Hindalco Industries Chairman's Speech > Engineering - Heavy > Chairman's Speech from Hindalco Industries - BSE: 500440, NSE: HINDALCO

Hindalco Industries

BSE: 500440|NSE: HINDALCO|ISIN: INE038A01020|SECTOR: Aluminium
Jul 24, 16:00
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Mar 15
Chairman's Speech (Hindalco Industries) Year : Mar '16
Dear Shareholders,
 Global Economy
 The global scenario continues to be trapped in a low growth trajectory,
 despite the steep drop in crude oil and commodity prices. Furthermore,
 a barrage of monetary stimulus has driven down interest rates close to
 zero in many of the advanced economies. With the monetary stimulus
 option by and large exhausted, governments are more likely to turn to
 fiscal and structural measures to revive growth.
 The IMF projects global growth to inch up from 3.1% in 2015, to 3.2% in
 2016, and increasing to 3.5% in 2017. Growth in the advanced economies
 is projected at 1.9% in 2016, with US growth pegged at 2.4%, Europe at
 1.5% and Japan at 0.5%. Growth in the emerging markets in 2016,
 overall, is projected at 4.1%, much of it coming from China, India and
 the ASEAN region. Growth in Latin America is expected to be only 0.5%,
 on account of a 3.8% decline in growth in Brazil. No sustained upside
 is seen in oil and commodity prices in 2016.
 The path ahead for the global economy remains challenging, with greater
 uncertainties thrown in. Concerns persist about the slowdown in China
 and its ability to shift smoothly from export-led to domestic-led
 growth.  Fiscal pressures will accentuate in the oil producing
 countries, including the rich Middle-East countries. Financial markets
 remain nervous and exchange rate volatility has been pronounced. This
 is reinforced by the impending reversal of the interest rate cycle in
 the US.
 Indian Economy
 Against the backdrop of a muted global economy, India''s economy is an
 outperformer. For 2016-17, GDP growth is projected at 7.5%. This would
 make it the fastest growing among the large economies. This is
 particularly creditable in the context of two successive unfavourable
 monsoons and a decline in exports. Recent data indicate a 5.7%
 year-on-year growth in eight of the key core sector industries, against
 2.3% growth registered last year.
 Inflationary pressures have been contained. The rise in the consumer
 price index averaged 4.9% in 2015-16, down from 5.9% in the previous
 year. The wholesale price index declined 2.5% on an averaged basis,
 compared to a rise of 2.0% in the previous year. In 2015-16,
 merchandise exports and imports each fell over 15% over 2014-15. The
 trade deficit in 2015-16 was US$ 118.5 billion, a decline of 14% over
 the previous year. The current account deficit narrowed sharply from
 US$ 26.1 billion to US$ 22.0 billion, representing 1.4% of GDP. India''s
 foreign exchange reserves, as at March-end 2016 were US$ 360.2 billion.
 The government is also committed to meeting the current year''s fiscal
 target of 3.5% of GDP. Overall, the economic fundamentals are sound.
 There have also been positive moves on the policy front, in areas
 related to ease of doing business, promoting start-ups, rationalising
 the tax structure and administration, and opening up more areas for
 foreign investment through the automatic route. The government is
 substantially stepping up infrastructure spending.
 Having said that, some issues come to the fore. For instance, capital
 investment will take time to revive, given stretched corporate balance
 sheets, low capacity utilization, (at only 72.5% in the organized
 industrial sector), and competition from imports. Slow global output
 and trade growth will continue to impact exports. There is also the
 overhang of non- performing assets in the banking sector. Much more
 also needs to be done to monsoon-proof the Indian economy.
 The growth in the manufacturing sector has been subdued, including a
 decline in the output of capital goods.
 Your Company''s Performance
 Your Company attained a consolidated revenue of US$ 15 billion (Rs.
 100,042 crore) and PBITDA of US$ 1.5 billion (Rs. 10,007 crore). This
 was despite a sharp drop in LME and the decline in aluminium ingot
 premium that caused a large adverse metal price lag. Further, the
 interest and depreciation charges rose significantly in line with the
 commissioning of new facilities. However, higher volumes and a
 significant reduction in the cost of production enabled your Company
 record a robust performance.
 The year 2015-16 was indeed a milestone year for your Company.
 Aluminium and alumina production at 1.1 million tons and 2.7 million
 tons respectively has been the highest ever achieved as were the
 shipments of fl at rolled products. Your Company''s three Greenfield
 projects  Mahan Aluminium, Aditya Aluminium and Utkal Alumina ramped
 up to their full capacity. Utkal, in fact, has positioned itself in the
 lowest decile on the global alumina cost curve on the back of very
 efficient logistics in a remote terrain and robust operational
 Of the 4 coal blocks  two in Chhatisgarh and two in Jharkhand - bagged
 by your Company in the auction process, both the Gare Palma mines in
 Chhatisgarh have become operational.
 Your Company''s Copper business also put in a commendable performance.
 Copper production for the year was at a record level of 388 KT. The
 continued thrust on value addition led to a higher production of
 continuous cast rods.
 The year also marked the culmination of Novelis'' large scale investment
 programme, started four years ago. Novelis'' Aluminium recycling center
 in Germany, the world''s largest of its kind, is stabilizing well.
 Additionally, it commissioned two new automotive lines in the US and in
 Europe. In all, the 5 automotive finishing lines consolidate Novelis''
 leadership in the high growth Auto segment.
 Importantly, Novelis'' auto shipments increased 47% during the year, in
 line with the strategic portfolio shift that is underway.
 The overall outlook for commodity markets continues to be challenging.
 The macroeconomic headwinds persist and the uncertain global macros
 pose many concerns. However, your Company''s structural positioning in
 the markets that it serves has strengthened significantly, following
 the completion of its ambitious Greenfield investments in India and the
 ongoing enrichment of the product portfolio in Novelis.
 Our People: Our Pride
 Despite yet another challenging year, we have achieved good results.
 This has been largely due to deft cost management, a concerted move
 towards on-streaming of new capacities, focus on efficiency
 improvement, productivity and customer centricity. Our employees have
 unflinchingly rallied around us. And for this, I would say a big thank
 you to all of them.
 The Aditya Birla Group: In perspective
 At the Group level, we have done well both in terms of revenue and
 earnings.  As a matter of fact, the EBIDTA attained has been the
 highest ever.
 Having worked extensively on the people front for over a decade, I am
 happy to state that our leadership processes are now mature. At the
 management level we have built quality bench strength.
 The Chairman''s Series launched last year for senior leaders in the
 areas of business strategy, finance and personal leadership saw 150 of
 our senior most leaders recourse to these learning interventions.
 To create a leadership pipeline to the Business Head roles within the
 next couple of years, we have created the Aditya Birla Fellows
 programme. The managers who have won this recognition are put in charge
 of critical Group- wide projects under my personal oversight. Up until
 now, we have named 14 managers who have tremendous potential to rise to
 the stature of Business Heads, going forward.
 A slew of other initiatives have been set afoot to grow leaders from
 within.  To do so, we have announced a hiring freeze at the middle and
 senior management levels for the next 3 years. It paves the way for
 accelerated talent growth.
 In this context, I am happy to state that our accelerated leadership
 programme Cutting Edge, which prepares high potential leaders for P&L
 positions across our Group is gaining traction. It was launched last
 year. Up until now, 20 of the 35 graduates of this programme have
 already moved roles to take on higher responsibilities.
 Furthermore, the 250  youngsters who joined us over 6 years ago as
 Group Management Trainees, in our Leadership Associate Programmes
 (Lead) and Leadership Programme for Experienced youngsters (Leap), are
 shaping well. In the last 2 years nearly a 100 from this slot have
 moved across functions and businesses. Additionally, we have 25
 mid-career participants who have joined us in the Group Manufacturing
 Leadership Programme. They too are making significant contributions in
 our manufacturing business units.
 The first batch of 14 participants in Spring Board, (a programme
 designed specially for high calibre women) graduated commendably to
 higher roles.  The second batch of 39 women leaders is making good
 progress on their way to greater responsibilities. As of now, we have
 nearly 5,000 women  14 percent in the managerial cadre.
 In the last 3 years, we have had more than 1100 inter-business and over
 1000 intra-business transfers of employees across levels.
 At Gyanodaya, the Aditya Birla Global Centre for Leadership Learning
 over 2000 managers enrolled for learning programmes. With a mix of
 academics and live case studies, these programmes enable our people to
 keep abreast of the developments in their area and stay contemporary.
 Side by side the Gyanodaya Virtual Campus hosts more than 500
 e-learning modules in multiple languages. During the year, over 25,000
 employees chose to access these programmes.
 The Aditya Birla Group Leadership Programme aimed at securing young
 talent from the top tier Business Schools of India has become
 aspirational.  I am happy to record that our Group''s brand
 attractiveness has taken a quantum leap across 35 top B-Schools in
 India. Our Group features among the formidable Top-5 in the A C Nielsen
 - CRI Campus Recruitment India Index 2015.
 In sum
 All these moves are a testament to our commitment to accord a World of
 Opportunity for our people and they are leveraging it. Our people are
 fully aware of what business needs to succeed. They are committed to
 contribute their best to our values based, performance driven,
 meritocratic culture.  We are future ready.
                                               Your sincerely 
                                         Kumar Mangalam Birla
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