Results Presentation Financial Quarter and Nine Months Ended December 31, 2020 February 10, 2021
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Results Presentation Financial quarter and nine months ended December 31, 2020 February 10, 2021 1 Safe harbor Statements in this presentation describing the Company’s performance may statement be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results may differ materially from those directly or indirectly expressed, inferred or implied. Important factors that could make a difference to the Company’s operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in or due to the environment, Government regulations, laws, statutes, judicial pronouncements and/or other incidental factors 2 Key performance highlights Revenue EBITDA Free cashflow Deleveraging ▪ Consolidated revenue ▪ Highest ever consolidated Generated free cash flow of ▪ Deleveraged sharply; Net improved 7%QoQ and EBITDA; up by 53%QoQ and Rs.20,588 crores in 9MFY21 debt reduced by Rs.18,609 11%YoY to Rs.39,594 crores 161%YoY to Rs.9,540 crores and Rs.12,078 crores in crores in 9MFY21 and ▪ India1 revenue improved ▪ Highest ever India1 EBITDA; up 3QFY21; driven by strong Rs.10,325 crores in 3QFY21 9%QoQ and 18%YoY to by 46%QoQ and 114%YoY to operating performance and ▪ Additional deleveraging Rs.25,211 crores Rs.8,811 crores better working capital planned in 4QFY21 including management ~Rs.6,400 crores repaid till date Disciplined capital Marketplace Sustainable Reorganization allocation initiatives operations ▪ Spent Rs.1,394 crores in ▪ Developed 25 and ▪ TSBSL merger into Tata ▪ Committed towards 3QFY21 on consolidated basis commercialised 8 new products Steel is underway decarbonization, water ▪ Restarting work on Pellet with applications across ▪ Merger of TML and ISWP neutrality and responsible plant and CRM complex at construction, automotive and into TSLP is ongoing supply chain Tata Steel Kalinganagar tubes/pipes ▪ Focus on circular economy and ▪ Separation of TSE into ▪ Digital platform Aashiyana2 development of TSN and TSUK is underway scaling up rapidly; Gross revenue environmentally sustainable generated >Rs.200 crores, up by products 40%QoQ and 134%YoY 1. Tata Steel India includes Tata Steel Standalone, Tata Steel BSL (TSBSL) and Tata Steel Long Products (TSLP) on proforma basis without inter-company eliminations; 2. Aashiyana is Tata Steel’s online/digital steel shopping platform targeted towards generating sales from retail ‘Individual home builder’ segment across India; TML: Tata Metaliks; ISWP: Indian Steel and Wire Products; TSLP: Tata Steel Long Products; TSE: Tata Steel Europe; TSN: Tata Steel Netherlands; TSUK: Tata Steel UK 3 Committed towards excellence in Safety, Health & Sustainability Safety Health Sustainability ▪ Identified 1,200 potential hazards ▪ Completed COVID-19 ▪ Tata Steel Group, including Europe, has under safety campaign on ‘Moving Seroprevalence study covering been rated “A-“ in the ‘Leadership Band’ Machinery – Risk perception & Risk 20,000 employees across multiple on Climate Disclosure elimination’; 86% has been closed locations to assess exposure ▪ Won CII 3R Awards 2020 for ▪ Launched safety campaign on ‘Drive ▪ Rolled out assessment of Industrial demonstrating 3R (Reduce, Reuse, Towards Zero Toppling Incident’ hygiene and implementation of Recycle) principles in by-products across raw material locations hazard control measures to management minimise exposure LTIFR reduction by ~23% 0.95 0.78 0.73 0.69 0.68 0.60 0.58 0.56 0.47 0.46 0.44 0.39 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 9M21 LTIFR: Lost Time Injury Frequency Rate per million man hours worked, for Tata Steel Group 4 Our sustainability strategy: Committed to decarbonisation, water neutrality and circular economy practices Key highlights Key targets Decarbonization ▪ Significant reduction in emission intensity till FY20: i) >27% at TSJ ▪ Tata Steel India: since 2005, ii) >20% at TSK since FY17, iii) 5% TSE since 2008, o <2 tCO2/tcs GHG emission intensity by 2025 and iv) >13% TSN since 1990 o Certification of all key manufacturing sites under TM ▪ TSJ at 2.27 tCO2/tcs is benchmark in India; TSN at 1.86 tCO2/tcs is ResponsibleSteel in next 2 years the 3rd most carbon efficient steelworks among the participants of ▪ Tata Steel Europe: 30% CO2 emissions reduction by worldsteel’s Climate Action Programme in 2020 2030 vs. 2018 and carbon neutrality of steel making ▪ Deployed Responsible supply chain policy; Member of by 2050 ResponsibleSteelTM ▪ Tata Steel Group rated “A-“ in the ‘Leadership Band’ on Climate Disclosure in CDP’s 2020 assessment Water Neutrality ▪ Tata Steel India: o <3m3/tcs specific water consumption by 2025 ▪ Reduction in specific water consumption till FY20: i) >58% at TSJ o Develop long-term plan for water neutrality since 2005 and ii) >45% at TSK since FY17 including initiatives at watershed level Circular ▪ Implemented “3-R” approach to maximize utilization ▪ Tata Steel India: Economy ▪ 100% LD Slag utilization by Tata Steel India since FY19; o Sustain LD slag utilization at 100% developed “Tata Aggreto” and Tata Nirman” products for o Ensure no net loss of biodiversity construction purpose o Cover 100% products under LCA in next 2 years ▪ TSE: World’s only steel company operating own EPD* program; ▪ Tata Steel Europe: 100% new products of FY20 scrutinised under the program o All TSN and TSUK products certified to BES6001 o Demonstrate Zinc circularity using HIsarna in 2 Scrap recycling business in India; Set-up 0.5 MTPA capacity on ▪ years asset light model TSJ: Tata Steel Jamshedpur; TSK: Tata Steel Kalinganagar; TSE: Tata Steel Europe; TSN: Tata Steel Netherlands; TSUK: Tata Steel UK; LCA: Life cycle assessment; 3-R” approach: Reducing waste, reusing and recycling resources; Tata Steel India includes Tata Steel Standalone, Tata Steel BSL (TSBSL) and Tata Steel Long Products (TSLP) on proforma basis without inter-company eliminations; Tata Steel Group: Tata Steel Limited including its key subsidiaries and joint ventures; EPD: Environmental Product Declaration; CDP: CDP is an international non-profit organization that runs the global disclosure system for investors, companies, cities, states and regions to 5 manage their environmental impacts Our sustainability journey - Way forward ▪ Improving transparency and disclosures by engaging in sector initiatives for best practices, certification, traceability, Injection Use of and policy advocacy; First Indian Company to adopt “Task technology in Hydrogen in Force on Climate-related Financial Disclosures” Blast Furnace and place of Top gas recycling fossil fuel ▪ Deploying responsible supply chain policy across value chain including 3rd party assessment Alternate ▪ Contributing towards the future circular economy by – i) using Pursuing Ironmaking low-quality raw materials, ii) securing value from by-products, routes (Gas based Carbon capture iii) increasing scrap recycling, and iv) innovating in products low carbon DRI/ Hisarna) that are lighter, more durable, flexible, re-usable and 100% utilization & technologies recyclable at end-of-life storage ▪ Implementing the best available technologies to improve energy efficiency and reduce emissions intensity; pursuing Green low carbon technologies through a variety of measures Increase electricity/ EAF/scrap Renewable ▪ Collaborating with customers to develop environmentally usage energy sustainable products using ‘Life cycle assessment’ approach; Environmental Product Declaration / GreenPro Certification Policy support necessary to drive enabling technology, infrastructure and make “Net Zero” steel competitive 6 Global macro environment World trade volume and Manufacturing PMIs Steel demand and production (mn tons) ▪ Global economy continues to recover from COVID-19 Global Manufcaturing PMI World ex-China Steel Production pandemic; expected to grow 5.5%YoY in 2021 driven by 60 EU Manufacturing PMI 10% 100 China Steel Production China Manufacturing PMI China Apperant Steel demand policy support and improving sentiment amidst vaccine World Trade Volume (%YoY, RHS) progress 50 0% 80 40 -10% 60 ▪ Chinese economic growth was stronger than estimate for Dec’20 quarter; expected to grow 8.1%YoY in 2021 30 -20% 40 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 ▪ China’s crude steel production decreased 3.4%QoQ; World-ex China production improved to pre-COVID levels China Steel inventory (mn tons) Global HRC prices ($/t) 45 FY18 FY19 Korea export FOB FY20 FY21 800 China export FOB China domestic ▪ China’s apparent steel demand softened in Dec’20 quarter 35 Germany domestic amidst harsh winters; Inventories fell to pre-COVID levels 650 25 before rising again in Jan’21 ahead of New Year holidays 15 500 ▪ Iron Ore prices remain buoyant on supply side constraints 5 350 and sustained Chinese demand; Broadly stable Coking Apr Jul Oct Jan Mar Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Coal prices jumped recently due to severe Australian weather concerns Spot HRC spreads ($/t) Key raw material prices ($/t) 450 Premium HCC, Australia FoB China export spread Iron Ore-62% Fe, China CFR (RHS) EU Spreads ▪ Regional gross spot spreads improved sharply as steel 375 225 200 prices rose consistently with demand recovery including 300 175 150 restocking, tight supply and cost push; Chinese steel 225 125 100 prices and spread have softened in Jan’21 ahead of New 150 Year holidays 75 75 50 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Sources: World Steel Association,