Progressing with focus and fortitude
When we look back on 2021 we will recall the impressive rebound of the global economyfollowing months of lockdowns and slowdowns during the first year of the COVID-19pandemic.
Revenue of I 145268 Mn represented a 38.8% increase compared with I 104647 Mn in2020. Moreover we finished the year with six consecutive quarters of increased revenues.
The first quarter of 2021 onwards pent-up demand spurred robust sales of nearly all ofour products helping drive stronger revenues and EBITDA at RAIN. By the fourth quarterwith COVID-19 waning the biggest challenges ahead of us seemed to be whether an overtaxedglobal supply chain could keep up with rising demand and our ability to source key rawmaterials such as green petroleum coke (GPC) and coal tar in an increasingly tight market.
By December and into early 2022 however other challenges emerged with the potentialto be even more disruptive - namely soaring energy costs in Europe and the globalimplications of the rapidly evolving conflict between Russia and Ukraine.
In terms of potential fallout from the conflict Russia contributes about 8% of RAINRssconsolidated revenue so we anticipate that any direct impact should be limited. Thatsaid we are taking nothing for granted which is why we have implemented proactivemeasures to minimise the risk to our production facilities in the rest of Europe in theevent that the conflict disrupts natural gas and/or petroleum flows. We have alsoresponded to high energy prices by implementing new purchasing and sales price strategiesand we are pursuing measures to reduce the energy intensity of our plants and preserve themargins in our business to the extent possible in these extreme conditions.
Despite these challenges barring any widespread repercussions in the markets we servewe anticipate robust sales of our carbon and advanced materials products to continue asthe global economy rebounds from COVID-19 - especially for calcined petroleum coke (CPC)and coal tar pitch (CTP) which are benefitting from strong output by the aluminiumindustry that is enjoying LME prices that have been well above US$ 3000 per tonne.Simultaneously we are looking for higher growth in our cement business driven by theIndian governmentRss strong focus on infrastructure development.
Against this backdrop we are reasonably optimistic that our 2022 performance canmirror 2021 that included:
- Revenue of RS 145268 Mn which represented a 38.8% increase compared with RS 104647Mn in 2020. Moreover we finished the year with six consecutive quarters of increasedrevenues
- Operating profit (or adjusted EBITDA) of RS 25174 Mn which was up 26.5% comparedwith RS 19896 Mn in the previous year putting us back in our historically normal range
- Strong safety performance with our third consecutive year with a total recordableinjury rate below 0.2% quite an achievement in this COVID-19 environment where many ofour production facilities have been operating with a depleted workforce and the addedstress that comes with it
While we are pleased with the yearRss results we are fully aware that there are someareas where we can further improve our performance in 2022. At the top of the list is theneed to monetise the investments we have made on our major expansion projects which arepart of our strategy to meet and exceed the marketRss need for cleaner and moresustainable materials produced with minimal impact on the environment.
During the past few years we have made a cumulative investment of more than US$ 225 Mnon the hydrogenation hydrocarbon resins (HHCR) plant in Germany the vertical-shaftcalciner in India and the anhydrous carbon pellet (ACP) production facility in the UnitedStates. In 2022 we are expecting that each of these plants should begin to provide areturn on investment. Moreover the fact that each facility has been commissioned willgreatly reduce our CAPEX spending in the coming years. Those savings in turn will beavailable for debt reduction.
A particular focus in the coming year will be on optimising the productivity of ourHHCR facility. If you recall the second half of 2020 was devoted to providing customerswith our new Rswater-whiteRs resins for technical evaluation and confirmation. Much ofearly 2021 was spent stabilising the plant which then allowed us to operate the facilityat ~40% of capacity during the second half of 2021. During the fourth quarter we alsofound an opportunity to upgrade the productivity and reliability of the plant with a moreefficient reactor design. These new reactors will eliminate unnecessary productionbottlenecks anc reduce the need for future maintenance outages positioning the plant tooperate at 75% of capacity by the end of 2022.
In terms of ACP we believe that this proprietary and value-added calcinable producthas a promising future thanks to its energy-saving and emissions-reduction potential aswell as its ability to improve our GPC utilisation. At the same time we recognise thatcommercialisation of this new material will be a process. By the end of the first quarterof 2022 we expect to ship a trial blend of calcined ACP and CPC from the new productionfacility in the US to certain global aluminium smelters.
Finally we have been working on ramping up CPC production at our newest and mostenvironmentally friendly calcination plant the vertical-shaft calciner in India - albeitslowly due to the limited availability of feedstock for the plant. Nonetheless we arethus far pleased with the quality of the CPC produced and the superior density that thevertical-shaft technology provides. In the coming months we expect to export our firstshipment of shaft CPC and we are continuing to work with Indian authorities to secure aseparate GPC import allocation for the vertical-shaft calciner.
Looking ahead 2022 will be yet another year when we continue to make measurableprogress on our sustainability journey. At RAIN we understand - and our employees haveembraced the fact - that we live in a society where sustainability has become a licencefor companies to do business. We know that nothing will have a greater impact on thesuccess of our business than our sustainability efforts and ability to meet the relatedneeds of our customers. In fact given the importance of sustainability we have recentlyinitiated a structured process for developing a sustainability strategy which aims todetermine mid- and long-term targets with respect to our sustainability journey.
As you review this integrated financial and sustainability Annual Report I hope thatyou will feel a greater appreciation for RAINRss part in meeting the evolving expectationsof society. RAIN plays an indispensable role in transforming industrial by-products intoessential materials for faster cleaner and lighter products that enhance the quality oflife for people around the world and contribute to a circular economy.
The many activities described in this Report are the latest examples of our on-goingand long-standing ability to proactively adapt and pivot as a business. As the world hasevolved since the days of Julius Rutgers in the 19th century so too has RAIN.In doing so we have demonstrated that RssustainabilityRs refers to even more than ourstrong environment-related and CSR-related activities.
After more than 150 years as an evolving adapting business RssustainabilityRs alsodescribes the longevity of our Company. With our investments in 21st-centurytechnologies and processes such as HHCR and our proprietary ACP to meet growing demand forgreener products RAIN is well positioned to continue to make meaningful and sustainablecontributions for our customers communities and investors for decades to come.
On behalf of our employees around the world thank you for your ongoing support. Inreturn we will continue to produce raw materials that make 21st-century lifepossible in a more sustainable way enhancing the quality of life in the communities wherewe operate and creating the shareholder value that you expect from RAIN.
|JAGAN MOHAN REDDY NELLORE |
|Vice Chairman |
|February 25 2022 |