The global economy recorded a healthy growth of 3.6% in 2018. During the second half ofthe year however the global economy lost some momentum mainly on account of theincreased trade frictions between the US and China and the tightening of financialconditions. International Monetary Fund (IMF) expects growth to decelerate to 3.3% in 2019and its projections suggest that all three major engines of the global economy viz. USChina and Euro area are likely to decelerate in 2019. On the positive side however IMFexpects world economic output to recover and grow at 3.6% in 2020.
Of late there have been a few growth-supportive factors such as the announcement ofeconomic stimulus in China and halt to the process of monetary policy tightening indeveloped countries. But the business sentiment has become somewhat clouded withchallenges arising from the apparent setback to the US-China trade talks the spread oftrade frictions to technology sectors and the increased intermingling of economicpolicies. These challenges signal that global commodity prices could be under pressure.
Indian economy exhibited mixed record in the just concluded fiscal. GDP growth slowedfrom 7.2% in FY18 to 6.8% in FY19. Sub-par rainfall in 2018 tight financial conditionsfaced by the non-banking financial sector and moderation of external demand were the keychallenges faced by the economy. Consumption growth declined during the second half of theyear but there were some signs of revival in the investment cycle as the rate of grossfixed capital formation improved from 31.4% of GDP in FY18 to 32.3% in FY19.
Macroeconomic stability indicators broadly maintained their health. Low inflation hascreated the space for monetary policy easing which will also help support growth revival.The fiscal deficit target for FY19 was adhered to despite a shortfall in tax revenues.While the current account deficit was high at 2.6% of GDP during the first three quartersof FY19 the softness in international oil prices portends its narrowing in the comingquarters. Following the resounding political mandate for the ruling Governmentexpectations of further economic reforms and impetus to large infrastructure investmentshave been reinforced. These are reflected in strong inflows in the capital market takingequity indices to record levels in the weeks following the general elections.
India's medium-term growth prospects continue to be robust. Significant reformsundertaken in the recent years such as GST and insolvency code would raise India's growthpotential in the coming years amplifying the effect of the long-term structuralcornerstones of the Indian growth story such as demography and urbanisation. In thenear-term however uncertainty over the forthcoming monsoon season and the heightenedglobal risks present headwinds for FY20. Accordingly the outlook for the Indian economyin FY20 is one of cautious optimism at this juncture.
Your Company's Performance:
The Indian cement industry witnessed a year of favourable demand scenario achievingdouble-digit volume growth last seen in FY10. With healthy volume off-take andcomparatively lesser new capacity addition of 12 mtpa during FY19 capacity utilisationfor the industry improved to 71% about 5% higher than the previous year.
During FY19 your Company put in an impressive performance attaining net revenues ofUS$ 5.26 billion (` 36775 crores) and EBITDA of US$ 1.03 billion (` 7227 crores).
The significant development of the year was the successful acquisition of Binani CementLimited renamed as UltraTech Nathdwara Cement Limited having an installed capacity of6.25 mtpa in India. The acquisition provides your Company access to large reserves ofhigh-quality limestone. It also consolidates your Company's leadership in the fast-growingNorthern and Western markets in the country. After completing quality upgradation the"UltraTech" brand was successfully launched from the erstwhile Binani plants.
Your Company also commissioned a greenfield cement project of 3.50 mtpa at Manavar inMadhya Pradesh. With this the total cement capacity for your Company has enhanced to94.75 mtpa in India.
In the next fiscal with the acquisition of Century Cement we expect UltraTech'sinstalled capacity to scale up to over 113 mtpa. It gives me great satisfaction to informyou that UltraTech is today the third largest cement company in the World excludingChina.
Your Company has also made rapid strides in its sustainability journey. UltraTech has awater-positive score of over 2.00 across its plants as appraised by DNV-GL a globalquality assurance and risk management company. Three of its integrated plants becamewater-sufficient as a first step towards becoming water-positive in the foreseeablefuture.
Your Company has developed in-house technology to use all waste generated from therejected concrete in the form of waste sludge or slurry for recycling into Ready MixConcrete production. This technology is fully automated and enables the plant to be realzero discharge with no water and solid waste. This eliminates the cost of waste disposaland recycling material generated out of the said process. The partial substitution ofsand fly ash and water makes it a sustainable business proposition.
I am proud to inform that your Company has commissioned the First Green RMC Plant byusing the said technology in Mumbai having zero discharge - A First of its kind RMC Plantin the World.
We remain optimistic in our outlook for the cement sector in FY20 and expect theindustry to grow at 7 to 8%.
With a stable government at the Centre we expect a renewed thrust on infrastructuredevelopment through the construction of roads metro rail projects airports renovationirrigation projects etc. This augurs well for your Company. UltraTech with its strategicexpansion plans in the last three years is well positioned to participate in the growthstory of a rising India.
The Aditya Birla Group: In Perspective
The Aditya Birla Group in many ways is a proxy for a Rising India given thediversified nature of our businesses.
FY19 has been one of strategic decisions and partnerships; with many transformationalbusiness transactions: Vodafone-Idea merger purchase of Binani Cement acquisition ofAleris in Metals and Soktas in Textiles. We have demonstrated the courage to think megascale to act decisively and to be calm in a volatile and changing environment. We havereaffirmed the commitment and trust that we can reinvent ourselves and be game changers inthe industry. Consequently we are globally the third largest cement company (outside ofChina) and among the top 3 telecom players in the world. We closed the year with revenuesof US$ 48.3 billion and an EBITDA of US$ 6.1 billion. We believe our people and peopleprocesses give us the definitive edge to manage scale and yet remain nimble to embracechange proactively.
On the people front I am delighted to share that our robust people processes that havebeen the bedrock of our success over the years continue to evolve and stay contemporary.Let me give you a flavour of what we have accomplished and how it is making a difference.
As a Group we continue to be deeply invested in our talent pipeline across levels. Atone level we have on-boarded over 200 fresh recruits from top engineering and managementinstitutes for premier trainee programs and at the other end we are actively building aninternal talent pipeline in our businesses. Our Employee Value Proposition of AWorld Of Opportunities' is truly coming alive with this eclectic mix of experienced andyoung leaders. We have developed a robust leadership pipeline with a healthy ratio of 1:1identified successors for more than 300 leadership roles across the Group.
Gyanodaya the Aditya Birla Group Centre for Leadership Development continues to buildcuriosity for new learning self-reflection and coaching in existing and future leaders.Broad-based leadership programs like Chairman Series brought 300 top leaders across theglobe together on marketing finance and strategy and built cohesion and cross-functionalappreciation. Functional Academies have been established in 5 distinct areas: HumanResources Manufacturing Sales / Marketing and Customer Centricity InformationTechnology and Finance to develop cutting edge functional capabilities in these areas.Over the past three years over 5000 employees have refreshed their skills therebyenhancing the functional design and experience across the Group.
ABG Core Conclave of middle managers across businesses enabled 3000 managers andbusiness leaders to share nuances and have candid conversations on missed opportunitiesand challenges ahead. This unique platform reinforced the One ABG connect brought newperspectives and gave me a first-hand feel of the excitement passion and commitment ofour vibrant next generation leaders.
Businesses have adopted new areas like Robotic Process Automation ArtificialIntelligence Machine Learning Analytics Design thinking. They are experimenting withthe same in manufacturing processes servicing customers logistics enhancing the agilityof the business and turnaround times dramatically.
I believe the real test of HR processes lies in advancing business outcomes and wehave demonstrated a track record of doing just that. Greenfield projects were commissionedat earlier than planned time and at a lower cost acquired units were rebranded andrecommissioned in days instead of months earlier. While saving precious capital andrelated resources these initiatives inspire confidence within the organisation and in theecosystem. The Aditya Birla Group over the years has institutionalised best practicesthat have led to efficiency safety sustainability and stronger Businesses. We havesystematically got the customer to the centre of our Business discussions. As we continueto strive on this front we need to get closer to the end consumer and innovatecontinuously to ensure a faster growth trajectory. With this in mind we have constitutedthe Central Innovation Team. This team will not only build the innovation framework andpipeline but also get an outside-in perspective to our Businesses. This team works closelywith Business R&D and Marketing teams Technology talent and a strong team of Datascientists. We are also in the process of evaluating partnerships with Global Universitiesand Start-ups relevant to the sectors in which we operate. The intent is to shift theCentre of gravity of your Company closer to the consumer.
We are determined to innovate. We are determined to grow. I am excited with the speedand precision with which we are transforming ourselves to be future-focused whileremaining steadfast to our time-tested values. We move into 2019 with the confidence thatwe have the right capabilities not just to seize but pounce on every opportunity thatcomes our way.
The best is yet to come. Thank you for your continuing support.
Kumar Mangalam Birla