siddiqsons tin plate limited (stpl : kar) · 2019-04-11 · siddiqsons tin plate limited (stpl :...

SIDDIQSONS TIN PLATE LIMITED(STPL : KAR)

May 10, 2018

Analyst Briefing

GROUP PROFILE

Siddiqsons Group traces its roots back to 1959 through establishment of Siddiqsons Limited, a textile unit which has grown to become a Denim Dynasty in Pakistan. Since then the Group has expanded into Tinplate, Energy and Construction & Real Estate

Siddiqsons Tin Plate Limited is the first and only Tin Plate Industry in Pakistan. Established in 1999, in

collaboration with SOLLAC of France and MITSUBISHI CORPORATION of

Japan. It operates a 120,000 tons per annum Electro Tin Plating (ETP) plant

catering to clients within the Consumer Goods and Business-to-

Business segments

Siddiqsons Limited, was established in 1959. It has established to become

a Denim Dynasty and is recognizedby WGSN as Asia's top denim

manufacturers. The company has a fully integrated vertical setup which

includes Spinning Division, Knit Denim Division, Garment Division and

Denim Division

Siddiqsons Energy is the Power Sector Development division of Siddiqsons

Group with the mandate to establish Coal and Renewable Energy IPPs for a sustainable energy-secured future of Pakistan. It is developing a 330 MW sub-critical Thar coal power plant at Thar Block-II, along with 200 MW of Solar and 35 MW of Hydro projects

Triple Tree Associates was incorporated by Siddiqsons, which further diversified its holdings into

Real Estate. Since then the company established itself as a formidable

competitor in the market with several real estate and construction projects under its belt including Ocean Mall

and Tower, the tallest building of Pakistan in 2014

FOREIGN SPONSORS – ArcelorMittal (France)

ArcelorMittal Packaging is one of the founding sponsors of Siddiqsons Tinplate Limited, owning 9% stake in the company.

Arcelor Mittal Packaging is one of the subsidiaries of ArcelorMittal S.A, the largest steel producer in the world. It is present in 60 countries and has an industrial footprint in 18 countries

ArcelorMittal Packaging has the production capacity of over 1.6 million tons of Packaging steel i.e. ETP, whereas the group has annual crude steel production of 98.1 million tons

The group has extensive product portfolio which includes Finished, semi-finished, long and flat products, such as hot-rolled coil, cold-rolled coil, coated steel products, tinplate and heavy plate, as well as billets, blooms, rebars, wire rod, sections, rails, sheet piles and drawn wire

3

ArecelorMittal Packaging’s Director

98 million tons per

annum of capacity

Mr. Jean Pierre Gugenheim is a nominee Director of M/s ArcelorMittal Packaging International of France for Siddiqsons Tinplate Limited

France

Spain

Belgium

Largest Steel

Producer in the World

Production Facilities

COMPANY OVERVIEW

Siddiqsons Tin Plate Limited is the first and only Tin Plate producer in Pakistan.

The Company was established in 1996, in collaboration with SOLLAC of France and Mitsubishi Corporation

Arcelor Mittal Packaging (formerly SOLLAC), a world renowned steel and mining company is a 9% shareholder of STPL and has

representation on its board

The factory is located at special industrial zone, Windhar, Baluchistan

The project has a capacity to produce 120,000 tons per annum of Tin Plate, which is primarily used for making cans and

containers for packaging of cooking oil, fruits, foods, vegetables, sea foods, beverages, paints, lubricant oil and other

edible products

Key customers of the Company Include Dalda Foods, Pakistan Oil Mills, Punjab Oil Mills, Latif Ghee Mills, IFFCO, Shujaabad Agro,

Zamin Containers, Meezan Oil, Associated Industries, Rehan Can

4

Key Products Major Clients

Siddiqsons Tin Plate Limited

Siddiqson Limited15.3%

Arcelor Mittal Packaging (France)

9.3%

Other Sponsors42.2%

General Public33.2%

PATTERN OF SHAREHOLDING

OPERATIONAL HIGHLIGHTS

6

Market size 76,000

Installed capacity 120,000

YearQty. Produced CAPU Qty. Dispatched Market Share

2015 24,327 20% 24,404 32%

2016 24,471 20% 24,676 32%

2017 19,051 16% 25,466 34%

2018 (3Q) 14,251 16% 17,520 31%

- The operational viability can only be ensured by increasing the CAPU, since there is already a significant supply gap in the market.

PROJECT SNAPSHOT

7

Importing TMBP isn’t feasible when compared to in-house production due to

price competitiveness, higher lead times (approx. 3 months) and inconsistent

quality

Huge inventory levels are required w.r.t thickness, width and temper to meet

market requirement, giving rise to higher working capital and inventory carrying

cost

As part of its business growth and to achieve cost efficiencies, STPL is

pursuing backward integration by installing a Cold Rolled Complex (“CRC”) with

a capacity of 200,000 MT p.a.

A major portion of TMBP produced (i.e 120,000 MT) will be utilized in-house to

increase the current capacity utilization of tin plating. Direct sales of CRC will

be done in the local market for the excess production

Installation of CRC will enable STPL to enhance its supply locally and to export

markets such as KSA, Dubai and Sri Lanka, Turkey and different European

destinations. (demand of over 1,200,000 tpa)

The approx. capex for the project is estimated to be at PKR 6 billion which will

be financed by a mix of 70% debt and 30% equity raised via rights issue

Cold Rolled Mill Project

Capacity of CRM 200,000 MT p.a.

Financing Required PKR 6 billion (financed by 70% debt and 30% equity)

Machinery Supplier CISRI (Beijing, China)

Project Completion Date

30/06/2020

Raw Material Procurement

HRC being the raw material for CRC is easily available and will be mainly procured through imports. HRC is subject to an import duty of 5%

Key Benefits Increase in capacity utilization of tin plating

Reduction in conversion cost of tin plate due to increased capacity utilization

Lower rate of import duty on HR Coils as compared to TMBP

Production with consistent and controlled quality

8

IN-HOUSE PRODUCTION OF TMBP, A GLOBAL PRACTICE

Having in-house production of Tin Mill Black Plate (TMBP) is a global practice amongst tier 1 and tier 2 tin plate producersaround the world

In-house production allows the producer to provide a diversified range of tin plate products so as to cater to the needs ofvarious clients

Having a variety of products allows the manufacturer to get larger purchase orders and become a supplier of choice

Name of Company Country HQ In-house TMBP Production

Arcelor Mittal Luxembourg Yes

Posco South Korea Yes

Nippon Japan Yes

Royal Industries Indonesia Indonesia Yes

Tata India India Yes

Youfu Industries China Yes

Domestic Demand1 Export Potential2 Untapped Market3 Import Substitution4

KEY INVESTMENT HIGHLIGHTS – DEMAND ANALYSIS

76,000 MT/annum 100,000 MT/annum 15,000 MT/annum 8,000 MT/annum

Total Market Potential 199,000 MT/annum

Historic Demand

Qty (MT)Year ETP-Imports STPL Sales Total 2013 22,272 24,835 47,1072014 33,788 22,095 55,8832015 29,881 25,420 55,3012016 33,126 24,474 57,6002017 52,129 24,380 76,509

4M2018 22,451 6,456 28,907

Source: Customs Import Data

Competitiveness

Cost Efficiencies to provide Price Competitiveness

Through the vertical integration the Company will beable to save HRC to CRC spread

The additional spread of USD 105/ton may be partiallypassed onto clients to gain the market share

2

Consistent & Superior Quality of Tin1

Lead time for imported ETP is around 3 months STPL ensures prompt delivery within 15 days Imported Tinplate needs to be scrapped if found

defective STPL provides facility to replace defective material if

found defective

USD/ton Imported

ETP PrimeETP

SecondaryCost 930 750Duty 158 195

Other Exp 26 26

Conversion HR-CR

Conversion CR-ETP

Wastage 83

Total 1,114 1,054




Pricing - Imported Tinplate vs. Domestic Pricing

Flat-Steel Type Sub-Category %ETP Prime 17%

Secondary 26%CR Prime 17%HR Prime 5%

Duty Structure

Current Case

CRC-ETP790135

26

180

1,131

Post CRC Expansion

HRC-CRC-ETP65033

26120

180

1,009

- $17/ton

+ $105/ton

Current Spread

Post-CRC


USD/ton Imported ETP in Pak

ETPPrime

ETPSecondary

Cost 930 750

Duty 158 195Other Exp 26 26

Conversion HR-CRConversion CR-ETP

Wastage 83Total 1,114 1,054




Local Sales Scenario

Post CRC Expansion

HRC-CRC-ETP65033

26120

180

1,009

+ $105/ton Post-CRC


Export Sales Scenario

USD/ton Imported ETP in ME*

ETP Prime(Chienese)

Cost 900 (FOB China)

DutyOcean Freight upto Dubai 25

Conversion HR-CRConversion CR-ETP

WastageTotal 925

Our Export Pricing

HRC-CRC-ETP650 (C&F Khi.)

3

120

120

893

+ $32/ton Post-CRC- The Cost of conversion would go down since export sell is assumed at 60% CAPU.- Duty will be Zero, if we declare that goods are for export purposes. - Borrowing cost go down drastically since Export Finance Rates will be applicable at 2.5% vs. 8.5%- This price competitiveness is in addition to the lower lead time.- Additional savings in terms of Income Tax would be around $5 per ton.

*Middle East





Increased capacity utilization will significantly add to the cost efficiencies due to reduction in fixed cost/ton

Capacity Utilization M.Ton Fixed Cost Variable Cost Total Conv. Cost Marginal Cost benefits

20% 24,000 8,340 12,360 20,700 -

30% 36,000 5,560 12,360 17,920 2,780

40% 48,000 4,170 12,360 16,530 4,170

50% 60,000 3,336 12,360 15,696 5,004

60% 72,000 2,780 12,360 15,140 5,560

70% 84,000 2,383 12,360 14,743 5,957

80% 96,000 2,085 12,360 14,445 6,255

PKR per ton





Qty (MT)Country DemandSaudi Arabia 350,000UAE 150,000Srilanka 50,000Bangladesh 100,000Iran 125,000Turkey 450,000Total 1,225,000

Export Potential

Source: Primary Market Research over last 6 years

Competitiveness

Reduction in Lead Time1

Middle Eastern customers will save upto USD30/ton on freight costs

Currently demand is met by European and FarEastern Countries

From point of order, it takes 75+ days for theorder to reach destinations in Middle East

STPL can meet their demand within 45 days

Freight Savings for regional Customers2

Targeted demand is <10% of actual demand




Pakistan is primarily an agrarian economy, however, due to lack of infrastructure and tin-canning units, most of the agricultural yield is wasted

Pakistan has a potential to utilize upto15,000 MT of Tinplate by canning products such as: Sea Food Tinned Fruit & Vegetables Cooked/Prepared Meals Tomato Puree Cans Beans/Pea Cans

As indicated in the import data, ~8,000 MT of empty cans are imported which include: Aerosol Cans Juice Cans Crab/Prawn/Tuna Meat Cans Beans/Vegetable Cans Sauce/Puree Cans Solvent/Chemical Cans

Untapped Demand Import Substitution


DEMAND & MARKETSHARE OUTLOOK

Tinplate (ETP) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Company's Dispatch (MT) 60,000 60,000 66,000 78,000 90,000 102,000 108,000 120,000 120,000 120,000

Capacity Utilization (%) 50% 50% 55% 65% 75% 85% 90% 100% 100% 100%

Historical 5-Year CAGR (%) 11.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6% 11.6%

Growth Rate Assumed (%) 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%

Industry Demand (MT) 99,287 106,237 113,674 121,631 130,145 139,255 149,003 159,433 170,593 182,535

Market Share (%) 60% 56% 58% 64% 69% 73% 72% 75% 70% 66%

CRC (TMBP) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Company's Dispatch (MT) 40,000 40,000 44,000 52,000 60,000 68,000 72,000 80,000 80,000 80,000

Capacity Utilization (%) 50% 50% 55% 65% 75% 85% 90% 100% 100% 100%

Historical Growth (%) 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00%

Growth Rate Assumed (%) 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%

Industry Demand (MT) 1,480,443 1,584,074 1,694,959 1,813,606 1,940,558 2,076,397 2,221,745 2,377,267 2,543,676 2,721,734

Market Share (%) 2.7% 2.5% 2.6% 2.9% 3.1% 3.3% 3.2% 3.4% 3.1% 2.9%

Tinplate (ETP) - Sales Mix

16

24,000 24,000 26,400 31,200 36,000 40,800 43,200 48,000

16,000 16,000 17,600

20,800 24,000

27,200 28,800

32,000

20,000 20,000 22,000

26,000

30,000

34,000 36,000

40,000

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1st Year 2nd Year 3rd Year 4th Year 5th Year 6th Year 7th Year 8th Year

Existing Local Market Additional Local (Post Expansion) Export

MT/A

5,300 5,300 6,330 8,390 10,450 12,510 13,540 15,600 6,900 6,900 7,590 8,970

10,350 11,730 12,420

13,800

9,000 9,000 9,900

11,700 13,500

15,300 16,200

18,000

18,800 18,800 20,180

22,940

25,700

28,460 29,840

32,600

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

1st Year 2nd Year 3rd Year 4th Year 5th Year 6th Year 7th Year 8th Year

Appliance / House holds Auto & Allied Engineering Sector Commercial Trader

MT/A

CRC- Sales Mix

PERFORMANCE HIGHLIGHTS

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PKR Mn FY12 FY13 FY14 FY15 FY16 FY17 2Q FY18 Net Turnover 2,509 2,771 2,092 2,341 2,119 2,538 1,234 Gross Profit 94.4 179.8 6.7 140 234 310 132 PBT (162) (75) (192) 3 80 159 52 PAT (124) (65) (152) (20) 59 128 31 EBITDA (12) 95 (51) 121 188 239 105

Total Assets 2,831 2,678 1,831 1,822 1,650 2,024 2,207Total Liabilities 1,831 1,743 1,047 1,059 828 1,104 1,256Share Capital 785 785 785 785 785 785 785Unapp. Profit 215 150 (2) (22) 37 135 166Net equity 1,000 935 783 763 822 920 951EPS (1.58) (0.82) (1.94) (0.26) 0.75 1.63 0.40BVPS 12.74 11.91 9.97 9.72 10.47 11.71 12.11

31,307 63,306

108,721

272,283 260,853

-

50,000

100,000

150,000

200,000

250,000

300,000

FY14 FY15 FY16 FY17 9MFY18

Historic Price Performance Trading Volumes (in 000s)

-50%0%

50%100%150%200%250%300%350%400%450%500%

1-J

an-1

5

1-M

ar-1

5

1-M

ay-1

5

1-J

ul-

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1-S

ep

-15

1-N

ov-

15

1-J

an-1

6

1-M

ar-1

6

1-M

ay-1

6

1-J

ul-

16

1-S

ep

-16

1-N

ov-

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1-J

an-1

7

1-M

ar-1

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ay-1

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-17

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ov-

17

1-J

an-1

8

1-M

ar-1

8

1-M

ay-1

8

STPL KSE All KSE 100

Base-case Vs. Best case Scenario

19

Particulars (PKR millions)55% CAPU 95% CAPU

Revenue 13,490 23,301

Cost of Sales 11,730 19,976

Operating Profit 1,378 2,997

Financing Cost 475 632

Profit available for appropriation 689 1,859

EPS 3.0 8.1

ROE 17.5% 42%

Thank You

siddiqsons tin plate limited (stpl : kar) · 2019-04-11 · siddiqsons tin plate limited (stpl :...

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