Progressing with focus and fortitude
DEAR SHAREHOLDERS,
When we look back on 2021, we will recall the impressive rebound of the global economy
following months of lockdowns and slowdowns during the first year of the COVID-19
pandemic.
Revenue of I 145,268 Mn represented a 38.8% increase compared with I 104,647 Mn in
2020. 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 of
our products, helping drive stronger revenues and EBITDA at RAIN. By the fourth quarter,
with COVID-19 waning, the biggest challenges ahead of us seemed to be whether an overtaxed
global supply chain could keep up with rising demand and our ability to source key raw
materials 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 potential
to be even more disruptive - namely, soaring energy costs in Europe and the global
implications of the rapidly evolving conflict between Russia and Ukraine.
In terms of potential fallout from the conflict, Russia contributes about 8% of RAINRss
consolidated revenue, so we anticipate that any direct impact should be limited. That
said, we are taking nothing for granted, which is why we have implemented proactive
measures to minimise the risk to our production facilities in the rest of Europe in the
event that the conflict disrupts natural gas and/or petroleum flows. We have also
responded to high energy prices by implementing new purchasing and sales price strategies,
and we are pursuing measures to reduce the energy intensity of our plants and preserve the
margins in our business to the extent possible in these extreme conditions.
Despite these challenges, barring any widespread repercussions in the markets we serve,
we anticipate robust sales of our carbon and advanced materials products to continue as
the 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 aluminium
industry that is enjoying LME prices that have been well above US$ 3,000 per tonne.
Simultaneously, we are looking for higher growth in our cement business, driven by the
Indian governmentRss strong focus on infrastructure development.
Against this backdrop, we are reasonably optimistic that our 2022 performance can
mirror 2021 that included:
- Revenue of RS 145,268 Mn, which represented a 38.8% increase compared with RS 104,647
Mn in 2020. Moreover, we finished the year with six consecutive quarters of increased
revenues
- Operating profit (or adjusted EBITDA) of RS 25,174 Mn, which was up 26.5% compared
with RS 19,896 Mn in the previous year, putting us back in our historically normal range
- Strong safety performance with our third consecutive year with a total recordable
injury rate below 0.2%, quite an achievement in this COVID-19 environment, where many of
our production facilities have been operating with a depleted workforce and the added
stress that comes with it
While we are pleased with the yearRss results, we are fully aware that there are some
areas where we can further improve our performance in 2022. At the top of the list is the
need to monetise the investments we have made on our major expansion projects, which are
part of our strategy to meet and exceed the marketRss need for cleaner and more
sustainable materials produced with minimal impact on the environment.
During the past few years, we have made a cumulative investment of more than US$ 225 Mn
on the hydrogenation hydrocarbon resins (HHCR) plant in Germany, the vertical-shaft
calciner in India and the anhydrous carbon pellet (ACP) production facility in the United
States. In 2022, we are expecting that each of these plants should begin to provide a
return on investment. Moreover, the fact that each facility has been commissioned will
greatly reduce our CAPEX spending in the coming years. Those savings, in turn, will be
available for debt reduction.
A particular focus in the coming year will be on optimising the productivity of our
HHCR facility. If you recall, the second half of 2020 was devoted to providing customers
with our new Rswater-whiteRs resins for technical evaluation and confirmation. Much of
early 2021 was spent stabilising the plant, which then allowed us to operate the facility
at ~40% of capacity during the second half of 2021. During the fourth quarter, we also
found an opportunity to upgrade the productivity and reliability of the plant with a more
efficient reactor design. These new reactors will eliminate unnecessary production
bottlenecks anc reduce the need for future maintenance outages, positioning the plant to
operate at 75% of capacity by the end of 2022.
In terms of ACP, we believe that this proprietary and value-added calcinable product
has a promising future, thanks to its energy-saving and emissions-reduction potential as
well as its ability to improve our GPC utilisation. At the same time, we recognise that
commercialisation of this new material will be a process. By the end of the first quarter
of 2022, we expect to ship a trial blend of calcined ACP and CPC from the new production
facility in the US to certain global aluminium smelters.
Finally, we have been working on ramping up CPC production at our newest and most
environmentally friendly calcination plant, the vertical-shaft calciner in India - albeit
slowly due to the limited availability of feedstock for the plant. Nonetheless, we are
thus far pleased with the quality of the CPC produced and the superior density that the
vertical-shaft technology provides. In the coming months, we expect to export our first
shipment of shaft CPC, and we are continuing to work with Indian authorities to secure a
separate GPC import allocation for the vertical-shaft calciner.
Looking ahead, 2022 will be yet another year when we continue to make measurable
progress on our sustainability journey. At RAIN, we understand - and our employees have
embraced the fact - that we live in a society where sustainability has become a licence
for companies to do business. We know that nothing will have a greater impact on the
success of our business than our sustainability efforts and ability to meet the related
needs of our customers. In fact, given the importance of sustainability, we have recently
initiated a structured process for developing a sustainability strategy, which aims to
determine mid- and long-term targets with respect to our sustainability journey.
As you review this integrated financial and sustainability Annual Report, I hope that
you will feel a greater appreciation for RAINRss part in meeting the evolving expectations
of society. RAIN plays an indispensable role in transforming industrial by-products into
essential materials for faster, cleaner and lighter products that enhance the quality of
life 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-going
and long-standing ability to proactively adapt and pivot as a business. As the world has
evolved 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 our
strong environment-related and CSR-related activities.
After more than 150 years as an evolving, adapting business, RssustainabilityRs also
describes the longevity of our Company. With our investments in 21st-century
technologies and processes such as HHCR and our proprietary ACP to meet growing demand for
greener products, RAIN is well positioned to continue to make meaningful and sustainable
contributions for our customers, communities and investors for decades to come.
On behalf of our employees around the world, thank you for your ongoing support. In
return, we will continue to produce raw materials that make 21st-century life
possible in a more sustainable way, enhancing the quality of life in the communities where
we operate and creating the shareholder value that you expect from RAIN.
Sincerely,
| JAGAN MOHAN REDDY NELLORE |
| Vice Chairman |
| February 25, 2022 |