The Global Scenario
Worldwide, 2014 portends to be much more encouraging than 2013, with
the forces driving the global economic recovery firmly entrenched. The
IMF projects that global economic growth will rise from 3% in 2013 to
3.6% in 2014, and to 3.9% in 2015. This is largely due to a turn for
the better in the developed economies estimated to grow 2.25% in
2014, a full percentage point more than in 2013. The US GDP growth for
2014 is projected at 2.8%, and in the Euro area at 1.2%, while China''s
economy is expected to grow at 7.5%. The GDP growth in the emerging
markets and developing economies is slated to increase from 4.7% in
2013 to 4.9% in 2014, as these regions step up exports to the developed
markets. Continued fiscal easing, loose monetary policy in developed
economies and stable commodity prices should boost the global recovery.
The nervousness in the financial markets, particularly related to
stability of the southern European economies, has abated considerably.
Furthermore, we must be prepared for unforeseen geopolitical
developments, which may have disruptive ripple effects on the global
The Indian Economy moving on to a stable footing
The outlook for the Indian economy has turned distinctly positive. The
increasing traction of the global economic revival and plans to restore
vim to India''s economy through a slew of timely measures by the new
Government by addressing fiscal imbalances and fast-forwarding
investment activity should play out positively in the coming year. The
RBI''s deft moves to stabilize the Rupee, enabled it to recover from a
low of around Rs. 68/$ to under Rs. 60/$. The current account deflicit for
the year has been contained at around 2.5% of GDP. Some progress has
been achieved on clearing the backlog of large projects, whose
approvals had been held up. The GDP growth is predicted at around 5.5%
However, industrial production needs to accelerate with the IIP
declining 0.1% year-on-year in the fi rst 11 months of 2013-14,
vis-ΰ-vis 0.9% growth in the same period last year. Infl ation also
remains a concern, with the wholesale and consumer price indices in
March 2014 up 5.7% and 8.3%, respectively, year-on- year. Continuing
infl ationary pressures have been a constraint in reducing interest
rates. In the medium term, the economy stands to benefit, if the Goods
and Services Tax is rolled out. Further initiatives and reforms in
areas such as land acquisition, allocation of natural resources and
taxation would help greatly to boost investor confi dence and
accelerate investment activity. Overall, the stage seems set for India
to shift to a higher growth trajectory.
These developments on the global and the domestic front have a telling
effect on your Company''s growth and end-results.
Your Company faced a very challenging year, replete with external
adversities, such as moderation in Chinese consumption growth, subdued
growth in other emerging markets, depressed metal prices and de-growth
in aluminium consumption in India. The expected birth pangs of
strategic green field projects also impacted costs significantly.
Braving these tough times, your Company posted an absolutely remarkable
performance a turnover of US$ 14.5 billion (Rs. 87,695 crore) and an
EBITDA of US$ 1.5 billion (Rs. 9,303 crore).
Regardless of the painpoints, this has been a watershed year for your
Company. All of its three strategic Greenfield projects Utkal
Alumina, Mahan Aluminium and Aditya Aluminium went on stream and are
currently ramping up. These projects in their fullness will redefi ne
Hindalco''s cost competitiveness on the global map. It will signifi
cantly enhance the long term sustainability of its operations. The
Hirakud Flat Rolled Products project and Mouda Foils projects are on
course and will sharpen the value addition edge of your Company. With
the commissioning of these projects, your Company''s Alumina and
Aluminium capacity will be doubled Alumina from 1.5 million tons to 3
million tons and Aluminium from 0.6 million tons to 1.3 million tons.
Novelis too achieved significant progress on all of its strategic
expansions. These include the ramp up of rolling production at the
Pinda plant in Brazil, coupled with the mill expansions in Korea and
the start of commercial production at its US automotive finishing
lines. These projects will enable your Company to leverage the
exponential growth in nascent product markets such as automobiles,
driven by environmental thoughtfulness and beverage demand in Brazil
spurred by the Soccer World Cup and the Summer Olympics.
Towards bolstering your Company''s recycling capabilities in line with
our goal of achieving 80% recycled aluminium content, significant
strides have been made. The commercial use of evercan^TM, the world''s
fi rst certifi ed high-recycled content beverage can sheet, marked yet
Hit by macroeconomic and industrial headwinds, besides a higher fi xed
cost base as expansions, have moved ahead of revenue generation,
Novelis reported adjusted EBITDA of US$ 885 million in FY 14, vis-ΰ-vis
US$ 961 million achieved in FY 13.
Your Company''s consolidated capex was close to US$ 1.5 billion (Rs. 9,300
crore). With most of its projects coming to fruition, we are now into
the consolidation phase. The ramping up of all these projects will aid
us gear for the discontinuous growth ahead. Importantly, these
projects will facilitate capturing value across the aluminium cycle on
a sustainable basis.
The Copper business delivered a standout performance this year again,
registering its highest ever EBIT in FY 14. With its thrust on multiple
value drivers and a pass through model, it once again managed to
deliver a robust performance despite plant shutdown, lower co-product
realisations and cost pressures. The copper business'' splendid
performance cushioned the pressure on aluminium margins, vindicating
the virtue of a balanced portfolio in your Company''s metal businesses.
Aluminium prices appear to have bottomed out and are on the mend.
However, the business will face near term challenges primarily due to
start-up costs during the ramp up phase of various projects and
associated challenges. Furthermore, depreciation and interest burden
from the expansion projects will also have a bearing on the financial
results in FY 15.
Nevertheless, Hindalco''s aluminium portfolio, in its completeness, will
further enhance your Company''s profitability. Attributes such as
economies of scale, state-of-the-art technology, greater control over
resources and a stronger presence across the value chain will start
kicking in. This, along with its global presence and superior product
portfolio, would lead to a quantum leap in profitability in the years
To Our Teams
In the face of continuing external challenges, our teams across
geographies have stayed focused and delivered performance. I thank all
of our employees for their tenacity and commitment to sustain top line
and bottom line growth year after year.
The Aditya Birla Group in Perspective
Despite the tectonics shifts witnessed globally and in India, at the
Group level, we have managed to sustain our revenues at US$ 40 billion.
Much credit must go to the talent resident in our 1,20,000 committed
workforce, spanning 36 countries and 42 nationalities.
I would like to reiterate that we place big bets on our people. Let me
elaborate on this aspect in some detail.
As a high performance driven meritocratic Group, we are constantly
focusing on building our talent pool to support our business vision. To
this end, substantive initiatives taken earlier have since
materialized. These include focused endeavours to build a robust talent
pipeline, building the employer brand of our Group beyond India, and
achieving the distinction of becoming the most aspirational employer
for manufacturing professionals also, besides augmenting talent on the
technical side. Furthermore to support our long-term strategies, our
business structures have been significantly bolstered.
Our reputation, as an employer of choice, is again something we are
incredibly proud of. We are recognised as an employer that offers a
World of Opportunities and is concerned about the professional growth
of its people. We continue to fast track our talent from our
management cadre comprising of 38,200 colleagues, 13% have been
promoted, 20% have changed roles and 12% have moved location during the
Gyanodaya, our in-house world-class university, continues to be an
important mainstay of our progress. Leveraging resources across
geographies and partnering with leading global faculty, institutions
and corporates, it ensures that our leadership and talent pool stays
contemporary, and is always in the learning mode.
To be a learning and growing organisation is an ongoing endeavour.
Ranked No. 1 in the Nielsen Corporate Image Monitor
I am pleased to share with you that for the second year running our
Group has been ranked No. 1 in the Nielsen Corporate Image Monitor
2013-14. Across the six pillars of corporate performance products and
services, vision and leadership, workplace environment, financial
performance, operating style and social responsibility Aditya Birla
Group emerges as the pace setter, way ahead of 40 corporates.
Nielsen''s Corporate Image Monitor measures the reputation of the 40
leading companies in India across sectors, and serves as an important
indicator of the strength of the corporate brand, they state. The
companies were covered in the survey, using the Economic Times 500 and
the Business Today 500 ranking of listed companies.
Nielsen is among the most renowned global market research companies,
headquartered in New York and operating in 60 countries.
With the best of talent in our midst, our strong Balance Sheets, robust
Cash Flows, the eye on the customer and unrelenting focus on delivering
shareholder value, we are confi dent of the future. The year ahead, I
believe, will be the one when we consolidate and reinforce what we have
achieved in recent years. And see the fruition of the several projects
and initiatives in each of the businesses that are currently underway.
Kumar Mangalam Birla