

ACL UltraTech Shree Others

Jaypee Birla Corp

* In 2005 and 2006, Top 3 are: ACL+ACC; Grasim + Ultratech, Jaypee

Comments Top three players now represent around 53% of the market* but still fragmented among 2nd and 3rd tier players Jaypee and Shree are relatively aggressive competitors Currently the region with the highest ACL presence 13
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Sales and market share: East

Market share
Top 3* [%] 100
80

Sales development
62
12.0 5.0
7.0 17.0

47
15.0 5.0
6.0

51
10.0 6.0
7.0 18.0

50
12.0 5.0
7.0 19.0

66
11.0 4.0
8.0 18.0

ACL Market Share in %

8
[Mio t]
8 8 8 8 8

60

20.0 12.0 11.0 12.0 13 7.0 18.0 8.0 14.0 12 8.0 17.0 8.0

11.0 14 8.0 17.0 8.0

40

13 13 7.0 7.0

20
14.0 8.0

19.0 8.0

2 1.3 2002 1.4 2003 1.5 2004 1.8 2005 2.0 2006

2002

2003

2004

2005

2006

Comments Most consolidated compared to all India Top three players represent around 66% of the market*

ACL

ACC

Grasim

Century
Birla Corp

Lafarge
Others

Orissa
UltraTech

* In 2005 and 2006, Top 3 are: ACL+ACC; Grasim + Ultratech, Lafarge. Their market share could reach close to 80% with the likely integration of Century into Grasim/Ultratech

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Content

Brief History Positioning in Indian Cement Industry Financial Performance Cost drivers Expansion Project

Financing of expansion projects

Conclusion

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Financial performance showing improving trajectory

2001-2002 ROCE (%) ROE (%)
70 36 60 35
Sales and EBITDA (INR Billion)

2002-03 9 14

2003-04 13 17

2004-05 17 22
37 36

2006* 47 43

9 12

50 40

33 63 32 22 31 30 8 29 28 27 2001-02 Sales 2002-03 2003-04 EBITA 2004-05 EBITA margin 2006

30 20 30 30

31

10 0

14

17

20

26

ACLs EBITDA in FY 2006 witnessed an impressive growth

* Figures for 2006 pertain to 18 months period July 05 December 2006

EBITDA Margin (%)

34

34

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Key financial figures *

Full Year Rs. In crores Sales Volume Sales EBITDA EBITDA margin 2006 16.3 4847.86 1880.68 38.8% 2006 12.2

Nine Months 2007 12.5 4198.13 1669.76 39.75% % (+/-) 2.46 19.31 26.33

3518.77 1321.66 37.56%

Profit after tax**

1340.07

1,099.53

967.61

13.63

* IGAAP. Figures for FY 2006 have been restated to make it comparable, on account of change in accounting year and merger of ACEL 17 ** Excluding extraordinary income
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Content

Brief History Positioning in Indian Cement Industry Financial Performance Cost drivers Expansion Project

Financing of expansion projects

Conclusion

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Cost drivers
Power

Captive Power Plants, AFR

Fuel (coal)

AFR/process efficiency / international sourcing

Clinker content

Composite cement

Transport

Grinding facility close to end user, production close to raw materials Terminal logistics
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Energy
Consumption per unit of Production
90 89 88 87 86 85 84 83 82 81 80
2001-02 2002-03 Electricity (Kw h/T of Cmt) 2003-04 2004-05 2006 720 715 710 705 700 745 740 735 730 725

Measures

Shift from liquid to solid fuel to reduce cost of captive energy cost by approx. Rs.2 per unit. Reduction dependence on grid power, with the construction of additional power plants aggregating to 178 MWs Captive power ensures continuous and consistent supply of

Coal/Other Fuel (Kcal/Kg of clinker)

Increase Captive Generation

Total Consumption Captive %

90 80 70 60 50

2050 1550
76 80 72 66 72

1050 550 50 2001-02

power

2002-03

2003-04

2004-05

2006

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Content

Brief History Positioning in Indian Cement Industry Financial Performance Cost drivers Expansion Project

Financing of expansion projects

Conclusion

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Expansion projects
Location Rauri Dadri Nalagarh Roorkee* Rabriyawas Surat Ahmedabad Bhatapara Farraka* Total Cluster North North North North North SW SW East East
Grinding Grinding Clinkering Grinding Grinding Clinkering

2007

2008
Clinkering Grinding

2009

2010

2011

Clinker Cement (million t) (million t)

2.2 1.5 1.5 1.0 1.0 1.5 2.2 5.0 1.0 7.5

Grinding

0.6

Capital outlay (in USD million) Clinker Grinding Captive power plant
* Already commissioned

Greenfield

Brownfield

388 302 203

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Content

Brief History Positioning in Indian Cement Industry Financial Performance Cost drivers Expansion Project

Financing of expansion projects

Conclusion

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Financial position
Million USD Net Cash from Operating Activities Debt:Equity Debt:EBITDA 1.10 3.83 1.09 3.42 0.63** 2.61 0.52 1.41 0.25 0.38 2001-02 28 2002-03 68 2003-04 144 2004-05 180 2006* 453

Improvements in operational efficiency

Favourable pricing environment

Net cash positive in 2007

Call option in ACIL to generate approx. USD 150 Mio
Strong cash flows and low debt : equity ensures financial flexibility for new projects
* Figures for 2006 pertain to 18 months period July 05 December 2006 ** improvement on account of conversion of convertible bonds

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Content

Brief History Positioning in Indian Cement Industry Financial Performance Cost drivers Expansion Project

Financing of expansion projects

Conclusion

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Conclusions

Solid market position built up within short period of time through organic growth and acquisitions

Pin-pointed positioning tied to substantial captive infrastructure to serve markets including sea transportation, capability to export
High use of alternative raw materials in production of composite cements Substantial greenfield and brownfield expansions plans to grow within the attractive markets and an internal financing capability to fund expansion projects
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Disclaimer
Cautionary statement regarding forward-looking statements
This presentation may contain certain forward-looking statements relating to the 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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