The global economy continued to be subdued in 2016. The slowdown in the advancedeconomies of the West adversely impacted growth levels resulting in the slowing of theworld economic growth to 3.1% from 3.4% in the earlier year. The growth in emergingmarkets and developing economies was encouraging. However China and India experienced adeceleration. Financial markets refl ected a broad uptrend notwithstanding Brexit and therate hikes by the US Fed. Recent data reveals that the global economy is gaining momentum.PMIs (Purchasing Managers' Indexes) accelerating trade fl ows and better business andconsumer confi dence are the key pointers. The IMF has projected global growth to notch upto 3.5% in 2017 from 3.1% last year. Growth in the advanced economies is estimated at 2%with US growth at 2.3% the Euro area at 1.7% and Japan at 1.2%. Growth in the emergingmarkets is pegged at 4.5% driven largely by China India and the ASEAN region. LatinAmerica is expected to grow only 1.1% affected by the weak trend in Brazil.
India is on a roll. There is a buzz about India as it blazes forth as the fastestgrowing economy in the world at 7.1%. The trade defi cit in 2016-17 was USD 106 billionlower by 11% over the previous year. The current account defi cit has been signifi cantlypared. India's foreign exchange reserves as at March end 2017 were USD 370 billion.Investors are bullish. Foreign investment fl ows which were at over USD 60 billion inFY-17 are scaling new records. Markets are buoyant. Stock index is at a historic peak.India's global ranking has jumped up in competitiveness and on the innovation index. Thevarious initiatives and reforms of the Modi Government have built the platform for aquantum leap ahead. High impact national projects coming to grips with structural issueswhich were holding back the country's progress innovative approaches in policy making have collectively contributed in driving India on a high growth trajectory. Goingforward the abiding sense is one of immense
India is on a roll. There is a buzz about India............ India's global ranking hasjumped up in competitiveness and on the innovation index.
optimism and confi dence in the future with the nation slated to grow at 7.5% to 8%.India's narrative is unmatchable. That said if there is one subject that needs greaterattention on the government's radar for the ensuing years it is the revival of investmentactivity and creation of quality jobs in large measure. The Government is seized of theseissues. The Government has taken many steps including a sharp focus on improving ease ofdoing business speeding of green clearances and stepping up public sector outlays forinfrastructure. I believe it is a matter of time before the private sector investmentspick up as NPAs are resolved and corporate balance sheets are deleveraged.
The metals sector: In brief
Global Aluminium demand excluding China grew by 3% in 2016 compared to the earlieryear. In China it rose by 7% in 2016 on the back of stimulus provided by the government.The overall global Aluminium consumption touched around 60 MnT registering a growth of5.0% in 2016 over 2015. China continues to be the largest consumer of metal accountingfor over 50% of the total global consumption. In FY17 Aluminium LME was on the upwardtrend compared to FY16. Premium in FY17 remained at low levels. Premiums started torecover from November 2016 due to supportive demand and price outlook and low inventorylevel in LME warehouses.
Global Refi ned copper consumption grew by 2.2% in 2016 vs 2015. China is the largestconsumer of copper. On the supply side global mine supply extended by 5% in 2016. Thisled to an increase in TcRc. However in early 2017 the disruption in mines resulted toreduced TcRc.
The Domestic Demand for Aluminium in India is expected to benefi t from theInfrastructure projects prioritised by the government. The government's thrust on thepower which sector is the dominant consumer of Aluminium in India augurs well for yourCompany. The Automobile and food packaging industries are also expected to stoke aluminiumgrowth. Furthermore rapid urbanisation should augment consumer demand yet anotherpositive for the sector. Moreover the per capita aluminium consumption is far below theglobal average. This offers a huge potential given our demographic and economic outlook.The Domestic Copper demand is led by the electrical and electronic products sectoraccounting for 34% of the consumption. The strong growth in end user segments such aswinding wires power cables and other user applications favour the sector.
Initiatives such as housing for all the creation of 100+ smart cities the thrust oninfrastructure especially rural infra development along with Make in India and DigitalIndia among others should spur the industrial sector to higher growth levels as well asenhance private investments in FY18.
Your Company's performance has been commendable in FY17. It registered a recordConsolidated EBITDA at
` 13558 crore on a turnover of ` 102631 crore.
Your Company's performance
In an environment of mixed economic signals your Company's performance has beencommendable in FY17. It registered a record Consolidated EBITDA at
` 13558 crore on a turnover of ` 102631 crore. Both Aluminium and Copper Businessesin India and Novelis registered robust operational performance.
Before I move into the operational aspects I would like to brief you on some of theimportant developments at your Company.
In line with our stated objective to deleverage the balance sheet your Companysuccessfully raised USD 500 million through a Qualifi ed Institutional Placement
For the FY 2017 the Company achieved record production Aluminium metal at 1.3million tonne and Alumina (including Utkal Alumina) at 2.9 million tonne.
(QIP) which along with the treasury balance was utilised to prepay the existingborrowing. This has led to a substantial improvement in the Consolidated Net Debt toEBITDA. Your Company has prepaid close to ` 5500 crore till date. Its subsidiary Novelisrefi nanced USD 4.3 billion long term debt. The annual cash interest expense standsreduced by USD 79 million.
Novelis entered into a JV agreement in May 2017 with Kobe Steel to sell 50 percent ofits ownership interest in its Ulsan South Korea facility for USD 315 million. YourCompany also divested Aditya Birla Minerals Limited Australia for USD 80 million.
Both these moves are towards enhancing stakeholder value.
I am also pleased to inform you that with new coal linkages attained in FY2017 coalsecurity is now at over 60% of your Company's annual requirement of the domestic AluminiumBusiness.
For the FY 2017 the Company achieved record production Aluminium metal at 1.3million tonne and Alumina (including Utkal Alumina) at 2.9 million tonne. Aluminaproduction was up 8 per cent and Aluminium metal production extended by 12 per cent ascompared to the previous year. Value Added Products (including Wire Rod) production was at481 kilotonne higher by 14 per cent as compared to the preceding year. All of yourCompany's new plants viz. Aditya Aluminium Mahan Aluminium and Utkal Alumina areoperating at their rated capacities. In the Copper Business production was lower as thebusiness took a planned shutdown. The Subdued demand in the wire rod segment also dentedCC Rod production. Consequently cathode CC rod and DAP production fell by 3 per cent 5per cent and 7 per cent respectively.
A big thank you to all of our employees
Organizational agility excellence in execution customer centricity and costoptimization are a given. I believe to drive business growth in a sustainable manner thecriticality of our people our intellectual capital is beyond expression. We deeplyvalue our employees' engagement and their commitment to our culture of innovation andperformance accountability.
Our Group's HR agenda is even more sharper and defi ning of our future. Our HR functionhas collectively developed and clearly articulated the HR 2020 strategy across theorganization.
Aditya Birla Group: In perspective
At the Group level our performance both in terms of revenue and earnings has beengrowing. In fact our EBIDTA has been the highest ever. In line with our people focus wehave strengthened the capacity of our leadership bench as well as employees across levels.Our Group's HR agenda is even more sharper and defi ning of our future. Our HR functionhas collectively developed and clearly articulated the HR 2020 strategy across theorganization. It has clear actionables and review mechanisms focused on talenttechnology productivity and employer brand. On the people front it has truly been anexciting year of development building on the strong foundations of the earlier years. AsI had shared with you earlier we have 3 accelerated leadership programs. First -The Turning Point which prepares high potential leaders for P&L roles. Second- Step Up which infuses a ready pipeline for Functional Head roles and Third -Springboard designed especially for high caliber women leaders.
Our Group features among the formidable Top-5 in the A C Nielsen CRI CampusRecruitment India Index 2016 as well.
These have enabled us to set up the requisite bench strength of leaders.
We have prepared 123 leaders for higher responsibilities over the last one year. Ofthis 26 have already taken on new roles. The Business leadership and I have personallyreviewed talent across the business and am happy to see the evolution of our structuredsuccession plans. The hiring freeze came into effect in January 2016. This coupled withour leadership development actions has resulted in extremely encouraging people moves.Over the last year we witnessed 5500+ career movements across the Group. Of these 600+were inter-business movements 150% higher than the previous year. The Aditya Birla GroupLeadership Program (ABGLP) is another strong source of building leaders. It has gainedgreater traction this year with 67% higher intake. From the earlier batches 95participants have over the last 2 years been given cross business and function exposuresgrooming them for a holistic perspective. I am happy to share that we continue to be anemployer of choice amongst the top B schools in India. Our Group features among theformidable Top-5 in the A C Nielsen CRI Campus Recruitment India Index 2016 aswell.
Additionally to accelerate opportunities for our talent we have set up Talent Councilsled by Business Heads and Directors at the business and Group levels. Up until now morethan a 100 Talent Councils meetings have happened across the Group where the developmentplans of approximately 3000 colleagues have been discussed and actions taken. Project Vegais yet another initiative launched this year. Its basic objective is to review the agilityof decision making in the organization keeping in view end-customer impact. This hasyielded signifi cant changes to internal processes delegation of authority and speed ofdecision making in turn empowering teams and freeing up leadership bandwidth. This alongwith our focus on technology enabled processes I believe will keep us sharp and nimble.Furthermore to hone and enhance our functional expertise Gyanodaya the Aditya BirlaGlobal Centre for Leadership & Learning launched Functional Academies last year. TheSales Marketing & Customer Centricity Academy and HR Academy enabled 1150 leadersbuild deeper expertise in their domain areas. Gyanodaya continues to deliver superiorlearning programs with over 1583 managers enrolled last year. Additionally the GyanodayaVirtual Campus hosts more than 500 e-learning modules in multiple languages. During theyear over 31664 employees accessed these e learning programs. I am happy to update youthat we are doubling our capacity in Gyanodaya through upcoming expansion plans.
Our Group's solid reputation robust fi nancials the quality and commitment of ourtalent our leadership positions in our businesses our operational excellence and our CSRengagement are our strengths that I believe will see us ride the wave of success.
Kumar Mangalam Birla