Larsen & Toubro Limited Performance for FY June 2002

Transcription

1 Larsen & Toubro Limited Performance for FY 2002 June

2 Disclaimer 2 This presentation contains certain forward looking statements concerning L&T s future business prospects and business profitability, which are subject to a number of risks and uncertainties and the actual results could materially differ from those in such forward looking statements. The risks and uncertainties relating to these statements include, but not limited to, risks and uncertainties, regarding fluctuations in earnings, our ability to manage growth, competition ( both domestic and international), economic growth in India and the target countries for exports, ability to attract and retain highly skilled professionals, time and cost over runs on contracts, our ability to manage our international operations, government policies and actions with respect to investments, fiscal deficits, regulations, etc., interest and other fiscal costs generally prevailing in the economy. The company does not undertake to make any announcement in case any of these forward looking statements become materially incorrect in future or update any forward looking statements made from time to time by or on behalf of the company.

3 Highlights of FY 2002 performance Order book grew by 4.7% to Rs billion Sales and service income at Rs billion registered a 6.8% increase Profit before taxes of Rs.4.01 billion higher by 18.3% Reduction in interest cost by Rs.0.45 billion Profit after taxes increased by 10% to Rs.3.47 billion Deferred tax provision of Rs.0.29 billion Funds employed reduced by Rs.5.23 billion 3

4 Economic scenario Industrial sector registers a marginal growth of 2.7% Capital goods sector had a negative growth of 4.1% Overall GDP growth of 5.4% on the back of a higher agricultural growth and services sector Fiscal situation affected by shortfall in tax collections and disinvestment receipts Global economic slowdown aggravated by the impact of 09/11 event and its aftermath Wide geographical and sectoral impact Fresh investment decisions postponed 4

5 Business Scenario Lackluster growth in investments Many projects either shelved or delayed Overcapacity in many industries stifle new investments Activity in infrastructure sector subdued as yet Spending on road projects yet to take off Housing continued to show robust growth No significant recovery of other economies in the region Intense competition for fewer opportunities 5

6 Initiatives to meet the challenges of today and tomorrow Major thrust on exports Almost trebled over the last three years Exports grow by 56% to Rs billion over the last year Manpower rationalization Over 1500 people opt for Voluntary Retirement Schemes over 3 years Management Leadership Programmes to identify to business leaders Several talent search initiatives Use of IT to improve business processes and facilitate real time business decisions ERP implementation in almost all ODs Cost reduction initiatives across the divisions Value engineering, Global sourcing, efficiency improvements Total Productive Maintenance, Six σ iniatives ROCE and FCF based performance measurement and employee rewards 6 for alignment of interest and sustained improvements

7 7 Segmental review

8 Engineering and Construction 8

9 The year that was Order book and sales grow by 2% and 6% respectively Longer gestation orders resulting in significant increase in average execution cycle Zero dates delayed in certain large value projects Margins dropped to 10.1% from 11.7% Change in project mix Under utilization of resources and certain specialized equipment Pricing pressures 9

10 Highlights Landmark jobs completed Khandala-Lonavala bypass Most Outstanding Structure awards for Narmada,Yamuna,Kune bridges Country s largest coal handling plant at Paradip Port 500 MW First End Shields for TAPP delivered to NPCIL Heaviest DHDS Reactor ( 295 MT) delivered on time India s first Gas Compressor Module for ONGC ( Mumbai High) Total re-construction of TISCO Blast Furnace in a record 105 days Orders from across continents for critical equipment and turnkey projects Acceptability of Made in India ; L&T brand established Global quality and delivery norms Compliance with International Quality Rating Systems Path of continuous improvement towards total quality Hazira Engineering Workshop targeting Level 6 10

11 Major orders executed FY 02 HRC Compressor Module For ONGC (785 Mt) First Time Fabricated In India Completed 20 Days Ahead Of Schedule 11 Clamp-on Structures For ONGC (1900 MT), 12 Platforms First Time Executed By L&T Completed 69 Days Ahead Of Schedule

12 Reels (840 Mt) For Wellstream, UK Completed 22 Days Ahead Of Schedule 12

13 Indian School of Business, Hyderabad Jack Welch R&D Center for GE ITC, Bangalore PARADIP COAL TERMINAL:BELT CONV. SYSTEM & YARD MACHINES Pre Heater Building, Chettinad Cements, Karikkali, TN FIRST FULLY MECHANISED COAL TERMINAL IN INDIA 13

14 S.S. Desalination Eqpt. (580 Mt)-70 Nos. For SIDEM, France 14 First Time Manufactured & Exported Completed 30 Days Ahead Of Schedule

15 DHDS Reactor for KRL-295 Tonnes 15

16 Recycle Column for Bechtel, USA-610 Tonnes 16

17 Sector-wise order backlog End Mar '01 Others 13% Pow er 25% End Mar '02 Others 9% Pow er 19% Infrastructure 46% Process & Hydro carbon Infrastructure 16% 52% Process & Hydrocarbon 20% 17

18 Execution cycle analysis Major orders in backlog Mar 01 Mar 02 11% 0-12 months 20% 25% months 43% 38% months 22% 13% months 5% 13% > 48 months 10% 18

19 Projects where Zero Date has been delayed Rs.billion Tirupur Water Supply 4.85 Konaseema Power Project 4.07 Essar Projects Limited

20 Divisional Performance Summary 20 Rs.billion FY 2002 FY 2001 % change Order Booking Domestic % Export (46.0)% Total % Sales Domestic (2.5)% Export % Total % Order Backlog % PBDIT/Sales 10.1% 11.7% PBIT Segmental Assets ( Net)

21 Efforts on cost reduction Extensive global sourcing In-house efforts on design optimisation Cost advantage Major IT initiatives Efficiency improvements eprocurement Knowledge Management Customer relationship management All projects to move to the module in a phased manner Reduction in manpower through optisizing 21

22 22 Electrical & Electronics

23 The year that was Overall electrical sector registers a marginal growth of 1.7% Switchgear market had a negative growth Divisional Sales grows marginally by 2% Drop in margins Predatory pricing by MNCs to gain market share Efforts on product development and export market development Right-sizing costs Several new products introduced New product intensity of 35% for standard products L&T maintained its market share Quality and contemporary products 23

24 Efforts on export market development Deeper penetration into overseas markets Major countries being UK, France, China, Qatar, Oman, Kuwait, Myanmar, Bangladesh, Africa Order booking grew from Rs.250 mio to Rs.460 mio Sales from Rs.226 mio to Rs.380 mio International accreditation for products Certification by Association of Short Circuit Testing Authority (ASTA) C Power Range MCCBs DH Range of ACBs Canadian Standards Association MN Range of Contactors CE marking ( European Exports) C Power range of ACBs MN Range of Contactors FN range of Switch Disconnector Fuses 24

25 Technology edge facilitated by a strong R&D Life cycle management of products State-of-the-art R&D facilities ProE workstation networked with Tool Room Balanced design skills in electronics, electrical and mechanical streams EmSyS for high end Electronics, Embedded Software and Systems U Power Air Circuit Breakers Overall best product award at ELECRAMA 2002 Hookable on electronic communication network Can receive and give commands from cell phones, PCs D-sine MCCBs Certificate of appreciation at ELECRAMA

26 Divisional Performance Summary Rs.billion FY 2002 FY 2001 % change Sales Domestic (1.8)% Export % Total % PBDIT/Sales 12.8% 16.5% PBIT Segmental Assets(Net) % drop in PBDIT for FY 02 due to change in expense allocation basis

27 Several initiatives to mitigate dropping margins Efficiency improvements and cost cutting Value engineering Savings in materials cost by around 1% for standard products during FY 02 Use of Six Sigma, First-time-right approach, Kanban 90% of vendors and 7% of stockists do business thru internet Actual cost increase over the last 5 years contained to 2.2% against an increase of 6% in cost index 27

28 28 Cement

29 Market Scenario Demand growth of 9.6% during the fiscal year Demand from infrastructure sector subdued as yet Housing remained the main driver for demand Gujarat reconstruction also helped Over capacity still persists New capacities aggravated the situation Prices were volatile since June 2001 Average prices better than previous year in most markets 29

30 Divisional Performance Domestic sales volume grows by 6.5% Margins improves from 16.9% to 18.5% Ex-factory realisation up by 4% Several Cost reduction initiatives Higher exports of cement better value addition 1.01 mt against 0.7 mt Continued efforts to improve operating efficiencies 30

31 Volatile cement prices Ahmedabad Mumbai Apr Jul Oct Jan Apr Jul Oct Jan Apr RS. per bag Apr Jul Oct Jan Apr Jul Oct Jan Apr Rs per bag Kolkota Chennai Rs. per bag Rs. per bag Apr Jul Oct Jan Apr Jul Oct Jan Apr Apr Jul Oct Jan Apr Jul Oct Jan Apr 31 Average ex-factory realisation at Rs.1303 per tonne (Rs.1251 for FY 01)

32 Towards a fully optimised business L&T s cement is among the most preferred Consistent Quality Commands a premium price in all markets L&T is already among the lowest cost producer, if not the lowest Continuing efforts to reduce cost further A strong and well spread distribution net work IT has emerged as a strong tool facilitating further improvement in the business processes First in India to implement SAP in all its modules Major efforts on to offset the distance to the market Several initiatives to bring down distribution costs 32

33 Consistent quality is our strength State of art Control & Automation systems with computer controlled operations. Systems at Awarpur and Hirmi upgraded On-line quality control to manage quality of the product. X-Ray Fluorescence analyzers to enable rapid and accurate quality control. Use of Mines Quality Optimization Software to ensure quality of limestone feed 33

34 Consistent improvement in operating efficiencies Heat Consumption Power Consumption FY 98 FY 99 FY 00 FY 01 FY FY 98 FY 99 FY 00 FY 01 FY 02 Kcal per tonne of cement Units per tonne of cement 34

35 Cost increases well below inflation 100 Variable cost index FY 98 FY 99 FY 00 FY 01 FY 02 35

36 Further reduction in costs Opportunistic purchases to manage costs Switch from imported coal to indigenous coal Purchase from smaller coal miners Total Productive Maintenance practiced in Gujarat and Andhra plants for Comprehensive Asset Care Regime Employee ownership of plant, ensures minimal breakdown and reduces cost TPM with Six σ project launched in Gujarat Plant for process improvement, optimisation & control 36

37 Further reduction in costs Packaging costs reduced through value engineering Specifications optimised Use of laminated bags in place of pure paper bags Fixed costs reduced by Rs. 320 million during FY 02 37

38 Minimize the Total Delivered Cost Reduce the number of stocking points and increase direct despatches Reduce secondary freight Reduce handling cost Reduce backtracking Reduce operating cost of dumps Maximize backhauling Optimisation software in place to manage the net work to minimise total delivered cost 10 production centres, destinations, stockists/retailers 38

39 Divisional Performance Summary FY 2002 FY 2001 % change Sales-Mio Tonnes Domestic % Exports % % Sales - Rs. Billion % Ex-factory realistion * % PBDIT/Sales 18.5% 16.9% PBDIT/Sales ( Incl.Fiscal benefits) 19.8% 19.0% PBIT Segmental Assets(Net) * Net of transportation, taxes and duties, discounts, commission

40 Summary Financial Performance 40

41 Profit & Loss Account FY02 FY01 %Change Order Booking % Sales % Other Income % Total Revenue Cost of sales Operating Margin % to total revenue 12.3% 12.6% Interest (12)% Depreciation PBT % Tax - Current Deferred PAT % 41

42 Savings in financing costs Refinancing and pre-payment of various high cost borrowings More than Rs.7 billion refinanced Prepayment of Rs.3.4 billion Judicious use of derivatives to hedge costs Effective monitoring of capital employed 42

43 Balance Sheet Rs. Billion 31-Mar Mar-01 SHAREHOLDERS' FUNDS Share Capital Reserves Net Worth* LOAN FUNDS Secured Loans Unsecured Loans Deferred Tax Liabilities (net) 8.52 TOTAL SOURCES Net Block incl. CWIP Investments Current Assets Less: Current Liab NCA Misc. Expenditure TOTAL APPLICATION * after adjusting deferred tax provision of Rs billion

44 Cash Flow Statement Rs.billion FY 02 FY 01 Net Profit before tax and extraordinary item Operating Profit before working capital changes Change in working Capital 2.65 (3.14) Operating Cash Flow Direct Taxes Paid 0.70 (0.68) Investment in Fixed Assets (2.86) (3.89) Free Cash Flow

45 45 Outlook FY 2003

46 E&C Strong backlog of over Rs.110 billion Revenue growth of 15% in FY 03 Following sectors will offer new opportunities Refineries & Petrochemicals Postponed expansion plans expected to take off Power Infrastructure Roads, Bridges, Airports, Water International Project Business Selective order booking Current shoploading levels are at around 90% 46

47 Order prospects Likely value prospects in various sectors Infrastructure Rs.35 billion Refineries & Petrochemicals Rs. 36 billion Power Rs.20 billion International Rs. 15 billion L&T well positioned to exploit these opportunities 47

48 Electricals Price cuts seem to have abated Margins could improve if competitive pressures ease Two new products to be introduced Both these products won award for Good Design in the recent Elecrama Exhibition Ongoing cost cutting measures 48

49 Cement Continued strong demand growth of 8-10% Low interest rates would encourage investments in housing Investments in roads and other infrastructure projects Capacity addition slowing down No major greenfield/brownfield capacity planned Most upgradation efforts completed Blended cement potential exists in the West East is at saturation level and South is nearing saturation Demand growth would help price stability Continue cost saving measures to improve margins Further savings expected in distribution costs Continue with optimisation of operating costs 49

50 50 We make the things that make India proud