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Hindalco Industries Ltd.

BSE: 500440 Sector: Metals & Mining
NSE: HINDALCO ISIN Code: INE038A01020
BSE LIVE 14:57 | 23 Aug 230.75 2.40
(1.05%)
OPEN

230.90

HIGH

231.15

LOW

225.80

NSE 14:41 | 23 Aug 229.75 0.85
(0.37%)
OPEN

230.00

HIGH

231.45

LOW

225.85

OPEN 230.90
PREVIOUS CLOSE 228.35
VOLUME 501545
52-Week high 244.80
52-Week low 138.75
P/E 33.11
Mkt Cap.(Rs cr) 51,769
Buy Price 230.65
Buy Qty 1364.00
Sell Price 230.90
Sell Qty 589.00
OPEN 230.90
CLOSE 228.35
VOLUME 501545
52-Week high 244.80
52-Week low 138.75
P/E 33.11
Mkt Cap.(Rs cr) 51,769
Buy Price 230.65
Buy Qty 1364.00
Sell Price 230.90
Sell Qty 589.00

Hindalco Industries Ltd. (HINDALCO) - Chairman Speech

Company chairman speech

TO SHAREHOLDERS

Dear Shareholders

Global Economy

The global scenario continues to be trapped in a low growth trajectory despite thesteep drop in crude oil and commodity prices. Furthermore a barrage of monetary stimulushas driven down interest rates close to zero in many of the advanced economies. With themonetary stimulus option by and large exhausted governments are more likely to turn tofiscal and structural measures to revive growth.

The IMF projects global growth to inch up from 3.1% in 2015 to 3.2% in 2016 andincreasing to 3.5% in 2017. Growth in the advanced economies is projected at 1.9% in 2016with US growth pegged at 2.4% Europe at 1.5% and Japan at 0.5%. Growth in the emergingmarkets in 2016 overall is projected at 4.1% much of it coming from China India andthe ASEAN region. Growth in Latin America is expected to be only 0.5% on account of a3.8% decline in growth in Brazil. No sustained upside is seen in oil and commodity pricesin 2016.

The path ahead for the global economy remains challenging with greater uncertaintiesthrown in. Concerns persist about the slowdown in China and its ability to shift smoothlyfrom export-led to domestic-led growth. Fiscal pressures will accentuate in the oilproducing countries including the rich Middle-East countries. Financial markets remainnervous and exchange rate volatility has been pronounced. This is reinforced by theimpending reversal of the interest rate cycle in the US.

Indian Economy

Against the backdrop of a muted global economy India's economy is an outperformer. For2016-17 GDP growth is projected at 7.5%. This would make it the fastest growing among thelarge economies. This is particularly creditable in the context of two successiveunfavourable monsoons and a decline in exports. Recent data indicate a 5.7% year-on-yeargrowth in eight of the key core sector industries against 2.3% growth registered lastyear.

Inflationary pressures have been contained. The rise in the consumer price indexaveraged 4.9% in 2015-16 down from 5.9% in the previous year. The wholesale price indexdeclined 2.5% on an averaged basis compared to a rise of 2.0% in the previous year. In2015-16 merchandise exports and imports each fell over 15% over 2014-15. The tradedeficit in 2015-16 was US$ 118.5 billion a decline of 14% over the previous year. Thecurrent account deficit narrowed sharply from US$ 26.1 billion to US$ 22.0 billionrepresenting

1.4% of GDP. India's foreign exchange reserves as at March-end 2016 were US$ 360.2billion. The government is also committed to meeting the current year's fiscal target of3.5% of GDP. Overall the economic fundamentals are sound.

There have also been positive moves on the policy front in areas related to ease ofdoing business promoting start-ups rationalising the tax structure and administrationand opening up more areas for foreign investment through the automatic route. Thegovernment is substantially stepping up infrastructure spending.

Having said that some issues come to the fore. For instance capital investment willtake time to revive given stretched corporate balance sheets low capacity utilization(at only 72.5% in the organized industrial sector) and competition from imports. Slowglobal output and trade growth will continue to impact exports. There is also the overhangof nonperforming assets in the banking sector. Much more also needs to be done to"monsoon-proof" the Indian economy.

The growth in the manufacturing sector has been subdued including a decline in theoutput of capital goods.

Your Company's Performance

Your Company attained a consolidated revenue of US$ 15 billion (' 100042 crore) andPBITDA of US$ 1.5 billion (' 10007 crore). This was despite a sharp drop in LME and thedecline in aluminium ingot premium that caused a large adverse metal price lag. Furtherthe interest and depreciation charges rose significantly in line with the commissioning ofnew facilities. However higher volumes and a significant reduction in the cost ofproduction enabled your Company record a robust performance.

The year 2015-16 was indeed a milestone year for your Company. Aluminium and aluminaproduction at 1.1 million tons and 2.7 million tons respectively has been the highest everachieved as were the shipments of flat rolled products. Your Company's three Greenfieldprojects - Mahan Aluminium Aditya Aluminium and Utkal Alumina ramped up to their fullcapacity. Utkal in fact has positioned itself in the lowest decile on the global aluminacost curve on the back of very efficient logistics in a remote terrain and robustoperational performance.

Of the 4 coal blocks - two in Chhatisgarh and two in Jharkhand - bagged by your Companyin the auction process both the Gare Palma mines in Chhatisgarh have become operational.

Your Company's Copper business also put in a commendable performance. Copper productionfor the year was at a record level of 388 KT. The continued thrust on value addition ledto a higher production of continuous cast rods.

The year also marked the culmination of Novelis' large scale investment programmestarted four years ago. Novelis' Aluminium recycling center in Germany the world'slargest of its kind is stabilizing well. Additionally it commissioned two new automotivelines in the US and in Europe. In all the 5 automotive finishing lines consolidateNovelis' leadership in the high growth Auto segment.

Importantly Novelis' auto shipments increased 47% during the year in line with thestrategic portfolio shift that is underway.

Outlook

The overall outlook for commodity markets continues to be challenging. Themacroeconomic headwinds persist and the uncertain global macros pose many concerns.However your Company's structural positioning in the markets that it serves hasstrengthened significantly following the completion of its ambitious Greenfieldinvestments in India and the ongoing enrichment of the product portfolio in Novelis.

Our People: Our Pride

Despite yet another challenging year we have achieved good results. This has beenlargely due to deft cost management a concerted move towards on-streaming of newcapacities focus on efficiency improvement productivity and customer centricity. Ouremployees have unflinchingly rallied around us. And for this I would say a big"thank you" to all of them".

The Aditya Birla Group: In perspective

At the Group level we have done well both in terms of revenue and earnings. As amatter of fact the EBIDTA attained has been the highest ever.

Having worked extensively on the people front for over a decade I am happy to statethat our leadership processes are now mature. At the management level we have builtquality bench strength.

The Chairman's Series launched last year for senior leaders in the areas of businessstrategy finance and personal leadership saw 150 of our senior most leaders recourse tothese learning interventions.

To create a leadership pipeline to the Business Head roles within the next couple ofyears we have created the Aditya Birla Fellows programme. The managers who have won thisrecognition are put in charge of critical Groupwide projects under my personal oversight.Up until now we have named 14 managers who have tremendous potential to rise to thestature of Business Heads going forward.

A slew of other initiatives have been set afoot to grow leaders from within. To do sowe have announced a hiring freeze at the middle and senior management levels for the next3 years. It paves the way for accelerated talent growth.

In this context I am happy to state that our accelerated leadership programme CuttingEdge which prepares high potential leaders for P&L positions across our Group isgaining traction. It was launched last year. Up until now 20 of the 35 graduates of thisprogramme have already moved roles to take on higher responsibilities.

Furthermore the 250+ youngsters who joined us over 6 years ago as Group ManagementTrainees in our Leadership Associate Programmes (Lead) and Leadership Programme forExperienced youngsters (Leap) are shaping well. In the last 2 years nearly a 100 fromthis slot have moved across functions and businesses. Additionally we have 25 mid-careerparticipants who have joined us in the Group Manufacturing Leadership Programme. They tooare making significant contributions in our manufacturing business units.

The first batch of 14 participants in "Spring Board" (a programme designedspecially for high calibre women) graduated commendably to higher roles. The second batchof 39 women leaders is making good progress on their way to greater responsibilities. Asof now we have nearly 5000 women - 14 percent in the managerial cadre.

In the last 3 years we have had more than 1100 inter-business and over 1000intra-business transfers of employees across levels.

At Gyanodaya the Aditya Birla Global Centre for Leadership Learning over 2000 managersenrolled for learning programmes. With a mix of academics and live case studies theseprogrammes enable our people to keep abreast of the developments in their area and staycontemporary. Side by side the Gyanodaya Virtual Campus hosts more than 500 e-learningmodules in multiple languages. During the year over 25000 employees chose to accessthese programmes.

The Aditya Birla Group Leadership Programme aimed at securing young talent from the toptier Business Schools of India has become aspirational. I am happy to record that ourGroup's brand attractiveness has taken a quantum leap across 35 top B-Schools in India.Our Group features among the formidable Top-5 in the A C Nielsen - CRI Campus RecruitmentIndia Index 2015.

In sum

All these moves are a testament to our commitment to accord a World of Opportunity forour people and they are leveraging it. Our people are fully aware of what business needsto succeed. They are committed to contribute their best to our values based performancedriven meritocratic culture. We are future ready.

Your sincerely

Kumar Mangalam Birla