The global economy is on a rebound. The International Monetary Fund (IM F) estimates indicate that global real GDP grew 3.8% in 2017. This is the highestgrowth pace over the last six years. It is also the broadest synchronised global growthupsurge since 2010 as underlined by IMF.
This impetus from a supportive monetary policy was further buoyed by arevival of investment spending in advanced economies. The expansionary fiscal and monetarypolicies in the US led to improve growth prospects. The US grew at 2.3% in 2017 as against1.5% in 2016. Growth accelerated in Europe and Asia too.
The global economic recovery is expected to continue. For the currentand the next year a strong growth at 3.9% is projected. This positive outlook is somewhatclouded. Increased trade protectionism rising international crude oil pricesgeo-political risks and the uncertainty about normalisation of monetary policies inadvanced economies from highly accommodative conditions in the past are some of thefactors that dim the outlook.
India's economy is emerging strongly from the transitory effectsof demonetisation and implementation of Goods and Services Tax (GST). AlthoughIndia's GDP growth slowed from 7.1% in FY 2017 to 6.7% in FY 2018 the economyrecorded a seven-quarter high GDP growth of 7.7% in the exit quarter of FY 2018. Thisreflects momentum.
India's macroeconomic indicators remain healthy. The fiscaldeficit has been cut to 3.5% of GDP. India's foreign exchange reserves as at Marchend stood at a comfortable level of USD 424 Billion.
Investors seem to be positive onI India's economic prospects. TheForeign Direct Investment (FDI) flows continue to be encouraging. India's globalranking on the ease of doing business notched up to 100 from 142 in barely four yearswhile that on global competitiveness index has climbed from 71st in 2014-15 to 39th in2016-17.
The prevailing sense of optimismac centuates India'scontinuingeconomic growth in the future as well. It is attributable to the country's solidfundamentals such as deleveraging by corporates resulting in much stronger balancesheets better capacity utilisation with consumption demand becoming stronger andinsolvency and bankruptcy process weeding out non-performing assets among others. TheGovernment's unwavering push for infrastructure projects BharatmalaPariyojana airports metros affordable housing urbanisation smart cities anddigitisation are excellent stimulators for the economy's growth in the medium-term.
At the same time we cannot ignore near-term challenges. The bucket ofconcerns consist of rising oil prices hardening inflation firming bond yields andwidening current account deficit. The ongoing global trade frictions particularly betweenthe US and China are worrisome and can have a spillover negative effect on countries likeIndia. So the terrain ahead could be a tad bumpy depending on the economic andgeopolitical environment.
Your Company's performance
Despite the challenging environment your Company recorded animpressive Revenue of Rs 57338 Cr. with EBITDA of Rs 10881 Cr. in FY 2017-18 on aconsolidated basis.
Your Company's Viscose Staple Fibre (VSF) business reported yetanother year of a strong operational and financial performance. VSF plants operated atfull capacity across various locations. Unrelenting focus on product quality constantinnovation and superior customer service have been at the core of your Company's VSFoperations.
Its brand "LIVA" has gained enormous traction. Today over 29Million garments feature the LIVA tag clearly a testament to the discerningcustomer's choice.
Through brown field expansion and debottlenecking initiativeswe plan to expand VSF capacity to 788 KT from 498 KT by FY 2020-21.
Viscose Sales Revenue grew by 11% YoY to Rs 8538 Cr. in FY 2017-18.EBITDA rose to Rs 1680 Cr. up 17%YoY. Despite strong headwinds from input costs likecaustic soda and sulphur that the business did so well is commendable.
I am delighted to inform you that your Company's sensitivity toenvironment conservation and sustainable forestry is being increasingly lauded. The NGOCanopy in its Hot Button Report ranked your Company as the Number ONE globally for itswork on the conservation of ancient and endangered forests.
Viscose Filament Yarn (VFY) business is now a part of your Companyconsequent to the merger of Aditya Birla Nuvo Ltd. (1st July 2017). Your Company has alsoacquired the rights to operate and manage the Century Rayon Division of Century Textilesand Industries Ltd. from the 1st of February 2018. I t has done well during theyear recording a healthy return of 28% on the capital employed.
I t has been a remarkable year for the Chlor Alkali industry as itwitnessed an improvement in utilisation levels. This was led by greater demand from theuser industry. Caustic soda prices rose sharply driven by global factors such as (i)Weather related disruption in the US bringing a halt on the logistics side (ii) Phasingout of mercury-based technology in Europe by Dec-17 and (iii) Capacity shutdown in Chinaon the back of environmental-related concerns.
While the demand for caustic soda remained firm barring a brief periodduring the implementation of GST. The demand for chlorine was subdued for most part of theyear. Going forward the demand and supply situation for the industry is well balanced forthe next couple of years with a limited visibility of large new capacity additions.
The Chemical business saw a record 22% YoY rise in the Revenue to Rs5105 Cr. and 54% YoY increase in the EBITDA to Rs 1300 Cr. in FY 2017-18 onbetter realisation and volumes. With ongoing brownfield capacity expansion the CausticSoda capacity is set to increase by 200 KT to 1140 KT by H1FY 2018-19.
Pulp & Fibre JVs:
We have strategic investments in pulp units in Canada and Sweden. Thesecater to 50% of our pulp requirement. These JVs ensure consistency in the supply of primequality pulp to our Indian operations.
The operational performance of the fertiliser business wassatisfactory. The demand for fertiliser remained strong on account of a good monsoon.
The linen business with an expanded capacity of 6250 MTPA maintainedits leadership. It enjoys 39% market share in the linen yarn segment.
The overall demand in the Indian Insulator market remained subdued.Your Company is increasingly diversifying towards composite insulators which is in linewith the market demand.
The MDA gives a detailed analysis of your Company's businesses. Iam sure you will read it with interest. I believe going forward your Company willcontinue its unrelenting pursuit of enhancing shareholder value and growth in earningsand revenues.
The Company's leadership position in Viscose and Chemicalssegments will get further strengthened by the new expansion plans. I believe goingforward your Company will continue its unrelenting pursuit of enhancing shareholdervalue and growth in earnings and revenues.
What Give Us The Edge
Undeniably our people their dedication to work their sense ofbelongingness and pride in the Group their putting the organisation first and living ourvalues. I acknowledge their contribution and count on their continued commitment to takeour business far ahead.
The Aditya Birla Group: In Perspective
The year 2017-18 has been a momentous year on all counts. We reached arecord revenue of USD 43 Billion with an EBITDA of USD 6 Billion. Our Group'smarket cap crossed the USD 50 Billion mark. These spectacular achievements are areflection not only of our growing size and scale the inherent soundness of ourstrategies and operations but importantly the enormous confidence that investorsand other stakeholders have reposed in us.
I am delighted to share with you that Aon Hewitt a reputed globalconsulting firm in the Best Employers 2018' study conducted by them havenamed our Aditya Birla Group as the Best Employer' in India.
Moving on to our people processes what strikes me most is that thedevelopment and leadership aspects embedded in it are all futuristic. I believe we areheaded in the right direction. Let me give you a flavour of what we have accomplished andhow we are constantly refreshing and reengineering our HR initiatives.
Our Group HR has formulated a unique proposition for leadershipdevelopment through the 2x2x2 formula. It is structured in a manner that accordsopportunities to high talent to work in two businesses across two geographies and in twofunctions. Such an approach should give a holistic experience and help prepare ourleaders of the future.
I had apprised you earlier on the talent councils led by Business Headsand Directors at Group business and at the functional levels. So far more than 250 talentcouncil meetings have been held with over 8000 development conversations and actionsinitiated for these colleagues. I have attended several of these meetings and am muchencouraged by the positivity and enthusiasm they generate among employees down theline. They rightly believe that talent will always bubble to the top.
More than ever before in the people domain two segments that havegrabbed the attention of progressive corporates comprise of the millennials andgender diversity issue. In our Group 52% of our executives are under 35 years ofage. They are the leaders of tomorrow whom we need to groom today.
Today women constitute over 14% of our employee force. Game-changingcareer enabling policies have been introduced. These include work-life issues such asmaternity childcare flexi time local commute and accompanied travel for the child andthe caretaker. Alongside as part of the family support initiative paternity leave is alsobeing provided.
For younger employees through our flagship programme which is theAditya Birla Group Leadership Programme ( AB GLP) we are building a robust talentpipeline at the entry junior and middle levels who over the years move into seniorleadership. From this cadre over 350 youngsters have been placed across the Group.
Gyanodaya the Aditya Birla Global Centre for Leadership and Learningcontinues its commitment to prepare P&L and manufacturing leaders through AcceleratedLeadership
Development programmes. I take great pride in Gyanodaya bagging GoldAward as Best Corporate University Culture and Brand in Global CCU Awards 2017"for operating at the highest levels of excellence and creating value for peoplebusiness and society".
The sales marketing and customer-centricity academy the HRacademy enabled 1765 managers hone their expertise to greater heights. TheGyanodaya virtual campus continues to offer 900+ e-learning modules in multiple languages.During the year nearly 40000 employees leveraged the e-learning programme.
We are enhancing our HR processes for scale agility and consistentemployee experience. A comprehensive HR assurance and excellence framework the HRportal to enable the last-mile employee anytime anywhere connect SeamEx the Group HRShared Services Centre are milestones in this journey as they enthuse and energise ourpeople.
Our Group's robust revenue growth healthy EBITDA marginsdeploying capital efficiently and generating cash flows support our ambitious growthplans. Innovation and spirit of entrepreneurship that our employees bring to work isamazing and a major contributant to our Group scaling newer heights year after year.
Kumar Mangalam Birla