The global economy is on a rebound. The International Monetary Fund (IMF) estimatesindicate that the global real GDP grew 3.8% in CY17. This is the highest growth pace overthe last six years. It is also the broadest synchronised global growth upsurge since CY10as underlined by the IMF. This impetus from a supportive monetary policy was furtherbuoyed by a revival of investment spending in advanced economies.
The expansionary fiscal and monetary policies in the US led to improved growthprospects. The US grew at 2.3% in CY17 as against 1.5% in CY16. Growth accelerated inEurope and Asia too.
The global economic recovery is expected to continue. For the current and the nextyear a strong growth at 3.9% is projected. This positive outlook is somewhat clouded.Increased trade protectionism rising international crude oil prices geo-political risksand the uncertainty about normalisation of monetary policies in advanced economies fromthe highly accommodative conditions in the past are some of the factors that dim theoutlook.
India's economy is emerging strongly from the transitory effects of demonetisation andthe implementation of the Goods and Services Tax (GST). Although India's GDP growth slowedfrom 7.1% in FY17 to 6.7% in FY18 the economy recorded a seven-quarter-high GDP growth of7.7% in the exit quarter of FY18. This reflects momentum.
India's macroeconomic indicators remain healthy. The fiscal deficit has been cut to3.5% of GDP. India's foreign exchange reserves as at March end stood at a comfortablelevel of $424 Billion.
Investors seem to be positive on India's economic prospects. The
Foreign Direct Investment (FDI) flows continue to be encouraging.
India's global ranking on the ease of doing business notched up to 100 from 142 inbarely four years while the country's ranking on global competitiveness index has climbedfrom 71st in FY15 to 39th in FY17. The prevailing sense of optimism accentuates India'scontinuing economic growth in the future as well. It is attributable to the country'ssolid fundamentals 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.
The Government's unwavering push for infrastructure projects Bharatmala Pariyojanaairports metros affordable housing urbanisation smart cities and digitisation-areexcellent stimulators for the economy's growth in the medium term. At the same time wecannot ignore near-term challenges. The bucket of concerns consists of rising oil priceshardening inflation firming bond yields and widening current account deficit. The ongoingglobal trade frictions particularly between the US and
China are worrisome and can have a spillover negative effect on countries like India.So the terrain ahead could be a tad bumpy depending on the economic and geopoliticalenvironment.
THE METALS SECTOR: IN BRIEF
The sector gained substantially from global economic growth with a surge in demandfrom the user industries in both aluminium and copper. China controls about 50% of theworld production and consumption of both the metals. In CY17 China implemented majorreforms resulting in environment-led closures in winter and a clamp permanently on allillegal capacities in aluminium.
Consequent to the Chinese actions the average LME price of aluminium touched afive-year high to $1969/ ton registering a growth of 23% in CY17 against a decline of 3%in CY16. The global demand barring China reflected a growth of 3.5% in CY17 compared to3% in the previous year.
A robust growth by over 8% in CY17 for the second year in a row in China portends well.With the surge in demand and moderation in inventories premiums increased acrossgeographies. In Asia the premium coursed by 14% to $100/ton in CY17 from $88.5/ton inCY16.
The average LME price of copper in CY17 augmented by 27% to $6166/ton from $4862/tonin CY16. This was driven by the tight supply of copper concentrate in the global marketcaused by disruptions in the world's two large copper mines in Indonesia and Chile. Thenon-availability of concentrate in the global market moderated Tc/Rc.
The demand for refined copper excluding China was a modest 1% in CY17 due to theabundance of scrap availability. The demand in China grew marginally at 4.5% in CY16 toaround 5% in CY17.
The Indian aluminium industry showed a significant recovery in H2FY18 after a subduedH1FY18. The domestic demand of aluminium extended by 9% in FY18 vis--vis a moderate 1.5%growth in FY17. The domestic demand of primary copper increased by 6% in FY18 as against2% in FY17.
Going forward the thrust on building renewable energy the emphasis on electricalvehicles and light weighting through increased usage of aluminium in railways metros andmass transportation should generate significant long-term growth opportunities for thealuminium and copper sector in India.
Further the ongoing government initiatives such as the creation of 100+ smart citiesthe push for infrastructure especially on rural infra development along with Make inIndia and Digital India will stoke greater demand.
YOUR COMPANY'S PERFORMANCE
For your Company this has truly been a record breaking year even as global marketsexperienced unusual volatility. Your
Company registered its highest ever Consolidated EBITDA of Rs.15025 Crore on aturnover of Rs.115809 Crore.
Your Company's aluminium and copper business in India and Novelis continued to deliveroutstanding operational and financial performance. Stable efficiencies betterrealisations and supportive macros were the major enablers.
Your Company (including Utkal) achieved record aluminium and alumina production levelsat 1.29 Mt and 2.88 Mt respectively.
All the plants operated at their designed capacities. The output of Value AddedProducts (including wire rods) stood at 479 Kt.
In the Copper Business Cathode production touched 410 Kt higher by 9% compared to theearlier year. CC Rod production was 156 Kt up by 4%. The new CCR#3 plant at Dahej wascommissioned.
Novelis reported a remarkable performance this year with a record shipment of 3.2 Mthigher by 4% over the previous year and an EBITDA of $1.2 Billion up by 12%. Their perton EBITDA of $381 is indeed notable. Novelis continues to improve its product mix byraising its share of automotive sector from 18% to 20%. Your Company intends to increasethe share of recycling to 57% in FY18 from 55% in FY17.
To further bolster the balance sheet your Company has prepaid close to Rs.8000 Croreof long-term project loans in India. This has led to a significant improvement in theConsolidated Net Debt to EBITDA at below 3x at the end of March 2018.
WHAT GIVES US THE EDGE
Undeniably our people their dedication to work their sense of belongingness andpride in the Group their efforts in putting the organisation first and living our valuesgive us an advantage over our competitors. I acknowledge their contribution and count ontheir continued commitment to take our business far ahead.
THE ADITYA BIRLA GROUP: IN PERSPECTIVE
The year FY18 has been a momentous year on all counts. We reached a record revenue of$43 Billion with an EBITDA of $6 Billion. Our Group's market cap crossed the $50 Billionmark. These spectacular achievements are a reflection not only of our growing size andscale the inherent soundness of our strategies and operations but also moreimportantly reflection of the enormous confidence that investors and other stakeholdershave reposed in us.
I am delighted to share with you that Aon Hewitt a reputed global consulting firm inthe Best Employers 2018' study conducted by them have named our Aditya Birla Groupas the Best Employer' in India.
Moving on to our people processes what strikes me most is that the development andleadership aspects embedded in them are all futuristic. I believe we are headed in theright direction. Let me give you a flavour of what we have accomplished and how we areconstantly refreshing and reengineering our HR initiatives. Our Group HR has formulated aunique proposition for leadership development through the 2x2x2 formula.
It is structured in a manner that accords opportunities to high talent to work in twobusinesses across two geographies and in two functions. Such an approach should give aholistic experience and help prepare our future leaders. I had apprised you earlier on thetalent councils led by the
Business Heads and Directors at the Group business and at the functional levels. Sofar more than 250 talent council meetings have been held with over 8000 developmentconversations and actions initiated for these colleagues. I have attended several of thesemeetings and am much encouraged by the positivity and enthusiasm they generate amongemployees down the line.
They rightly believe that talent will always bubble to the top.
More than ever before in the people domain two segments that have grabbed theattention of progressive corporates comprise the millennials and the gender diversityissue. In our Group 52% of our executives are under 35 years of age. They are the leadersof tomorrow whom we need to groom today. Today women constitute over 14% of our employeeforce. Game-changing career-enabling policies have been introduced.
These include work-life issues such as maternity childcare flexi time local commuteand accompanied travel for the child and the caretaker. Alongside as part of the familysupport initiative paternity leave is also being provided.
For younger employees through our flagship Aditya Birla Group Leadership Programme(ABGLP) we are building a robust talent pipeline at the entry junior and middle levelswho will move into senior leadership over the years. From this cadre over 350 youngstershave been placed across the Group.
Gyanodaya the Aditya Birla Global Centre for Leadership and Learning continues itscommitment to prepare Profit and Loss (P&L) and manufacturing leaders through itsAccelerated Leadership Development programmes. I take great pride in Gyanodaya bagging theGold Award for the Best Corporate University-Culture and Brand in Global CCU Awards FY17'for operating at the highest levels of excellence and creating value for people businessand society'.
The Sales Marketing and Customer Centricity Academy and the HR academy enabled 1765managers to hone their expertise to greater heights. The Gyanodaya virtual campuscontinues to offer 900+ e-learning modules in multiple languages. During the year nearly40000 employees leveraged the e-learning programme.
We are enhancing our HR processes for scale agility and consistent employeeexperience. A comprehensive HR assurance and excellence framework the HR portal to enablethe last-mile employee anytime-anywhere connect and SeamEx the Group HR Shared ServicesCentre are milestones in this journey as they enthuse and energise our people.
Our Group's robust revenue growth healthy EBITDA margins efficient capital deploymentand cash flow generation support our ambitious growth plans. Innovation and the spirit ofentrepreneurship that our employees bring to work is amazing and a major contributor toour Group scaling newer heights year after year.
Kumar Mangalam Birla