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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Vedanta | LSE:VED | London | Ordinary Share | GB0033277061 | ORD USD0.10 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 832.60 | 834.80 | 835.80 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMVED
RNS Number : 1514N
Vedanta Resources PLC
14 May 2015
14 May 2015
Vedanta Resources plc
Preliminary Results for the Year Ended 31 March 2015
Strong underlying results in a volatile commodity price environment
Financial Highlights
n Revenue of US$12.9 billion in line with prior year
n EBITDA(1) of US$3.7 billion (FY2014 US$4.5 billion), adjusted EBITDA margin of 38%(2) (FY2014 : 45%)
n Underlying Earnings/(Loss) Per Share(3) of (14.2) US cents (FY2014: 14.7 US cents)
n Basic Earnings Per Share (EPS) of (654.5) US cents primarily on account of an impairment of US$4.5 billion(net of tax)
o Non-cash Impairment reflecting lower commodity price
n Free cash flow after growth capex of US$1.0 billion (FY2014 US$1.3 billion)
n Gross debt reduced by US$ 0.6 billion in H2 FY2015 and US$0.2 billion in FY2015 with gross debt at US$16.7 billion in FY 2015(FY2014 US$16.9 billion)
n Net debt up by US$0.5 billion to US$8.5 billion; US$0.8 billion spent on increasing our stake in subsidiaries, Vedanta Limited and Cairn India Limited
n Credit rating changed from BB to BB- by S&P, Moody's retained at Ba1 with change in outlook to negative mainly on account of lower oil prices
n Final dividend of 40 US cents per share, full year dividend 63 US cents per share, up 3%
Business Highlights
n Record full-year mined metal production at Zinc India; better positioned for underground transition
n Copper India: Record production
n Copper Zambia: Production for the full year lower; KDMP Shaft # 1 back on line and production improving at Konkola
n Record full year Aluminium and Alumina production; started new Jharsuguda-II and Korba-II smelters
n Recommenced Iron ore production at Karnataka, final approval awaited at Goa; record annual production of Pig Iron
n Iron ore export duty in India reduced from 30% to 10% for less than 58% Fe iron ore, effective 1 June 2015
n Oil & Gas production normalised after the planned shutdown in Q2 FY2015
Mr Anil Agarwal, Chairman of Vedanta Resources Plc, said:"In FY2015 we have delivered robust operational performance, achieving record production at Zinc-India, Aluminium and Copper-India while setting the stage for continued ramp up of our new Aluminium smelters and Iron Ore operations in FY2016. We have taken actions to maintain financial strength and flexibility during this period of weak commodity prices through re-phasing of our capex plans, and cost management initiatives. We are focussed on realising the full potential of our long-life, tier-one assets and simplifying our Group structure to generate superior returns for our shareholders in a sustainable manner."
(US$ millions, except as stated)
Hot Features
Premium
Consolidated Group Results FY2015 FY2014
------------------------------------- ---------- ---------
Revenue 12,878.7 12,945.0
EBITDA(1) 3,741.2 4,491.2
EBITDA(1) margin (%) 29.1% 34.7%
EBITDA margin excluding custom
Smelting(2) (%) 38.0% 44.9%
Operating Profit before Special
Items 1,735.5 2,288.1
Loss attributable to equity
holders (1,798.6) (196.0)
Underlying attributable Profit(3) (38.9) 40.2
Basic (Loss)/Earnings per Share
(US cents) (654.5) (71.7)
Earnings per Share on Underlying
Profit (US cents) (14.2) 14.7
ROCE (excluding project capital
work in progress and exploratory
assets & one time impairment
charge) (%) 8.7% 14.9%
------------------------------------- ---------- ---------
Total Dividend (US cents per
share) 63.0 61.0
------------------------------------- ---------- ---------
(1) Earnings before interest, taxation, depreciation, amortisation /impairment and special items.
(2) Excludes custom smelting revenue and EBITDA at Copper and Zinc-India operations as custom smelting has different business economics .
(3) Based on profit for the period after adding back special items and other gains and losses, and their resultant tax and non-controlling interest effects. In the prior period, the underlying attributable profit included the net tax benefit from the Sesa Sterlite merger offset by a deferred tax charge due to the change in tax rates at Cairn India.
There will be a conference call at 9:00 a.m. UK time (1:30 p.m. India time), where senior management will discuss the results.
Dial in:
UK toll free: 0 808 101 1573 USA toll free: 1 International & UK: +44 20 866 746 2133 3478 5524 USA: +1 323 386 8721 India: +91 22 3938 1017 and Singapore toll free: +91 22 6746 8333 800 101 2045 India toll free: 1 800 209 Hong Kong toll free: 1221 or 1 800 200 1221 800 964 448
Please allow time to register your name and company, or pre-register online at:
http://services.choruscall.in/diamondpass/registration?confirmationNumber=4169828
The results will be webcast and can be accessed via investor relations section of our website www.vedantaresources.com or directly at http://edge.media-server.com/m/p/otyufqv7.
For further information, please contact:
Communications Finsbury
Roma Balwani Daniela Fleischmann
President - Group Sustainability, Tel: +44 20 7251 3801
CSR and Communications
Tel: +91 22 6646 1000
gc@vedanta.co.in
Investors
Ashwin Bajaj Tel: +44 20 7659 4732
Director - Investor Relations Tel: +91 22 6646 1531
ir@vedanta.co.in
Anshu Goel
Vice President - Investor
Relations
Radhika Arora
Associate General Manager
- Investor Relations
About Vedanta Resources
Vedanta Resources Plc ("Vedanta") is a London-listed diversified global resources company. The group produces aluminium, copper, zinc, lead, silver, iron ore, oil & gas and commercial energy. Vedanta has operations in India, Zambia, Namibia, South Africa, Ireland, Liberia, Australia and Sri Lanka. With an empowered talent pool globally, Vedanta places strong emphasis on partnering with all its stakeholders based on the core values of entrepreneurship, excellence, trust, inclusiveness and growth. For more information, please visit www.vedantaresources.com.
Disclaimer
This press release contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "should" or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, uncertainties arise from the behaviour of financial and metals markets including the London Metal Exchange, fluctuations in interest and or exchange rates and metal prices; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different that those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
CHAIRMAN'S STATEMENT
"My vision for the future is to continue to fulfil Vedanta's potential while helping to advance the world's largest democratic developing nation economically, socially and sustainably. India is richly-endowed with the natural resources that will fuel its future growth and raise the living standards of its population of 1.2 billion people. We are working with our employees, communities and Governments in India and Africa to help unlock their vast resource potential."
Highlights of the Year
This year I was delighted to welcome Tom Albanese to his position as Vedanta's Chief Executive. His strong industry experience is already making a difference and he has demonstrated that he shares my vision for building an ethical, sustainable business.
The election of a new Government in India is also beginning to have a positive impact on the business environment we operate in and I believe that the country will benefit from the progressive reforms being proposed by the Government.
This Government is firmly committed to supporting a fast-growing Indian economy, to shape business policy and make it easier for the private sector to create economic value. We are among the largest contributors to the exchequer in India and play a strong role in nation building. Vedanta makes important, long-term contributions to local and regional economies, paying around US$15 billion in taxes, royalties and other levies in total over the past three years alone.
Reflecting on another productive year, we have proven that we are well-positioned to capitalise on India's abundant natural resource opportunities. Despite the volatility in global commodity prices, we have delivered a sound financial and operating performance. To reflect this challenging market environment, we have implemented a series of initiatives aimed at reducing capital and operating costs across the Group, which will maintain our financial strength going forward in a low commodity price environment.
Financial Performance
Throughout this year, we have remained focused on our stated strategic priorities. We have started to ease back on capital expenditure and concentrated on increasing production through optimising our core assets.
We've seen unprecedented declines in oil and iron ore prices, though zinc and aluminium prices were relatively more resilient. These affected Group EBITDA, which decreased by 17% to US$3.7 billion (FY2014: US$4.5 billion). However, our diversified portfolio allowed us to maintain robust adjusted EBITDA margins of 38% on the back of our diversified portfolio
The substantial drop in oil prices during the year has led to a revaluation of our oil & gas business and a US$4.5 billion (net of tax) writedown. This is a reflection on the reality of oil prices today and doesn't affect our strategy in any way. We remain committed to being a diversified resources player, capitalising on our strengths.
Gross debt reduced by US$0.2 billion in FY2015 and US$0.6 billion in H2 FY2015. However, net debt has increased by US$0.5 billion, mainly due to US$0.8 billion spent on increasing our stake in Vedanta Limited (formerly Sesa Sterlite) and Cairn India during H1 FY2015. Our final dividend of 40 US cents per share, taking the full year dividend up by 3%, reflects our continued confidence in the strength and prospects of the business.
The fundamentals for our business remain sound, but we have to navigate this downturn. We operate in cyclical markets and at this point in the cycle our focus is on productivity, efficiency and preserving value and I am confident that this will happen given the strength of our businesses and dedication of our people.
We will continue to implement initiatives to contain capital expenditure and operating costs to maintain financial strength during this period of weaker commodity prices. At the same time we will preserve our portfolio of assets with attractive long-term growth prospects and a strong resource position. We also aim to maintain a strong balance sheet, with a focus on maximising free cash flows, deleveraging and returns to investors.
Sustainability
Sustainable development is at the core of Vedanta's operations. Our Sustainability framework comprising of four pillars: Responsible Stewardship, Building Strong Relationships, Adding & Sharing Value and Strategic Communications. Our Sustainability Framework has a set of policies, with technical and management standards aligned to international standards, to enable significant improvement in the way we do business.
Social development is fundamental to any country's growth and we are focussed on platforms for education, healthcare, nutrition and sanitation that benefits around 4 million people every year. We work closely with local governments, NGOs and academic institutions to help ensure that our programmes benefit as many people as possible around our communities. I remain committed to collaborating on mutually beneficial partnerships that will further our positive impact on communities and uphold our licence to operate in countries with rising expectations of corporate social responsibility.
Vedanta now employs, either directly or indirectly approximately 82,000 people, globally. While we are encouraged that there is an improvement in the safety performance of the Group this year, I am saddened that we experienced eight fatalities. Our efforts across Vedanta, to achieve a Zero Harm culture is a personal priority for our CEO, Mr. Tom Albanese and me.
Governance
In 2014, we welcomed Katya Zotova, who joined the Vedanta Board as a Non-Executive Director, and became a member of the Nominations and Remuneration Committee. She brings a wealth of oil & gas sector experience to the Board and her perspective will be invaluable as we drive sustainable improvement and growth in our global business.
Diversity is a business imperative as well as an expectation by society. We have set ourselves some challenging targets in this area and I am pleased with the progress we are making. Today, we have a strong management team with diverse backgrounds, including three female executives in front line positions.
I'd like to thank my energetic and hard-working Vedanta team - I am amazed at what we have achieved over the past 11 years and their contribution is immense. Together we have created a value-based and empowered organisation that is well-positioned for the next stage of its growth. I would also like to acknowledge all my fellow directors for their sound guidance and contribution.
Vedanta's role in transforming India
The winds of change for economic growth in India are blowing strongly. A country of almost 1.2 billion people, India is the largest democracy in the world, rich in human and natural resources. Vedanta has a very important role to play in ensuring that India is able to benefit from these resources and become self-sufficient in energy supply. India spends a significant proportion of its foreign exchange on importing oil, and local resources companies including Vedanta can help redress this balance.
The new Government has a mandate for economic growth and job creation. We support its reforms, such as the auctioning of natural resources and the 'Make in India' programme, which is designed to transform India into a global manufacturing hub. India has so much to offer, and by implementing important changes such as making it an easier place to do business, by opening up the country to foreign investment, and improving infrastructure and productivity, it will inevitably create jobs, particularly for our young people, and bring further prosperity to the country.
Outlook
Going forward, our overall strategic priorities remain the same, to build a resilient portfolio which enables us to withstand a volatile commodity environment and continue to deliver long-term value to our shareholders. Group simplification is key and looking forward over the next year, Tom Albanese and I will be putting greater focus on this. The recent name change of Sesa Sterlite Limited to Vedanta Limited is a significant milestone, which reflects Vedanta's commitment to strengthen the linkage between our businesses, communities and stakeholders across the globe.
In terms of market conditions, India is at an inflection point, with its metals and energy demand poised to explode as its GDP potentially doubles over the next decade. There is significant potential for growth in India, and Vedanta is a vehicle for these new potential investment opportunities. Over the next few years, we are likely to see the demand for all our commodities and commercial power increase substantially as the Government of India's focus on 'Make in India' and infrastructure investments start yielding results. As a large and responsible corporation, Vedanta is well-positioned to participate in this journey, and I look forward to our future.
Anil Agrawal
14.05.2015
Chief Executive's Statement
"We have continued to focus on improving our operational performance and enhancing production, delivering record volumes of zinc and aluminium, and generating free cash flow in volatile commodity markets. Safety remains a top priority and although fatalities have dropped, more remains to be done."
At the end of my first year as Chief Executive, I am pleased with the progress we have made against the key operational priorities I set last year and the continued momentum of the Company towards its strategic objectives, against the backdrop of volatile global commodity markets.
Progress against operational priorities
The highlights for the year include the ramping up of our world-class aluminium assets, following the approximate US$8 billion investment programme, to hit record production levels. We are now well positioned for an accelerated growth in 2016 with progressive ramp up of the new smelters at Korba and Jharsuguda. The total mined metal production for Zinc and Lead also hit a historic high, supported by strong performance of the Rampura Agucha mine, one of the largest and lowest cost zinc mines in the world. The year also saw significant progress being made in development of underground mines at Rampura Agucha and Sindesar Khurd (SK). Our Oil & Gas business delivered a robust performance with Mangala and Aishwariya fields performing as expected, and strong contributions coming from offshore assets. Our Oil & Gas business will now reap the benefits from the high-impact Enhanced Oil Recovery (EOR) project in Rajasthan. Looking ahead, increasing gas production in the Raageshwari Deep Gas field and development at Barmer Hill will continue to provide us with growth options.
Though our copper smelter in India recorded the highest-ever production and best-in-class operational efficiencies during the year, the turnaround at Konkola Copper Mines (KCM) in Zambia continues to present challenges. Volumes and ore grade were lower at the Nchanga mine complex and the rehabilitation programme of shafts have affected production in Konkola Deeps. However, with the new management team and operating strategy in place, we have already started seeing positive momentum in the last quarter. While it was disappointing that iron ore mining at Goa did not resume last year, this has had less of a material impact due to decline in iron ore prices globally. We have made some progress on this front during the year. Mining in Karnataka resumed in February 2015 and we have been allocated an interim capacity of 5.5 million tonnes of saleable ore in Goa where mining is expected to recommence post the monsoon season, after receipt of the remaining approvals from the Government. Export duty has now been reduced to 10% for <58% grade iron ore.
Market environment
The volatility of global commodity prices has dampened our financial results, particularly the lower oil prices, and this has slowed down the pace of our deleveraging programme. That said, I was pleased to see reduction in our gross and net debt in the second half, despite lower oil prices.
Recognising the current commodity environment we are implementing a series of initiatives to reduce capital and operating costs across all our businesses to maintain financial strength and a strong balance sheet.
Despite today's volatile and weak commodity markets, looking forward we see demand and supply rebalancing with more robust pricing as a consequence. China's slowdown is moving to a more sustainable level of growth and Vedanta's position as low-cost operator of long-life mines will serve it well as global demand returns to more normal levels.
As a non-Indian, I had the privilege of being in India during the election campaign and I have great expectations that the new government will get India's economy up and running, in contrast to the slowdown in China and stagnation in Europe. The pace of change has inevitably been slower than the early optimism suggested but progress on coal and energy policies and clarity on iron ore mining are encouraging. The step towards auction of coal blocks, which we participated in, is a critical part of the journey to make India self-sufficient in coal. Today, India is one of the largest importers of coal, despite its huge reserves, and coal must be a key feature of the Government's energy strategy.
Licence to operate
Safety has been a key priority at Vedanta as it is a weak link in our otherwise robust sustainability programme. The best businesses are the safest businesses and there has been a marked improvement in our results this year. Although I am encouraged by our progress, I am saddened by our eight fatalities and there remains much more to do on our journey towards achieving a "Zero Harm" culture.
My personal focus is on raising the levels of safety consciousness across the Group and ensuring that we invest more in safety management alongside raising standards, expectations and accountabilities.
Maintaining our licence to operate is at the heart of the Group strategy and essential for our access to resources, people and capital. I am a firm believer that being a responsible miner is critical to a sustainable future and our corporate social responsibility (CSR) programme must be world class.
In my first year as CEO, I have been struck by the sheer breadth and depth of our community development initiatives. We have very strong CSR programmes around child health care & education, water, sanitation, livelihood and the empowerment of women. The sector is now increasingly seeing ethics and integrity overlapping with the sustainable development agenda, and so we have added Strategic Communication as a fourth pillar to our sustainability model, to ensure transparent dialogue with our stakeholders. This reflects our commitment to become, a corporate citizen who will not act without the consent of local communities.
Our long-term success is only partly attributable to our core facilities; people, performance and innovation are all equally important. This year we have made great strides in water and energy management, with various improvement initiatives including enhanced operating efficiencies resulting in water & energy savings surpassing our targets.
It is critical to our success that we have the highest quality of workforce and I have been incredibly impressed by the professional capability and leadership ability demonstrated by our employees - from our recent graduates to our senior executives. We have set up an innovation task force as part of our drive to encourage innovation across our business units. This includes the engineers within the Group and will extend to universities and other avenues. We have also invigorated the initiatives for developing high potential talents through our 'ACT UP' and Leaders Connect Programmes, to create leadership succession in all levels across the organisation.
Progress against strategic priorities
Our key strategic priorities remain unchanged. We have ramped up production and optimised Opex & Capex across our businesses and reduced gross debt by US$0.2 billion (US$16.7 billion in FY2015). We continue to focus on optimising our assets, maintaining positive free cash flows, efficiently refinancing upcoming maturities and deliver on our priority of deleveraging.
The long-life nature of our resource base underpins our track record of adding more to our reserves and resources (R&R) than we extract and we continue to use our exploration skills to expand the potential of our ore bodies and petroleum reservoirs going forward. As we can only book reserves against the duration of our leases and our current oil & gas lease in Rajasthan expires in 2020, our Oil & Gas reserve schedule does not accurately reflect the strong exploration success and potential of the Rajasthan basin. The renewal of this lease is currently under consideration by the Government of India.
I acknowledge shareholder feedback that we need to simplify Vedanta's group structure and we intend to put greater focus on this in the coming year to make Vedanta easier to understand and more attractive to invest in.
Looking forward
There is much to do on the operational front in FY2016; to move aluminium above its current operating level of 38% capacity, secure a local source of bauxite for our refineries and smelters, stabilise KCM, restart iron ore mining in Goa, and ensure our Oil & Gas business is positioned for robust performance notwithstanding weak oil prices. We need to continue strengthening our balance sheet through further deleveraging and delivering a simpler corporate structure.
We will continue to have a relentless focus on costs alongside rising capacity utilisation thus driving value growth. Looking forward over the next few years, we expect the worst of the sector oversupply to be behind us and Vedanta will be well placed to take advantage of future growth in India and globally, as a premier developer and innovator of choice. This will position the company and its shareholders for a long period of profitable value creation.
Tom Albanese
14.5.2015
Overview
Key strategic priorities
n Production Growth & Operational Excellence
n Reduce Gearing
n Add Reserves & Resources
n Simplify Group Structure
n Protect and preserve our licence to operate
Production Growth & Operational Excellence
FY 2015 was a year in which we achieved record production across several assets due to our focus on asset optimisation.
Zinc India had a record production in line with the mine plan of the Rampura Agucha mine and the mine development rates also improved, better positioning it for transition to underground mining. Initial work on expansion of the Rampura Agucha open pit life to FY2020 was commenced and this will de-risk mined metal volumes as we transition to underground mining.
At Zinc International, while the Lisheen mine will reach the end of its life in the middle of FY2016 the Skorpion mine life is being extended by two years from FY2017 to FY2019 by deepening the current open pit. The 250 ktpa Gamsberg project capex has been re-phased and we expect to break ground in FY2016 with the first ore production in FY2018.
The Aluminium and Alumina plants also produced record volumes as we started the new Jharsuguda-II and Korba-II smelters during the year. The BALCO 1200 MW power plant also started ramp up after receipt of the approvals in Q3.
We also made progress in securing raw material for our Alumina refinery, with the Government of Odisha granting Prospecting Licenses (PLs) for three laterite deposits. The exploration work at these deposits is in progress and we expect to start production in FY2016 after receipt of the Mining Leases (ML). The expansion of the Lanjigarh Alumina refinery has reached final stages of approval and Environmental Clearance is expected soon.
Oil & Gas production normalised post the shutdown at the Mangala Processing Terminal (MPT) in Q2 FY 2015. The offshore fields at Ravva and Cambay saw strong production growth. In the Rajasthan block, the Aishwariya field achieved production of 30,000 boepd in the third quarter and the Barmer Hill and Satellite fields, though in early stages of development, achieved an exit production rate of 5,000 bopd. We also completed the first polymer injection in Mangala for the Enhanced Oil Recovery program, debottlenecked MPT's fluid handling capacity and completed the Mangala EOR pilot spending about $1.1 bn of capex. The Management Committee has approved the Raageshwari Deep Gas Field Development Plan for 100 million standard cubic feet per day (mmscfd) production and the work on execution, planning and contracting is underway.
Iron ore production recommenced at Karnataka with a production cap of 2.3 mtpa and the restart of production at Goa is awaiting final approvals. Recently we have been granted an interim capacity of 5.5 mtpa of saleable ore at Goa. The export duty on low grade iron ore (< 58% Fe) has been reduced from 30% to 10% effective 1 June 2015, a step in the right direction to enable the Goa iron ore mines to restart operations in this cycle of depressed iron ore prices.
At the Talwandi Sabo power plant, the first 660MW unit has started commercial power generation with other unit under trial runs. The 1,980 MW power plant is expected to ramp up fully during FY2016, significantly increasing our commercial power volumes.
At Copper Zambia, Konkola underground mine production was negatively affected as remediation and critical maintenance was being carried out at the shafts and at Nchanga, production was affected by lower grades and lower equipment availabilities. We remain focused on the operational turnaround of these assets and the last quarter has shown positive results with an uptick in volumes and lower costs. We also remain engaged with the Zambian government on refund of past VAT charges and the new Royalty regime.
In September 2014, the Supreme Court of India passed a judgment cancelling 214 coal block allocations since 1993, which included one coal block allocated to us for BALCO. This block was at advanced stages of approvals but had not commenced mining. In Q4, the cancelled coal blocks were auctioned by the Government, and BALCO emerged as the highest bidder for two operating coal mines (Chotia Block with reserves of 15.5 mt and production capacity of 1mtpa; and Gare Palma IV/1 Block with reserves of 44 mt and production capacity of 6 mtpa). We plan to commence coal production at the Chotia mine in the FY 2016 after transfer of the mining lease and other approvals awaited from the Government. BALCO is seeking a court judgement regarding the Government's denial of its winning bid for the Gare Palma IV/1 block which was well above the reserve price and the matter is sub-judice.
Enactment of the Mines and Minerals (Development and Regulation) Amendment Act, 2015 provides continuity to our mining leases and brings transparency to the granting of future mineral concessions via auctions. However, it can further increase contribution to the government by up to 100% of current Royalties through contributions to the District Mineral Foundation (DMF). Royalty rates for zinc and lead in India are at 10% and 14.5% respectively, which are amongst the highest in the world and are much higher compared to other base metals. We are therefore hopeful that the Government will rationalise the contribution to DMF in its notification.
Reduce Gearing
We remain focused on our strategy to deleverage, and reduced gross debt by US$0.2 billion in FY 2015. In response to the sharp fall in oil prices in the second half of the year, we announced a reduction in FY 2016 capex for the Oil & Gas operations from US $1.2 bn to US$0.5 bn. This will help to maintain positive free cash flows at current oil prices, while we retain the flexibility to invest in growth projects as oil prices improve and costs are further optimised.
We are also prioritising exploration spending, and will focus on appraisal drilling in Oil & Gas and reserve enhancement in Zinc. The volume ramp up and the efforts to optimise operational and capital expenditure will provide the cash flows to reduce gearing in the medium term.
Simplify Group Structure
During the year, Sesa Sterlite Limited was renamed as Vedanta Limited, aligning its identity with that of its parent, Vedanta Resources Plc. This creates a unified branding for the Vedanta Group, as a diversified natural resources company. The name change is a significant milestone which reflects Vedanta's continued commitment to strengthen the linkage between its businesses, communities and stakeholders across the globe.
In line with our priority to simplify and consolidate the Group structure, we have increased Vedanta Resources Plc's holding in its key subsidiary, Vedanta Limited, through the open market purchase of a 4.6% equity stake for US$0.6 billion, taking our ownership in Vedanta Limited from 58.3% to 62.9% during the year. Our subsidiary, Cairn India, completed a US$0.2 billion buyback program, purchasing 2% of its equity, consequently leading to an increase in our ownership.
The process for divestment of the Government's stake in HZL and BALCO continues and the valuers visited the plants last year. The process has been slower than expected but we have noted that the Government has included this divestment in its budget for fiscal year 2016.
We will continue to evaluate various options to further simplify the group structure for the benefit of all stakeholders.
Add Reserves and Resources
During the year at Zinc India, gross addition of 19.4 million tonnes were made to reserves and resources (R&R), prior to a depletion of 9.4 million tonnes, adding further to R&R. Total R&R at 31 March 2015 were 375.1 million tonnes containing 35.3 million tonnes of zinc-lead metal and 970 moz of silver. Overall mine life continues to be 25+ years.
Despite a dramatic decrease in oil price during the year, Cairn managed to add gross 2P reserves of approximately 16 million barrels of oil equivalent. Completing the testing of the drilled HIIP and Prospective 2C and seismic activity will be among the primary focus areas for exploration in fiscal 2016 with the objective to eventually add to our contingent resource inventory.
To bring synergy and improve the overall exploration efforts across the Group, we have formed a Central Exploration Group. The mandate of this group is to deal with Exploration as a strategic subject and to streamline drilling activities and exploration processes and to keep the Exploration function abreast of the latest trends in exploration methodology and technology.
Protect and preserve our licence to operate
During the year, we have continued to strengthen our Vedanta Sustainability Framework with the release of guidance notes on safety, environment and community relations. We are using the Vedanta Sustainability Assurance Programme (VSAP) to ensure Framework compliance, including a programme of audits.
Our Sustainability Model, is comprised of four pillars: Responsible Stewardship, Building Strong Relationships, Adding and Sharing Value and this year, we have added a fourth - Strategic Communications. These pillars capture the steps we must take to ensure a long-term, successful future for our business - meeting our strategic goals of growth, long-term value and sustainable development.
Responsible stewardship
This pillar of our Sustainability Model encapsulates our approach to managing our risks and how we conduct our business ethically. It also guides us in ensuring the health and safety of our workforce and how we minimise our environmental footprint.
Health & Safety
Protecting the safety, health and well-being of those who work for us is a business imperative. Our stakeholders recognise this and have rated safety and health as our highest strategic priority. In FY 2015, we began to see tangible outcomes of our safety drive, with fewer fatalities and lost time injuries. Tragically, we had eight fatalities during the year. Each subsidiary company's Chief Executive or Chief Operating Officer presented a detailed appraisal of the root causes of each fatality to the Board's Sustainability Committee and updated them on action plans. Whilst safety management is continually improving around the Group, we remain focused on improving our performance and meeting our target of zero harm.
Environment
Our continuous improvement projects in air, water and energy management have made good progress, but the business has much more to do to meet our own challenging targets. During the year, we recycled 56% of overall non-hazardous waste. We have achieved our target for Water savings and Energy savings this year. As a result of embracing innovations to maximise operating efficiencies and implementing water resources management plan we have delivered savings of about 7.2 million cubic metres of water against the target of 2.49 million cubic metres. Further, internal benchmarking on energy consumption and process oriented technological interventions has saved us about 0.91 million gigajoules (GJ) of energy against the target of 0.87 million GJ. These milestones reflect the commitment of our teams in each of our operations, towards sustainable development.
Building strong relationships
Identifying and actively managing all our stakeholder relationships - including our employees, our host communities, our shareholders and lenders is important to maintain our licence to operate. This year, we took another step to add consistency across the Group, with all subsidiary businesses now formally recording all stakeholder expectations and the outcomes of their engagements. Further, all our CSR community projects underwent a base assessment exercise.
Throughout the year around 3,500 stakeholder engagement meetings took place, with community leaders, non-governmental organisations (NGOs), governments and government bodies, academic institutions and more than 250 partnerships are now in place.
We also undertook internal reviews related to human rights and child labour risk assessments led by the Sustainability Committee.
Adding & sharing value
We believe our role is to create value for all our stakeholders; not just through the financial value we create for our shareholders, but the non-financial value we add to society. To deliver this responsibility, we employ, directly and through contractors, around 82,000 people. We play a significant role in growing local skills and in the development of local infrastructure, including roads, sanitation, education and medical facilities. We made a community investment of US$42 million this year, reaching around 4 million people and providing support for schools, hospitals, health centres and farmers.
We contributed US$4.6 billion to the Exchequer in FY2015 through direct and indirect taxes, levies and royalties.
Strategic Communications:
This year we added a fourth pillar to our Sustainability Model, Strategic Communications, which reflects our commitment to transparent dialogue with all stakeholders and mutual respect, including free prior informed consent to access natural resources. Strategic Communications interlocks with the other three pillars of our model, and is the guiding principle which enables the organisation to engage with our stakeholders in a transparent manner. This pillar is the vital element of sustainable development, in implementing and strengthening our 'license to operate' efforts.
Other Matters:
A tax demand of approximately US$ 3.3 billion has been made on Cairn India under provisions of a retrospective amendment to the Indian Income Tax laws, carried out in 2012. The tax demand for an alleged failure to deduct withholding tax on alleged capital gains in the hands of Cairn UK Holdings Limited (CUHL) pertains to an internal group reorganisation carried out in 2006-07 to facilitate the IPO of Cairn India Limited. This transaction pre-dated Vedanta's purchase of Cairn India from Cairn Energy plc. We are pursuing multiple legal options to protect our interest. We have filed a Notice of Claim against the Government of India under the UK-India bilateral investment treaty and Cairn India Limited has also filed a petition in High Court representing our position on this matter.
In view of the volatile commodity environment, we have taken a non-cash impairment charge of c.$4.5 bn (net of tax) in the Oil & Gas business and part of Nchanga mines underground assets of our Copper - Zambia business. This charge is not expected to affect any of the company's operations, financial covenants or funding position.
Finance Review
Our total revenue for the year was US$12.9 billion, in line with the previous year and despite a weaker commodity environment. We believe this demonstrates the underlying strength of our diversified portfolio of assets.
Vedanta delivered EBITDA of US$3.7 billion, a decrease of 17% due to the negative impact of the commodity price environment, lower volumes and consequently higher unit costs across a number of businesses, principally the Zinc operations, Cairn India and Copper Zambia. Average Brent for the year was down 21% and LME copper down 8%. Iron ore prices were down 39%, however this did not have a material impact on EBITDA given the low production volumes. Strong operational performances at Copper India and Aluminium and a better price environment for Zinc and Aluminium mitigated some of the downside.
Average EBIDTA margin (excluding custom smelting) for the year continues to remain healthy at 38%, despite the weaker commodity prices largely due to continued strength in our Zinc businesses and improving margins in Aluminium, Copper India.
Special items principally include asset impairments of US$4.5 billion (net of tax) in FY2015. This largely relates to the oil & gas business, and was triggered by a steep fall in Brent prices which were down 50% compared to beginning of the year.
Excluding special items, Profit Before Tax was down only 12% despite a higher decline in EBITDA, largely owing to lower net interest and lower depreciation charges. Profit After Tax at $751 million, down 32%. The tax charge was higher in FY2015 in comparison to FY2014 primarily due to the effect of a one off tax credit in FY2014.. Underlying EPS at loss (14.2) US Cents was lower than FY 2014 at 14.7 US Cents.
Consolidated operating profit summary before special items
(in US$ million, except as stated)
Consolidated Operating
Profit before special items FY2015 FY 2014 % Change
------------------------------ -------- -------- ---------
Oil & Gas 206.6 933.6 (77.9)%
Zinc 1,129.2 1,106.3 2.1%
India 1,059.4 1,030.2 2.8%
International 69.8 76.1 (8.4)%
Iron Ore (10.9) (70.0) -
Copper 38.5 140.6 (72.7)%
India/Australia 229.5 155.8 47.2%
Zambia (191.0) (15.2) -
Aluminium 275.9 112.6 145.0%
Power 88.0 69.3 27.0%
Others 8.2 (4.3) -
Total Group Operating Profit
before special items 1,735.5 2,288.1 (24.1)%
------------------------------ -------- -------- ---------
Consolidated operating profit variance analysis
(In US$ million)
Operating Profit before special
items for FY2014 2,288.1
--------------------------------- -------- --------
Volume - operations (153.2)
Volumes - CMT - temporary
shutdown (37.2)
Prices (182.0)
LME/LBMA/Brent (328.7)
Premium 146.7
Foreign Exchange fluctuation 87.1
Cash cost of production (301.1)
Profit Petroleum (121.3)
Depreciation 155.7
Amortisation 41.5
Others (42.1)
--------------------------------- -------- --------
Operating Profit before special
items for FY2015 1,735.5
--------------------------------- -------- --------
Note : Of the total operating profit variance above $ 552 million, $ 750 million (total operating profit variance less depreciation and amortisation variance as above) is the EBITDA variance
Volumes
Whilst higher production volumes in Copper India, the recommencement of Iron Ore production in Karnataka and the commissioning of a new power plant at Talwandi Sabo helped increase operating profit; this was more than offset by lower volumes in our Zinc businesses, Oil & Gas and Copper Zambia.
In our Zinc International business, production was affected by a few unplanned maintenance shut downs and a fire at Skorpion in January 2015. Production also declined as the Lisheen mine nears the end of its life.
In India, Zinc production volumes in the first half of the year were affected by lower mined metal production and the temporary lower silver grades at Sindesar Khurd.
In our Oil & Gas business, volumes were marginally lower as a result of a 10 day planned maintenance shutdown in the first half, and a temporary disruption of gas production.
Production at Copper Zambia was primarily affected by remediation and critical maintenance being carried out on the shafts and lower grades at Nchanga.
Together the above factors impacted operating profit before special items by US$153.2 million.
CMT, our copper mines in Australia remains under care and maintenance following a safety incident in January 2014 reducing operating profit by $37.2 million.
Prices
The operating profit before special items of a number of our businesses have been significantly affected by the changes in commodity prices.
Oil & Gas : Brent prices fell sharply in the second half of FY2015 reducing operating profit by US$543 million.
Copper : Average LME copper prices were down 8% in FY2015 compared to the previous year adversely affecting Zambian operating profit by US$61 million.
Lead and Silver : Average lead prices were down 3% and silver down 15%, together these reduced operating profit by $ 40 million.
Power : Lower energy prices following reduced short term demand, had an adverse effect of US$38 million.
These negative impacts totalling US$682 million were partly offset by increases in the average Zinc and Aluminium prices of 14% and 7% respectively. This, in combination with stronger premia in both the businesses, resulted in a positive offset of US$439 million (Zinc US$279 million, Aluminium US$160 million). Stronger TcRc's in Copper India contributed US$39 million, giving an overall adverse net price impact of US$182 million.
Foreign Exchange fluctuation
Local currencies weakened versus the US dollar, increasing our profitability by reducing locally denominated costs in US dollar terms..
The Indian rupee: US$ exchange rate at the beginning of FY2015 was 60.10 Indian rupees per US$, closing at 62.59 Indian rupees per US$ at the year end. The average exchange rate for FY2015 was 61.15 Indian rupees per US$, a marginal increase of 1.1% compared to the average of 60.50 Indian rupees per US$ for FY2014. This improved operating profits by US$87 million. In FY2015 the movements in currencies other than the India Rupee had a nil net impact compared to the prior year.
Information regarding exchange rates against the US dollar :
Average Average As at As at
FY2015 FY2014 31.3.15 31.3.14
Indian Rupee 61.15 60.50 62.59 60.10
Australian
dollar 0.87 0.93 0.76 0.93
South African
Rand 11.06 10.11 12.10 10.58
Kwacha 6.45 5.54 7.59 6.25
--------------- -------- -------- --------- ---------
Costs of production
Unit costs across our businesses have been affected by lower volumes, regulatory headwinds in the form of higher royalties and coal availability:
n Oil & Gas: Costs were adversely affected by US$99 million due to higher processing and well maintenance costs and the expense of the 10 day planned shutdown.
n Zinc India: A negative effect of US$93 million, principally comprised higher royalty charges of US$56 million (the royalty fund increased by 160 bps to 10% and included contributions to a new 'District Mineral Fund' at 33% of the royalty rate), together with long term wage settlements and coal cost increases also driven by regulatory issues ,
n Aluminium: Whilst operating profit in our Aluminium business has improved on the back of stronger prices and premia, the business has suffered higher coal and alumina costs, due to regulatory sourcing issues leading to an overall adverse impact of US$75 million.
n Copper Zambia: The additional costs incurred in addressing the shaft and equipment availability issues, combined with the US$15million effect of the higher royalty rate, reduced profitability by US$55 million.
The adverse cost impacts above, were partially mitigated by US$33 million of positive unit cost variances. These included higher acid credits at the Copper smelter at Tuticorin leading to lower net costs and improved efficiency at our power plant in Jharsuguda.
The net effect of the above was an adverse impact of around $301 million on the operating profit before special items.
Profit petroleum
The change in government share of profit petroleum in Rajasthan block at Cairn India from 30% to 40% in FY2015 resulted most of the increase.
Depreciation
The oil and gas business realised a lower depreciation charge of US$120 million in the year. The expense is based on production, divided by the Group's economic interest, which has increased as the interest accruing to partners has fallen in line with lower prices.
In accordance with its accounting policy, the Group carried out a review of the useful life of its assets. This was based on technical studies performed by an independent external agency and applying their recommendations with effect from 1 October 2014 resulted in a US$71 million lower net charge compared to FY 2014.
The capitalisation of one unit of TSPL and 84 pots at Korba-II contributed to an increase in depreciation of US$8 million. The further commissioning of pots in Aluminium and the continued staged commissioning of power plants at BALCO IPP and TSPL, will increase the depreciation charge in FY 2016.
Amortisation
The reduction in amortisation charges in FY2015 compared to the previous year was US$42 million, mainly attributable to lower volumes at Cairn India and Zinc International.
Others
An exploratory asset write off of US$129 million, largely pertaining to a deep gas well in the Ravva production block, offset by higher profitability from our smaller businesses (Pig Iron, Phosphoric Acids and Precious Metal), leads to a net reduction in operating profit before special items of US$42 million.
Income Statement
(in US$ million, except as stated)
FY2015 FY2014 %Change
--------------------------- ---------- ---------- --------
Revenue 12,878.7 12,945.0 (0.5)%
EBITDA 3,741.2 4,491.2 (16.7)%
EBITDA margin (%) 29.1% 34.7% -
EBITDA margin without
custom smelting (%) 38.0% 44.9% -
Special items (6,744.2) (138.0)
Depreciation (1,254.6) (1,410.5) (11.1)%
Amortisation (751.1) (792.6) (5.2)%
---------------------------- ---------- ---------- --------
Operating (Loss)/
Profit (5,008.7) 2,150.1
Operating (Loss)
Profit without Special
Items 1,735.5 2,288.1 (24.2)%
Net interest expense (554.6) (752.1) (26.3)%
Other Gains and (Losses) (76.9) (279.9) -
(Loss)/Profit before
Taxation (5,640.2) 1,118.1
Profit before Taxation
without Special Items 1,104.0 1,256.1 (12.1)%
Income Tax Expense-others (352.6) (158.1) -
Income Tax Credit
(Special Items) 2,205.1 29.4 -
Effective Tax Rate
without Special Items
(%) 31.9% 12.6% -
---------------------------- ---------- ---------- --------
(Loss)/Profit for
the year (3,787.7) 989.4
Profit for the year
without Special Items 751.4 1,098.0 (31.6)%
Non-controlling Interest (1,988.1) 1,185.4
Non-controlling Interest
without Special Items 826.5 1,221.1 (32.3)%
Non-controlling Interest
without Special Items
(%) 110.0% 111.2% -
Attributable loss (1,798.6) (196.0)
Attributable loss
without Special Items (74.7) (123.0)
Underlying Attributable
(Loss)/ profit (38.9) 40.2
Basic (loss)/ earnings
per share (US cents
per share) (654.5) (71.7)
Earnings per share
without special items
(US cents per share) (27.2) (45.0)
Underlying earnings
per share (US cents
per share) (14.2) 14.7
---------------------------- ---------- ---------- --------
Revenue
Overall revenues, as explained earlier, were stable in FY2015. The table below indicates the movement by segment. Primarily, the fall in oil and gas revenue, as a result of lower Brent prices, has been offset by increased revenue in Zinc, Iron Ore, Copper, Aluminium and Power.
Consolidated Revenue - Detail
(in US$ million, except as stated)
FY2015 FY2014 % Change
------------------- --------- --------- ---------
Zinc 2,943.9 2,856.8 3.1%
_ India 2,357.0 2,195.4 7.4%
_ International 586.9 661.4 (11.3)%
Oil & Gas 2,397.5 3,092.8 (22.5)%
Iron Ore 326.5 267.1 22.2%
Copper 4,777.8 4,676.2 2.2%
_ India/Australia 3,700.7 3,404.8 8.7%
_ Zambia 1,077.1 1,271.4 (15.3)%
Aluminium 2,081.9 1,785.4 16.6%
Power 671.9 621.7 8.1%
Eliminations (320.8) (355.0) -
------------------- --------- --------- ---------
Revenue 12,878.7 12,945.0 (0.5)%
------------------- --------- --------- ---------
Consolidated EBITDA
The consolidated EBITDA by sector is set out in the table below:
(in US$ million, except as stated)
EBITDA
Margin%
FY2015 FY2014 % Change FY2015 FY2014
------------------- -------- -------- --------- ---------- -------
Oil & Gas 1,476.8 2,347.0 (37.1)% 61.6% 75.9%
Zinc 1,373.3 1,358.4 1.1% 46.6% 47.5%
_ India 1,192.5 1,145.0 4.1% 50.6% 52.2%
_ International 180.8 213.4 (15.3)% 30.8% 32.3%
Iron Ore 31.4 (24.2) 9.6% (9.1%)
Copper 277.2 354.2 (21.7)% 5.8% 7.6%
_ India/Australia 281.0 197.9 42.0% 7.6% 5.8%
_ Zambia (3.8) 156.3 (0.4)% 12.3%
Aluminium 415.5 287.3 44.6% 20.0% 16.1%
Power 153.8 168.4 (8.7)% 22.9% 27.1%
Others* 13.2 0.1 - -
Total 3,741.2 4,491.2 (16.7)% 29.0% 34.7%
------------------- -------- -------- --------- ---------- -------
* Includes port business
EBITDA for FY2015 is lower by 16.7% at US$3,741 million. This was primarily due to reduction in Oil and Gas, Copper Zambia, Zinc International and power businesses.
Further detail on the year on year variations are provided in the operational review.
EBITDA Margin
In FY2015 EBITDA margin was 29% as compared to 35% in FY2014. EBITDA margin excluding custom smelting was 38.0% and reduced from 44.5% in FY2014. The main drivers across key businesses were :
n Oil & Gas - The sharp decline in crude oil prices and the Ravva exploration asset write off
n Zinc India - Higher prices and premia offset by higher royalty and wage settlement costs
n Zinc International - Higher prices offset by unit cost increases.
n Copper - Improvement in smelting margins in copper India with higher TcRc's; higher per unit costs as well as lower prices in copper Zambia; and the full year effect of Australian assets being under care & maintenance.
n Aluminium - Higher costs driven coal and bauxite sourcing offset by higher prices and premia.
Special items
Special items of US$6,744 million include a non-cash impairment charge of US$6,642 ($4,504 million net of tax) relating to the Oil and Gas business and US$52 million in Copper Zambia.
The impairment in Oil and Gas was triggered by the steep fall in Brent oil prices. The non cash charge includes US$5,854 million (US$3,716 million net of tax) on the Rajasthan and other Cash Generating Unit which includes both producing and exploratory assets and US$788 million on the Sri Lankan exploratory block. Key assumptions include the short term (5 years) oil price and the long term nominal oil price of US$84 per barrel increasing at 2.5% per annum. The assumptions selected were consistent with the various available analyst pricing.
The charge at the Vedanta Resources Plc level is greater than that announced previously by Vedanta Limited (formerly Sesa Sterlite) as additional carrying value was previously recognised on the acquisition of Cairn India in FY2012, as under IFRS were on 100% basis with a corresponding non-controlling interest, whereas under Indian Generally Accepted Accounting Principles the fair value uplift only arose on the economic interest acquired. This non cash impairment charge will not have any impact in the future operating or earnings capacity of the underlying assets.
Copper Zambia impairment charge arose on the underground assets at Nchanga where the Upper Ore Body project started in 2008 was suspended due to ground conditions and existing mine infrastructure constraints.
Other special items include the provision in respect of an investment in the cancelled coal block of the company pursuant to a Supreme Court decision in September 2014, and a US$8 million provision in respect of a contractor dispute in Copper Zambia.
Net interest
Finance costs decreased by 4% to US$1,387 million in FY2015 (FY2014: US$ 1,440 million). This is largely due to refinancing at lower interest rates. The average borrowing cost of the Group is 7.5% per annum (8.0% in FY2014) ].
Investment revenue increased to US$833 million, (FY2014: US$688 million), mainly at Zinc India and Cairn India, driven by higher treasury income on account of mark-to-market (MTM) gains accruing in a falling interest rate environment in India where most of the group's cash and investments reside. The combination of significantly higher investment revenues and lower finance cost led to a decrease of US$198 million in net interest expense for the year.
Other gains and losses
Other gains and losses include the impact of mark-to-market (MTM) on foreign currency borrowings, primarily at our Indian businesses and dollar denominated cash deposits at the oil and gas business. Depreciation in the Indian rupee against the US dollar during FY2015 was only around 1% against an unprecedented 10% in FY2014. The FY2015 MTM cost of US$77 million was thus significantly lower than US$280 million in FY2014.
Taxation
The Effective Tax Rate (ETR) in FY2014 was primarily lower as a result of a tax credit of US$176 million which arose on the restructuring of the Indian subsidiary Vedanta Limited (erstwhile Sesa Sterlite Limited).
The tax charge, excluding special items, in FY2015 is US$352 million (effective tax rate 32%) compared with US$158 million (effect tax rate 13%) in FY2014.
Tax charge (with special items) in FY2015 includes a credit of US$ 2,205 million relating to the corresponding non cash impairment charge and other special items described earlier.
Attributable (loss) / profit
Attributable loss (before special items) was US$(75) million as compared to US$(123) million in previous year mainly driven by the weak commodity prices resulting lower EBITDA, which includes one time provision of 7% Gridco receivables US$45 million and exploratory asset write off at Cairn India US$88 million pertaining to a deep gas well in the Ravva production block. Further, it reduced due to the higher tax which was partially offset by lower depreciation and amortisation and the lower net interest expense. The attributable loss (including special items) at US$(1,799) million (FY2014 at US$196 million) is significantly greater largely due to the non cash impairments in the Oil and Gas business.
Earnings per share
Basic EPS at loss (654.5) US cents (FY2014 loss (71.7) US cents) decreased significantly primarily as a result of the special items described above. Excluding the impact of specials items and other gains and losses, the underlying EPS was loss (14.2) US cents per share (FY2014 14.7 US cents).
Balance Sheet
(In US$ million, except as stated)
31 March 31 March
2015 2014
Goodwill 16.6 16.6
Intangible assets 101.9 108.6
Tangible fixed assets 23,352.0 31,043.5
Other non-current assets 1,807.0 1,373.7
Cash and liquid investments 8,209.8 8,937.9
Other current assets 3,501.6 3,894.0
Gross Debt (16,667.8) (16,871.2)
Other current and non-current
liabilities (8,063.7) (10,528.3)
Net assets 12,257.4 17,974.8
Shareholders' equity 1,603.1 4,010.4
Non- controlling interests 10,654.3 13,964.4
Total equity 12,257.4 17,974.8
------------------------------- ------------ -----------
Shareholder's equity was US$1,603 million at 31 March 2015 compared to US$4,010 million at 31 March 2014 reflecting largely the impact of the impairments and other special items of US$4,539 million, adverse currency translation impact due to depreciation of the operating currencies against US dollar (mainly, the Indian rupee) of US$291 million, a decrease in equity attributable to shareholders by US$175 million on account of both the Cairn share buyback and stake acquisition in Vedanta Limited (Sesa Sterlite Limited) representing difference between acquisition price and book value and the US$171 million dividend payment.
Tangible fixed assets
During the year, we invested US$1,752 million in property, plant and equipment; comprising of US$1,531 million on our expansion and improvement projects and US$221 million spent on sustaining capital expenditure. Expansion project expenses were US$1,080 million in our Oil & Gas business at Cairn India; US$167 million at Zinc India; US$142 million in the Power business mainly at Talwandi Sabo, US$145 million in our Aluminium business.
Net Debt
Gross debt as at 31 March 2015 was US$16,668 million (31 March 2014: US$16,871 million). This reduction was mainly driven by the repayment of maturing debt (cUS$500 million of FCCBs) in the copper business out of operating cash flows and devaluation of Rupee denominated debt largely offset by the increase in borrowings primarily to fund capital expenditure in projects and some short term operational needs.
The average debt in FY2015 was US$17,074 million. Given the significant repayments of debt in the second half of the year and lower capex in general, the closing debt position was lower at US$16,668 million. The debt reduction in the second half was approximately US$600 million, driven by strong capital rationing and working capital management in a difficult commodity price environment.
Of our total gross debt (excluding working capital loans) of US$16.2 billion debt at our subsidiaries is US$8.4 billion, with the balance in the holding company. The future maturity profile of debt (in US$ billion) of Vedanta Resources Plc is as follows:
Beyond
FY
Particulars Total FY2016 FY 2017 FY2018 FY2019 FY2020 2020
---------------------- ------ ------- -------- ------- ------- ------- --------
Debt at Vedanta
Resources Plc 7.8 0.4 2.0 1.0 2.6 0.3 1.5
Debt at Subsidiaries 8.4 2.1 1.3 1.7 1.7 0.7 0.9
---------------------- ------ ------- -------- ------- ------- ------- --------
Total Debt 16.2 2.5 3.3 2.7 4.3 1.0 2.4
---------------------- ------ ------- -------- ------- ------- ------- --------
A US$350 million loan has been arranged with State Bank Of India (SBI) at Vedanta Resources Plc (of which US$25 million had been drawn as at 31 March 2015), to meet the upcoming debt maturities.
Of the US$2.1 billion debt maturing in subsidiaries during FY2016, almost US$1.6 billion is in the Aluminium and Power businesses. These maturities mainly relate to short-term loans which are expected to be refinanced from long-term sources in view of the softer interest rate regime in the Indian market. Cash and liquid investments were US$8,210 million at 31 March 2015 (31 March 2014: US$8,938 million).
Net debt increased by US$540 million to US$8,460 million at 31 March 2015, (31 March 2014: US$7,920 million). This increase is mainly due to the outflow of US$820 million in first half of the year towards the share buyback by Cairn India and the acquisition of a 5% stake in Vedanta Limited (erstwhile Sesa Sterlite Limited) by Vedanta Resources Plc.
The Group's net gearing has gone from 30.6% to 40.8% with 7.3% of this change relating to the noncash impairments in the year and their corresponding effect on net assets.
Credit Rating
The downward pressure on metal and oil prices has impacted the Company's credit rating. In January 2015, the rating agency Moody's revised the outlook on the Company's ratings to 'Negative' from 'Stable', while maintaining the rating at 'Ba1'. S&P recently revised the Company rating to 'BB-' from 'BB', with the outlook on the rating to 'Negative'.
Fund Flows
The movement in Fund Flow in FY2015 is set out below.
(in US$ million, except as stated)
Fund Flow FY2015 FY2014 --------------------------- -------- -------- EBITDA 3,741 4,491 Operating Exceptional Items (50) (138) Working Capital Movements 131 395 Changes in non-cash items 203 151 Sustaining capital expenditure (221) (322) Movement in capital creditors (288) (320) Sale of tangible fixed assets 26 9 Net interest (362) (710) Tax paid (602) (861) Expansion capital expenditure(1) (1,531) (1,425) Free Cash Flow post Capex 1,047 1,270 Acquisition of minorities (819) - Dividend paid to equity shareholders (171) (163) Dividend paid to non-controlling interests (340) (346) Sale of fixed asset investments - 17 Other movement(2) (258) (82) Movement in net debt (541) 696 --------------------------- -------- --------
(1) On an accrual basis
(2) Includes foreign exchange movements
Project Capex
Spent Unspent
up to as at
Capex March Spent 31 March
Capex in Progress Status (US$mn) 2014 in FY2015 2015
------------------- ---------------------- -------- ------ ---------- ---------
Phase wise completion
($500 mn to
be spent in
FY16 and retain
the flexibility
to invest balance
$1.4 bn as
oil prices improve
and costs bottom
Cairn India out) 3,030 - 1,080 1,949
------------------- ---------------------- -------- ------ ---------- ---------
Total Capex
in Progress
- Oil & Gas 3,030 - 1,080 1,949
------------------------------------------- -------- ------ ---------- ---------
Aluminium Sector
------------------- ---------------------- -------- ------ ---------- ---------
BALCO - Korba-II
325ktpa Smelter
and 1200MW Smelter: 84
power plant post capitalised
(4x300MW) in Sep 2014 1,872 1,721 98 53
------------------- ---------------------- -------- ------ ---------- ---------
Lanjigarh Refinery
(Phase II)
- 4mtpa Awaiting approval 1,570 809 - 761
------------------- ---------------------- -------- ------ ---------- ---------
Potline-wise
commissioning:
Jharsuguda 1st phase of
1.25mtpa smelter 50 pots started 2,920 2,500 35 385
------------------- ---------------------- -------- ------ ---------- ---------
Power Sector
------------------- ---------------------- -------- ------ ---------- ---------
Talwandi 1980MW Unit II under
IPP Trial Run 2,150 1,869 142 139
------------------- ---------------------- -------- ------ ---------- ---------
Zinc Sector
------------------- ---------------------- -------- ------ ---------- ---------
Zinc India
(Mines Expansion) Phasewise Completion 1,500 435 167 898
------------------- ---------------------- -------- ------ ---------- ---------
Zinc International
------------------- ---------------------- -------- ------ ---------- ---------
Gamsberg Mining
Project Capex Rephased 630 - 5 625
------------------- ---------------------- -------- ------ ---------- ---------
Skorpion Refinery
Conversion 152 - 4 148
------------------------------------------- -------- ------ ---------- ---------
Total Capex
in Progress
-Metals & Mining 10,794 7,334 451 3,009
------------------------------------------- -------- ------ ---------- ---------
Spent Unspent
up to as at
Capex March Spent 31 March
Capex Flexibility Status (US$mn) 2015 in FY2015 2015
------------------- ---------------------- -------- ------ ---------- ---------
Copper Sector
------------------- ---------------------- -------- ------ ---------- ---------
Tuticorin Smelter
400ktpa EC awaited 367 129 - 239
------------------- ---------------------- -------- ------ ---------- ---------
Total Capex
Flexibility 367 129 - 239
------------------------------------------- -------- ------ ---------- ---------
Total Capex
(excl. Cairn) 11,161 7,463 451 3,247
------------------------------------------- -------- ------ ---------- ---------
Total Capex
(incl. Cairn) 14,191 7,463 1,531 5,197
------------------------------------------- -------- ------ ---------- ---------
Operational Reviews
Oil & Gas
Production Performance
Unit FY2015 FY2014 % Change
------------------- -------- -------- -------- ---------
Gross Production Boepd 211,671 218,651 (3.2)%
Rajasthan Boepd 175,144 181,530 (3.5)%
Ravva Boepd 25,989 27,386 (5.1)%
Cambay Boepd 10,538 9,735 8.2%
Oil Bopd 204,761 209,378 (2.2)%
Gas mmscfd 41 56 (25.5%
Net production-
working interest Boepd 132,663 137,127 (3.3)%
Oil Bopd 130,050 134,116 (3.0)%
Gas mmscfd 16 18 (13.2)%
Gross Production Mboe 77.3 79.8 (3.2)%
Working interest
production Mboe 48.4 50.1 (3.3)%
------------------- -------- -------- -------- ---------
Operations
Average gross production for FY2015 was 211,671 barrels of oil equivalent per day (boepd), 3% lower than the previous year. This was largely on account of planned maintenance activity at Mangala Processing Terminal at Rajasthan, higher-than-expected water cuts at Bhagyam in Rajasthan and suspension of gas sales at Ravva for around three months as a result of the breakdown of the OMGC gas pipeline This was partially offset by higher production at Cambay and better performance of the Mangala field in Rajasthan. In the Rajasthan block, the Aishwariya field crossed a production threshold of 30,000 boepd in Q4 2015.
Both offshore assets have performed exceptionally well during the year. The Ravva block achieved over 30,000 bopd in Q4 FY2015 after three and a half years, driven by successful application of 4D seismic technology, better-than-expected results from the infill drilling program and the contribution from the RE-6 exploration well. Production at Cambay grew 8% year-on-year, driven by successful well interventions and ramp-up.
Gas development in the Raageshwari Deep Gas (RDG) field in Rajasthan continues to be a priority. Management Committee approval has been received for the RDG Field Development Plan for 100 million standard cubic feet per day (mmscfd) production and work on execution, planning and contracting is underway. In FY2015, RDG gas production was 16 mmscfd and is expected to increase to 25 mmscfd during FY2016.
FY2015 FY2014 % Change
------------------------ ------- ------- ---------
Average Brent Prices -
US$/barrel 85.4 107.6 (20.6)%
------------------------ ------- ------- ---------
Crude oil prices fell sharply in the second half of FY2015 as a result of increasing supply, a lower demand outlook and OPEC's decision to maintain production levels. Average Brent prices for the year reduced 21% to US$85.4/bbl compared to FY2014.
Financial Performance
(in US$ million, except as stated)
FY2015 FY2014 % Change
--------------------- -------- -------- ---------
Revenue 2,397.5 3,092.8 (22.5)%
EBITDA 1,476.8 2,347.0 (37.1)%
EBITDA Margin 61.6% 75.9%
Depreciation 572.6 692.4 (17.3)%
Acquisition related
amortisation 697.6 721.0 (3.2)%
Operating Profit 206.6 933.6 (77.9)%
Share in group
operating profit
% 11.9% 40.8%
Capital Expenditure 1,080.1 649.4 66.3%
Sustaining - - -
Projects 1,080.1 649.4 66.3%
---------------------- -------- -------- ---------
Revenue for the year was US$2,398 million, (after profit and royalty sharing with the Government of India), driven by weaker crude prices. As a result, EBITDA for FY2015 was lower by 37% at US$1,477 million. The overall operating expense in Rajasthan was at US$5.8/bbl, an increase compared with US$3.9/bbl in FY2014 due to higher processing and increased well maintenance costs.
In line with global peers, we have revised capex for FY2016 from US$1.2 billion to US$0.5 billion, while deferring the rest. Of this around 45% has been allocated to core fields, 40% to growth projects and remaining 15% for exploration. Further, we will undertake projects that are economically viable at current oil prices, while actively re-engineering projects and renegotiating contracts to improve viability. We have spent $1.1 billion in FY 2015 out of the announced program of $3.0 billion, thus retaining the flexibility to invest the remaining US$1.4 billion in the future as oil prices improve and more projects clear investment thresholds.
In the core fields, our focus continues to be completing the polymer flood EOR project at Mangala, continued infill drilling in our onshore fields and sustenance projects at Mangala Port Terminal.
The Management Committee approved the Raageshwari Deep Gas FDP for 100 mmscfd and contracting for this project is currently underway. The two key packages for this project will be the pipeline and the gas terminal EPCs. Likewise, an application has been submitted to PNGRB regarding the authorization of a pipeline under their policy for Tie-in Provisions. The Terminal EPC is presently in the tendering process and the gas project is expected to be completed by the end of FY2017 subject to regulatory approvals.
Exploration & Development
Since the re-commencement of exploration in the Rajasthan block in March 2013, across FY14-FY15, Cairn India has made 12 new discoveries and has drilled and tested 1.5 bn boe of in-place hydrocarbons with an additional 0.8 bn boe drilled but yet to be tested. Additionally, Cairn has Discovered 2C of 183 mn boe in Rajasthan since resumption of exploration. An additional 166 mn boe of Prospective 2C has been drilled and awaits testing.
In FY15, Cairn delivered the largest Exploration and Appraisal program in its history, with 12 exploration and 22 appraisal wells drilled; totalling 34 wells during the year. Of the exploration wells drilled in the year, 9 encountered hydrocarbons. In FY15, 6 additional discoveries were announced taking the total number of discoveries since resumption of exploration to 12.
During the next financial year, activity will continue to be focused upon appraisal of the Raageshwari Deep Gas Field and the key oil discoveries at DP, NL and V&V, with the objective of progressing these discoveries to development. Future programs will also focus upon identification of additional prospects that will act to replenish the inventory of exploration prospects.
At the KG offshore block, detailed planning for the exploration drilling campaign is underway and drilling is anticipated in the first half of FY 2016. In South Africa, the group continues to interpret the 3D and 2D seismic data across its block and add to Prospective inventory with parallel discussions on going with our joint venture partner on contractual terms. In Sri Lanka, whilst the group has taken a non cash impairment charge, it will continue to seek solutions and options to farm out the interests.
Outlook
Despite the partial deferral of capex, we expect production volumes to increase in FY16 driven by our planned investment in the polymer flood at Mangala, the infill drilling across the Mangala Bhagyam and Aishwariya fields, infrastructure debottlenecking and sustenance projects.
Additionally, production upside in the near-term will come from other growth projects where we retain the flexibility and agility to switch on projects as they clear investment thresholds as oil prices improve.
In Exploration, Cairn India will prioritise capital allocation for low-risk, high-potential prospects. Cairn India plans to spend around 15% of next year's capex on appraisal, testing and seismic activity across our assets.
Our Strategic Priorities
n Rajasthan development;
n Sustaining production at MBA fields through EOR, drilling campaign and facilities upgrade;
n To target world-class recovery and next generation of resources at Barmer Hill;
n Leverage gas potential through step-wise development ramp-up;
n Increase recovery from mature assets through infill drilling, technology adoption and development of satellite fields;
n Continue exploration and appraisal program across the portfolio, focussing on Rajasthan;
n And pursue extension of Production Sharing Contracts.
Zinc India
Production Performance
FY2015 FY2014 % Change
-------------------------------- ------- ------- ---------
Production(kt)
Total Mined metal 887 880 0.8%
Zinc 774 770 0.6%
Lead 113 110 2.7%
Zinc Refined metal- Total 734 749 (2.1)%
Integrated 721 743 (3.0)%
Custom 13 6 110.1%
Lead Refined metal- Total(1) 127 123 3.7%
Integrated 105 111 (4.8)%
Custom 22 12 81.1%
Saleable Silver-Total(m.
oz)(2) 10.53 11.24 (6.3)%
Integrated 8.56 9.66 (11.4)%
Custom 1.97 1.58 24.8%
(1) Excluding captive consumption of 8 kt v/s 7 kt in FY2015 v/s FY2014
(2) Excluding captive consumption of 1,293 thousand ounces v/s 1,232 thousand ounces in FY2015 vs FY2014.
Operations
Mined metal production for the full year was 887,000 tonnes, marginally higher than a year ago, achieving a new annual record. Production in the second half of FY2015 was higher than the first half. This increase is in line with the mine plans for Rampura Agucha and Sindesar Khurd.
Integrated refined zinc, lead and silver metal production reduced by 3%, 5% and 11% respectively over FY2014 due to lower mined metal production in the first half and lower silver grades at the Sindesar Khurd mine. In accordance with its mine plan, grade is expected to improve in the next year. However, higher mined metal production volumes over the second half of FY2015 added to the mined metal inventory, a large part of which will be consumed in FY2016.
FY2015 FY2014 % Change
-------------------------- ------- ------- ---------
Average Zinc LME cash
settlement prices US$/T 2,177 1,909 14.0%
Average Lead LME cash
settlement prices US$/T 2,021 2,092 (3.4%)
Average Silver Prices
US$/ounce 18.1 21.4 (15.3%)
-------------------------- ------- ------- ---------
Zinc prices gathered strength during the year despite a weak start. This was driven by improving demand in India and the continued global demand-supply gap. LME zinc prices averaged US$2,177 per tonne compared to US$1,909 per tonne over the same period in FY2014, an increase of 14%. Lead average prices weakened by 3% on the back of marginally higher supply and lower demand. Average silver prices reduced significantly by 15% in line with the general weakness in precious metals on the backdrop of a stronger US dollar.
Unit Costs
FY2015 FY2014 % Change
-------------------------------- ------- ------- ---------
nit costs(1)
Zinc (US$ per tonne) 1,093 978 11.7%
Zinc (Other than Royalty)
(US$ per tonne) 868 817 6.2%
-------------------------------- ------- ------- ---------
(1) With IFRIC 20 impact
The unit cost of zinc production increased by 12% to US$1,093 per tonne, compared to FY2014. This was due to a higher royalty, higher landed coal cost and increased employee expense due to long-term wage settlements partly offset by higher acid credits and lower fuel costs. In India the Zinc and lead royalty rates were increased from 8.4% to 10.0% and from 12.7% to 14.5% respectively, effective 1 September, 2014. At these levels, these are amongst the highest in the world and higher than other base metals. In addition, an amount equal to 35% of royalty was provided with effect from 12 January, 2015 for the contribution to the proposed District Mineral Fund (DMF) (33%) and National Mineral Exploration Trust (NMET) (2%), even as notification for these under the Mines and Mineral Development and Regulation (Amendment) Act 2015 ( MMDRA)is awaited.
Financial Performance
(in US$ million, except as stated)
FY2015 FY2014 % Change
------------------------------- ------------------------- -------- ---------
Revenue 2,357.0 2,195.4 7.4%
EBITDA 1,192.5 1,145.0 4.1%
EBITDA Margin (%) 50.6% 52.2% -
Depreciation and amortisation 133.2 114.8 16.0%
Operating (Loss)/Profit
before special items 1,059.3 1,030.2 2.8%
Share in group operating
profit (%) 61.0% 45.0%
Capital Expenditure 222.7 346.0 (35.6)%
Sustaining 56.1 102.7 (45.4)%
Growth 166.6 243.3 (31.5)%
------------------------------- ------------------------- -------- ---------
EBITDA for FY2015 increased to US$1,193 million, compared with US$1,145 million during FY2014. This increase was mainly due to higher Zinc LME prices and premia, which were partially offset by a reduction in Lead and Silver prices, lower metal sales volumes and higher cost of production.
Projects
HZL is in the midst of a transition from open cast to underground mining. Historically, open cast mining has accounted for about 80% of total MIC production, which in future will be replaced by underground mines. It will gradually taper off production from open cast and by FY2021, all production will be from the underground mines. The newly announced cut 5 Rampura Agucha open pit will extend open pit life giving a sufficient cushion for underground transition., The ultimate open pit depth will go down by 50 metres to 420 metres, with preparatory work having started in Q4 FY2015. Underground expansion is progressing well, and for FY2016, significant progress is expected in terms of mine development and ore production.
HZL is enhancing its ore production capacity in Sindesar Khurd by 50%, from 2 million tonnes to 3 million tonnes. The shaft sinking project at Sindesar Khurd is ahead of schedule with the main shaft sinking almost complete; having reached the depth of over 1 km of the planned depth of 1.05 km. Development of associated infrastructure is also progressing well and production from the shaft is planned to commence ahead of schedule, in the latter half of 2018.
The progress of the underground shaft project at Rampura Agucha is behind schedule and has reached a depth of 650 metres of the planned depth of 950 metres. With the planned extension of the open cast mine, overall production from Rampura Agucha is expected to remain on track.
Exploration
During the year, gross additions of 19.4 million MT were made to reserves and resources (R&R), prior to a depletion of 9.4 million MT. Total R&R at 31 March, 2015 were 375.1 million MT, containing 35.3 million MT of zinc-lead metal and 970 Moz of silver. Overall mine life continues to be over 25 years.
Outlook
Significant progress is expected in terms of mine development and ore production from the underground mine projects. Rampura Agucha will continue to provide the majority of mined metal in FY2016, although overall production from this mine will be less than in FY2015. The gap in production will be made up primarily by higher volumes from Sindesar Khurd.
In FY2016, mined metal production is expected to be higher from FY2015, while integrated refined metal production, including silver, will be significantly higher as the company will process the available mined metal inventory from previous year.
The cost of production excluding royalty is expected to remain stable. There would be an additional outflow towards District Mineral Fund and National Mineral Exploration Trust in accordance with the MMDRA Act 2015 as mentioned above.
Our Strategic Priorities
n Progress on brownfield expansion of mines to achieve 1.2mtpa of mined zinc-lead;
n Managing the transition from open-pit to underground mining at Rampura Agucha;
n Ramping up silver production volumes;
n Rampura Agucha stage V open cast mine life extension;
n Asset optimisation and operational efficiencies to maintain cost leadership;
n And continuing focus on adding reserves and resources through exploration.
Zinc International
Production Performance
FY2015 FY2014 % Change
-------------------------- ------- ------- ---------
Total Production (kt) 312 364 (14.3)%
Production- Mined metal
(kt)
BMM 59 67 (11.9)%
Lisheen 150 172 (12.8)%
Refined metal Skorpion 102 125 (18.2)%
-------------------------- ------- ------- ---------
Mined metal output for FY2015 was 14% lower compared with FY2014, primarily due to lower production at Lisheen by 22,000 tonnes and unplanned disruptions at Skorpion.
The Lisheen mine, which is near the end of its life, is expected to end production in mid-FY2016. At Skorpion, production was lower by 23,000 tonnes. This was primarily due to a fire incident in the cell house, resulting in the refinery shutting-down during January 2015 for 23 days, followed by a gradual ramp-up. The production loss was also due to lower Zinc Feed grade (FY 15: 8.7% vs FY 2014:9.6%).
The production at BMM was 12% down due to lower ore grades and the change in mining methods.
Unit Costs
FY2015 FY2014 % Change
-------------------------- ------- ------- ---------
Zinc (US$ per tonne) CoP 1,393 1,167 19.4%
-------------------------- ------- ------- ---------
The unit cost of production increased to US$1,393 per tonne, up from US$1,167 per tonne in FY2014. This was mainly driven by reduced volumes, due to lower ore grades and increasing treatment and refining charges. Due to unplanned disruptions, maintenance expenses were higher, resulting in increased cost of production
Financial Performance
(in US$ million, except as stated)
FY2015 FY2014 % Change
---------------------------------- ------- ------- ---------
Revenue 586.9 661.4 (11.3)%
EBITDA 180.8 213.4 (15.3)%
EBITDA Margin 30.8% 32.3% -
Depreciation 85.7 90.3 (5.1)%
Acquisition related amortisation 25.4 47.0 (46.0)%
Operating Profit before
special items 69.7 76.1 (8.4)%
Share in group operating
profit % 4.0% 3.3% -
Capital Expenditure 39.7 44.6 (10.9)%
Sustaining 30.4 29.3 3.8%
Growth 9.3 15.3 (39.2)%
---------------------------------- ------- ------- ---------
EBITDA reduced by 15% to US$181 million for FY2015 due to lower volumes and higher costs, partially offset by higher zinc prices.
Projects:
Gamsberg Phase 1 will partially replace the declining production from Lisheen and restore production to over 300ktpa. Project execution is in the final stages of planning. Capex has been re-phased in line with the Group strategy of optimising capex and focussing on critical pre-stripping and associated activities. The first ore production is planned for 2018, and the ramp-up to full production will be in line with the revised capex profile.
This resource has the potential to triple production; once the first phase of the project is underway we will start to investigate future phases of expansion.
Outlook
In FY2016 production volumes as expected to be c.220-230kt.
Cost of production is expected to remain at current levels of c. $1,450/t-$1,500/t even as mines go deeper.
The Lisheen mine is scheduled for closure in Q2 FY2016.
At Skorpion, plans are in place to extend mine life with a new Life Of Mine Plan which is being extended from FY2017 to FY2019. This is being achieved by deepening of current open pit to access additional resources. Mine production will end in FY2019 and oxide ore processing will continue until FY2020 from stockpile.
At BMM, near-mine resource potential remains high. The company is taking a focussed approach to improve confidence in other deposits within the mining licence, to firm up its plan for the next 5-years.
Our Strategic Priorities
n Execution of the Gamsberg project in a phased manner;
n Extending the mine life at Skorpion;
n And phased closure of the Lisheen mine.
IRON ORE
Production Performance
FY2015 FY 2014 % Change
-------------------- ------- -------- ----------
Production
Saleable ore (mt) 0.6 1.5 (59.0)%
Goa - - -
Karnataka 0.6 1.5 (59.0)%
Pig Iron 611 510 19.8%
Sales
Iron ore (mt) 1.2 0.0 -
Goa - - -
Karnataka 1.2 0.0 -
Pig iron (kt) 605 544 11.3%
-------------------- ------- -------- ----------
Operations
At Karnataka, production recommenced at an annual capacity of 2.29 mtpa on 28 February 2015, following receipt of all requisite clearances and approvals,. About 0.3 mt of saleable ore was produced during the quarter and the sales are expected to resume in Q1 FY 2016 through the existing e-auction procedures managed by the government.
During the quarter, the Ministry of Environment and Forest revoked its earlier order which had kept the environment clearances for iron ore mines in Goa in abeyance. We have been allocated an interim annual mining quantity of 5.5 million tonnes of saleable ore. Mining is expected to commence after the monsoon season, following the expected receipt of the remaining approvals from the Government.
With effect from 1 June 2015, the export duty on low grade iron ore (< 58% Fe) has been reduced from 30% to 10% and it will enable the Goan iron ore prices to have improved prospects in this cycle of depressed iron ore prices.
Production of pig iron ramped up from 510kt in FY2014 to a record production of 611kt. In March 2015, further de-bottlenecking of the pig iron plant was completed resulting in an increase in capacity from 625kt to 700kt.
Iron ore spot prices averaged US$67.5 (FOB) for 62% Fe grade a tonne over FY2015 and price pressures intensified as the year progressed.
Financial Performance
(in US$ million, except as stated)
FY2015 FY2014 % Change
---------------------------------- ------- ------- ---------
Revenue 326.5 267.1 22.2%
EBITDA 31.4 (24.2) -
EBITDA Margin 9.6% (9.1%) -
Depreciation 35.8 33.9 5.7%
Acquisition related amortisation 6.5 11.9 (45.5)%
Operating (Loss) before
special items (10.9) (70.0) (84.4)%-
Share in group operating
profit % (0.6)% (3.1)%
Capital Expenditure 36.9 43.6 (15.2)%
Sustaining 36.9 14.1
Growth - 29.5
---------------------------------- ------- ------- ---------
EBITDA in FY2015 increased to US$31.4 million, compared with a loss of US$(24.2) million in the previous year, due to higher volumes and improved margin from the pig iron business. In FY2015 operating losses was significantly lower at US$(10.9) million.
Outlook
Approval for commencing production at 5.5 mn tonne saleable ore capacity received and expect to resume operations post monsoons. An aggressive cost-reduction agenda is being implemented to effectively counter low price environment.
The pace of the Liberia project execution has been impacted by the 'ebola virus' situation for most of the year. The company expects to progress exploration and commission a feasibility study in early FY2017.
Our Strategic Priorities remain:
n Ramping-up Karnataka mines to its capacity
n Resuming mining operations in Goa and recommencing exports;
n Work with Government for removal/revision of mining capacity
n Complete feasibility work at Western Cluster.
COPPER - INDIA / AUSTRALIA
Production Performance
FY2015 FY2014 % Change
------------------------------ ------- ------- ---------
Production (kt)
India- Cathode 362 294 23.1%
Australia - Mined metal
content 0 18 -
------------------------------ ------- ------- ---------
Operations
FY2015 copper cathode production at Tuticorin was a record 362,000 tonnes, despite the 23-day planned maintenance shutdown in Q1. The 160MW power plant at Tuticorin continued to operate at a Plant Load Factor of 86%.
Our copper mine in Australia remains under care and maintenance and we continue to evaluate various options for its restart.
FY2015 FY2014 % Change
----------------------------- ------- ------- ---------
Average LME cash settlement
prices (US$ per tonne) 6,558 7,103 (7.7)%
Realised TCs/RCs (US
cents per lb) 21.4 16.6 29.2%
----------------------------- ------- ------- ---------
Over FY2015, average LME copper price fell by 8% while treatment and refining charges (TCs/RCs) increased by 29%.
Unit Costs
FY2015 FY2014 % Change
------------------------ ------- ------- ---------
Unit conversion costs
(CoP) - (US cents per
lb) 4.2 9.7 (56.8)%
------------------------ ------- ------- ---------
At the Tuticorin smelter, the cost of production decreased from 9.7 US cents per/lb to 4.2 US cents per/lb, mainly due to higher volumes, lower input costs (fuel and power) and higher by-product credits.
Recently, we have seen some pressure on copper prices but treatment and refining charges are expected to remain relatively strong. Global treatment and refining charges for 2015 have so far settled at higher levels compared to 2014, and we expect to realise over USc 24/lb for FY2016.
Financial Performance
(in US$ million, except as stated)
FY2015 FY2014 % Change
------------------------------- -------- -------- ---------
Revenue 3,700.7 3,404.8 (8.7)%
EBITDA 281.0 197.9 42.0%
EBITDA Margin 7.6% 5.8% -
Depreciation and Amortisation 51.6 42.1 22.6%
Operating Profit before
special items 229.4 155.7 47.2%
Share in group operating
profit % 13.2% 6.8%
Capital Expenditure 29.6 56.2 (47.3)%
Sustaining 29.6 37.3 (20.6)%
Growth - 18.9
------------------------------- -------- -------- ---------
EBITDA for FY2015 was US$281.0 million, significantly higher compared with US$197.9 million in the previous year. This increase was mainly driven by higher volumes, with improved operational efficiencies, higher treatment and refining charges, and lower cost of production. Operating profit was US$229.4 million in FY2015, an improvement from US$155.7 million in the previous year.
Outlook
Production is expected to be stable around 400 KT with no planned maintenance activities scheduled in FY2016.
Our Strategic Priorities
n Sustaining operating efficiencies and reducing our cost profile;
n And, 4LTPA project to expand capacity along with the flexibility to handle multiple grades of concentrate.
COPPER - ZAMBIA
Production Performance
FY2015 FY2014 % Change
----------------- ------- ------- ---------
Production (kt)
Mined Metal 116 128 (9.5)%
Finished Copper 169 177 (4.6)%
Integrated 117 124 (5.9)%
Custom 52 53 (1.3)%
----------------- ------- ------- ---------
Operations
FY2015 mined metal production was 10% lower at 116kt. Production at the Konkola underground mine was negatively affected as remediation and critical maintenance was being carried out at the shafts. Shaft #1 resumed partial hoisting in March 2015 and work at Shaft #4 is expected to be completed by Q3 FY2016. At Nchanga, FY2015 mined production was affected by lower grades and a transformer failure at the Tailings Leach Plant (TLP). During the year, TLP primary copper production was at 52,000 tonnes (56,000 tonnes in FY2014).
Production from the Upper Ore Body at the Nchanga underground was suspended in November 2014 pending a review of an appropriate mining method to exploit this ore body.
Copper custom production was marginally lower by 1%, constrained by blending challenges from concentrates available in the market.
On 23 February 2015, the Government amended the documentation requirements to reclaim VAT on future exports. This will enable us to resume purchase and treatment of third-party concentrate and thereby increase the smelter utilization.
Unit Costs (Integrated Production)
FY2015 FY2014 % Change
------------------------- ------- ------- ---------
C1 cash costs (US cents
per lb)(1) 257.7 238.4 8.1%
------------------------- ------- ------- ---------
Total cash costs (US
cents per lb)(2) 329.1 334.0 (1.5)%
------------------------- ------- ------- ---------
(1) C1 cash cost, excludes royalty, logistics, depreciation, interest, sustaining capex
(2) Total Cash Cost includes sustaining capex
The unit cost of production without royalty, logistics, depreciation, interest and sustaining capex increased to 257.7 US cents per lb in FY2015, 8.1% higher than the previous year. This was mainly due to the lower volumes and higher maintenance costs.
Financial Performance
(in US$ million, except as stated)
FY2015 FY2014 % Change
------------------------------- -------- -------- ---------
Revenue 1,077.1 1,271.4 (15.3)%
EBITDA (3.8) 156.3 (102.4)%
EBITDA Margin (0.4)% 12.3% -
Depreciation and amortisation 187.2 171.5 9.2%
Operating (Loss)/Profit
before special items (191.0) (15.3)
Share in group operating
profit (%) (11.0)% (0.7) -
Capital Expenditure 57.9 150.9 (61.6)%
ustaining 57.9 114.2 (49.3)%
Growth - 36.7 (100.0)%
------------------------------- -------- -------- ---------
EBITDA in FY2015 was US$(4) million compared with US$156 million in the previous year, impacted by the lower volumes explained above, higher unit costs and lower metal prices. These factors also contributed to an operating loss before special items of US$191 million for FY2015.
Outlook
Konkola Mine
KCM is focussing on running the Konkola mining operations efficiently through its Pivot strategy, which focuses on three key production areas, thereby resulting in improved equipment availability and productivity. There is also a programme underway to increase the number of underground workshops and the training of frontline employees.
Smelter and Refinery
While the Konkola mine ramps up production levels, we have the opportunity to increase the utilisation rate of the smelter by treating third party concentrates, from both within Zambia and from other countries. This has been positively assisted by the decision of the Government of Zambia to amend Rule 18, which has eased the documentation requirements for VAT refunds.
Nchanga Operations
At Nchanga, we are focussed on sustaining and improving the operations at the Tailings Leach Plant by treating CRO stockpiles and old tailings. Open pit and underground operations at Nchanga are approaching the end of their economic life, and therefore experiencing low grades and high unit costs.
Production is expected to ramp up after first quarter. FY2016 total production is expected to be 190-210kt with integrated production of 120-130kt at c1 cost of 225 cents/lb.
Our Strategic Priorities
n Focus on profitable production at Konkola, with the 'pivot' and project maintenance work around the shaft infrastructure and mobile fleet to up availabilities
n Ensure that Tailings Leach Plant operations continue reliably, and roll out an effective preventative maintenance programme
n Increase smelter utilization by filling spare capacity with purchased concentrates available locally in Zambia, DRC and Chile
n Realise cost efficiency, driven by volume growth and other measures
n Improve productivity.
ALUMINIUM
Production Performance
FY2015 FY2014 % Change
-------------------------------------- ------- ------- ---------
Production (kt)
Alumina - Lanjigarh 977 524 86.4%
Aluminium - Jharsuguda
I 534 542 (1.4%)
- Jharsuguda II(1) 19 - -
Aluminium - Korba I 253 252 0.7%
- Korba II(2) 71 1 -
-------------------------------------- ------- ------- ---------
Total Aluminium 877 794 10.4%
-------------------------------------- ------- ------- ---------
(1) Including trial run production of 19kt in FY15
(2) Including trial run production of 24kt in FY15.
Operations
At the Lanjigarh Alumina refinery, FY2015 production reached record levels, allowing us to achieve 98% of the permitted capacity of 1 million tonnes. Production numbers for FY2015 are not comparable to the previous year, due to the temporary suspension of production which was lifted in July 2013.
In FY2015, production was stable at the 500kt Jharsuguda-I and 245kt Korba-I smelters.
We initiated a number of innovative and cost saving projects to increase operational efficiencies. Pot-lines and other facilities including billet and wire rods are now working at much higher than designed capacities, with improved recovery and quality.
We have also commenced the start-up of the first pot line of 312.5 kt of the 1.25 mtpa Jharsuguda II smelter, using surplus power from the 1,215 MW power plant and 82 pots were under trial run in March 2015. Ramp-up of the remaining pots of the first pot line commenced in April 2015, using power from one 600MW unit of the 2,400 MW power plant.
Unit Costs
(US$ per tonne)
FY2015 FY2014 % Change
-------------------------------- ------- ------- ---------
Alumina Cost 356 358 (0.6)%
Aluminium hot metal production
cost 1,755 1,658 3.6%
Jharsuguda I CoP 1,630 1,602 1.8%%
Jharsuguda I Smelting
Cost 907 889 2.0%
BALCO CoP 1,961 1,781 6.9%
BALCO Smelting Cost 1,270 1,082 12.2%
-------------------------------- ------- ------- ---------
In FY2015, Alumina cost of production was US$356 per tonne, almost flat on FY2014.
The Cost of production of hot metal at Jharsuguda-I was US$1,630 per tonne and increased by 2.0%, compared to US$1,602 per tonne in FY2014. The increase was due to higher purchased alumina prices and higher e-auction coal prices, partially offset by improved linkage coal availability and lower specific power consumption.
The cost of production at the 245kt Korba-I increased to US$1,904 per tonne from US$1,781 per tonne in FY2014. This increase was due to higher alumina and coal costs, as linkage coal availability reduced by a further 25% this year. However, this was partially offset by the improved operational efficiencies.
FY2015 FY2014 % Change
----------------------------- ------- ------- ---------
Average LME cash settlement
prices (US$ per tonne) 1,890 1,773 6.6%
----------------------------- ------- ------- ---------
Average LME prices for Aluminium for the year were US$1,890, an increase of 7% on the previous year's average price level of US$1,773.
Financial Performance
(in US$ million, except as stated)
FY2015 FY2014 % Change
------------------------------- -------- -------- ---------
Revenue 2,081.9 1,785.4 16.6%
EBITDA 415.5 287.3 44.6%
EBITDA Margin 20.0% 16.1% -
Depreciation and amortisation 139.6 174.7 (20.1)%
Operating Profit before
special items 275.9 112.5 145.1%
Share in group operating
profit (%) 15.9% 4.9%
Capital Expenditure 142.0 165.3 (14.1)%
Sustaining 9.5 18.3 (47.9)%
Growth 132.5 147.1 (9.9)%
------------------------------- -------- -------- ---------
FY2015 EBITDA was up 44.6% at US$416 million, compared with US$287 million in the previous year. This was primarily due to higher LME prices and premia on metals, as well as additional volume from the new Korba II smelter.
Projects
During the year, progress was made in securing raw material for our Alumina refinery, with the Government of Odisha granting Prospecting Licenses (PLs) for three laterite deposits. The exploration work is ongoing and we expect to start production in FY2016 after receipt of the Mining Leases (ML). The approval for expansion of the Lanjigarh Alumina refinery has reached the final stages and Environmental Clearance is expected soon.
At the new 325kt Korba- II smelter, 84 pots were commissioned during the year and produced 71,000 tonnes, which includes 19,000 under trial run. Ramp up to full capacity will take place during H1 FY2016, along with the ramp up of the 1,200 MW power plant. Out of the two captive power units of 300 MW each, the first unit is expected to be commissioned in Q1 FY2016. The BALCO 270MW power plant will be available for captive consumption as a back-up for pot ramp-up support.
We have also commenced the start-up of the first pot line of 312.5 kt of the 1.25 mtpa Jharsuguda II smelter, using surplus power from the 1,215 MW power plant. 82 pots have been started during the last quarter of FY2015 and are under trial run. Ramp-up of the remaining pots of the first pot line commenced in April 2015, using power from one 600MW unit of the 2,400 MW power plant.
In the recent coal block auctions conducted by the Government, BALCO was successful in securing two coal mines which are ready for production; Chotia Block with reserves of 15.5 mt and annual production capacity of 1mtpa; and Gare Palma IV/1 Block with reserves of 44 mt and capacity of 6 mtpa.
We will commence production at the Chotia mine over the next few months after transfer of the mining lease and other statutory approvals. BALCO has appealed regarding Government's rejection of its winning bid for the Gare Palma IV/1 block and the matter is sub-judice.
Despite a successful bid, for Gare Palma, the Government has challenged the award and the matter is now sub jurisdiction.
Outlook
During FY2016, the company will produce and consume 1.7mt of Alumina from Lanjigarh refinery, the balance requirements will be imported (largely tied up with major Alumina producers). For producing Alumina, the main sources of bauxite will be 2 mt from captive mines at BALCO, but sourced from other domestic bauxite mines and imports (apart from availability of laterite).
The company has Prospecting Licences for three laterite mines in Odisha and exploration is in progress. We expect to commence mining in the second half of FY2016.
Strategic Priorities
n Secure captive refinery feed to realise the full potential of cost efficiencies and increase capacity utilisation;
n Ramp up Aluminium capacity;
n Laterite mining;
n Commencement of coal block operations at BALCO; and
n Lanjigarh refinery expansion to 4mpta.
POWER
Production Performance
FY2015 FY2014 % Change
------------------------- ------- ------- ---------
Power Sales (MU) 9,859 9,374 5.2%
MALCO and Wind Energy 1,341 1,359 (1.3)%
BALCO 270 MW 89 390 (77.2)%
600 MW(1) 10 - -
Jharsuguda 2,400 MW 7,206 7,625 (5.5)%
Talwandi Sabo(TSPL)(2) 1,213 - -
------------------------- ------- ------- ---------
(1) Includes production under trial run 10 million units in FY2015
(2) Includes production under trial run 264 million units in FY2015
Operations
The Jharsuguda 2,400MW power plant operated at a lower Plant Load Factor (PLF) of 39% during FY2015 due to lower market demand and evacuation constraints for some regions. However, during FY2016 capacity utilisation is expected to go up significantly as we ramp-up the plant for additional aluminium pot-lines.
Out of the two 300MW units of the 1,200 MW Korba Power Plant destined for commercial power: one 300MW unit is currently under trial run, and will be commissioned during Q1 FY2016; the second commercial unit is expected to be commissioned during Q2 FY2016.
At the Talwandi Sabo power plant, the first 660MW unit has started commercial power generation with another unit synchronised. The 1980 MW power plant is expected to ramp up to capacity during FY 2016.
Unit Sales and Costs
FY2015 FY2014 % Change
----------------------- ------- ------- ---------
Sales realisation(US
cents/kwh) 5.3 5.9 (9.1)%
Cost of production(US
cents/kwh) 3.5 3.7 (5.2)%
----------------------- ------- ------- ---------
Average power sale prices were lower in FY2015 at US cents 5.3 per unit compared with US cents 5.9 per unit in the previous year due to lower demand.
During FY2015, average power power generation costs improved, falling to 3.5 US cents per unit compared with 3.7 US cents per unit in the previous year on account of a lower coal cost.
Financial Performance
(US$ million, except as stated)
FY2015 FY2014 % Change
------------------------------- ------- ------- ---------
Revenue 671.9 621.7 8.1%
EBITDA 153.8 168.4 (8.7)%
EBITDA Margin 22.9% 27.1%
Depreciation and amortisation 65.8 99.1 (33.6)%
Operating Profit before
special items 88.0 69.4 26.8%
Share in group operating
profit% 5.1% 3.0% -
Capital Expenditure 142.2 288.9 (50.8)%
Sustaining - 5.8 -
Project 142.2 283.1 (49.7)%
------------------------------- ------- ------- ---------
EBITDA remained at a similar level despite lower demand and tariffs, following additional power sold from the newly commissioned unit of the Talwandi Sabo power plant.
Outlook
During FY2016, we will continue to increase capacity utilisation at Jharsuguda and bring new capacity at Korba and Talwandi Sabo.
Our Strategic Priorities
n Enhance access to power transmission facilities
n Complete the 1,980MW Talwandi Sabo power project
Port Business
The Vizag General Cargo Berth (VGCB) tonnage handled increased by 48% to 7 million tonnes as compared to 4.7 million tonnes in FY2014 and generated an EBITDA of US$13.0 million.
VGCB is one of the deepest coal terminals on the eastern coast of India, which enables docking of large Cape-size vessels.
Principal Risks and Uncertainties
Vedanta's businesses are exposed to variety of risks inherent to an international Oil and Gas, mining and resources organisation. The nature of operations for resource companies operations is long term, resulting in the identification of several on-going risks. Resource companies also carry a significant element of constantly-evolving risks.
It is essential to have in place necessary systems to manage these risks, while balancing the relative risk/reward equations demanded by stakeholders. Our management systems, organizational structures, processes, standards, and code of conduct together form our internal control systems, which govern how we conduct the Group's business and manage all associated risks. Materiality and tolerance for risk are key considerations in our decision-making.
Risk management is embedded in our critical business activities, functions and processes. It helps Vedanta meet its objectives through aligning operating controls with mission and vision. Our risk management framework is designed to be a simple, consistent and clear format for managing and reporting risks from the Group's businesses to the Board. It is a multi-layered risk management framework, aimed at effectively mitigating the various risks our businesses are exposed to over the course of their operations and in their strategic actions.
We identify risk at the individual business level for existing operations as well as for ongoing projects through a consistently applied methodology, using the Turnbull risk matrix. At least once a quarter, formal discussions on risk management take place in business level review meetings throughout the Group. At these meetings, each business reviews its risks, and any change in the nature and extent of the major risks since the last assessment, also control measures established for the risk and further action plans. Control measures in the Turnbull risk matrix are also periodically reviewed by business management teams to verify their effectiveness.
All Vedanta risk management review meetings are chaired by business CEO and attended by COO/CFO, senior management and functional heads. Risk officers are formally nominated at all operating businesses, and Group level. The role of the risk officer is to create awareness of risk at senior management level and to develop and nurture a risk management culture within all businesses.
Risk mitigation plans form an integral part of the KRA / KPI process of process owners. Structured discussion on risk management also happens at SBU levels on their respective risk matrix and mitigation plans. Governance of the risk management framework in the businesses is anchored with their leadership team.
The Board of Directors has the ultimate responsibility for management of risks and for ensuring the effectiveness of internal control systems. The Audit Committee aids the Board in this process by identifying and assessing any changes in risk exposure, reviewing all risk control measures and approving remedial actions, where appropriate.
The Audit Committee supported by the Risk Management Committee, which helps evaluate the design and operating effectiveness of the risk mitigation program and control systems.
Additional key risk governance and oversight committees include:
n CFO Committee - has an oversight on any treasury-related risks. This committee comprises the Group Chief Financial Officer, business Chief Financial Officers and Treasury Heads at respective businesses
n Group Capex Sub-Committee - evaluates capex risks while reviewing any capital investment decisions, and institutes a risk management framework in all expansion projects
n Vedanta Board Level Sustainability Committee - looks at sustainability related risks. This committee is headed by a Non-Executive Director, and other members are the Group Chief Executive Officer and other business leaders.
Every business division in the Group has developed its own risk matrix of Top 20 risks, which are reviewed at Business Management Committee level. Business divisions have developed individual risk registers, depending on the size of their operations and the number of SBUs / locations. These risks are reviewed in SBU level meetings.
Our principal risks have been assessed according to impact and likelihood, and are described on the following pages. The order in which these risks appear does not necessarily reflect the likelihood of their occurrence or the relative magnitude of their impact on our business. While our risk management framework is designed to help Vedanta meet its objectives, there can be no guarantee that our risk management activities will mitigate or prevent these or other risks from occurring.
Risks & Impact Mitigation Plan
--------------------------------- ----------------------------------------
Delay in commencement We continue our efforts to
of production facilities secure key raw material linkages
in aluminium business for our alumina / aluminium
business. We are also pursuing
multiple options for bauxite
sourcing with the Government
of Odisha. Volumes are gradually
ramping up across our Aluminium
and Power businesses and
we have received the approval
to start our 1200 MW power
plant in Korba. We are pursuing
the deemed CPP route under
the Electricity Act to resolve
availability of power at
Jharsuguda on commercially
viable terms.
Infrastructure-related challenges
are being addressed, with
requisite approvals for the
commencement of production
facilities are being pursued.
A strong management team
is in place and continues
to work towards sustainable
low production costs, operational
excellence and securing key
raw material linkages.
--------------------------------- ----------------------------------------
Some of our projects
have been completed
(pending commissioning)
or are nearing completion.
The timing, implementation
and cost of these
expansion projects
is subject to a number
of risks, including
a delay in obtaining
necessary approvals,
which may delay or
prevent us from commencing
commercial operations
at some of these projects,
availability of power
at commercially reasonable
rates etc.
--------------------------------- ----------------------------------------
Challenges in resumption, The Honourable Supreme Court
continuation of Iron ('The Court') in India lifted
Ore business the ban on mining in the
State of Goa, in April 2014,
subject to certain conditions.
The Indian Ministry of Environment
and Forest has also revoked
its earlier order, which
had kept environment clearances
for iron ore mines in Goa
in abeyance. Vedanta has
been allocated with an interim
annual mining quantity of
5.5 million tonnes of saleable
ore based on the state wide
cap of 20 mtpa for FY2015
which the group expects to
be progressively increased
in the coming years.
Mining is expected to commence
post monsoons, after receipt
of remaining approvals from
the Indian Government. We
are working towards securing
the necessary permissions
for commencement of operations.
Aggressive cost reduction
initiatives are also underway
at our Iron Ore business.
--------------------------------- ----------------------------------------
The iron ore business
has faced temporary
suspension and Goa
iron ore yet to commence
its operation
--------------------------------- ----------------------------------------
Transitioning of Zinc We are working with internationally
and Lead mining operations renowned engineering and
from open pit to underground technology partners towards
mining ensuring a smooth transition
from open pit to underground
mining, with a major focus
on safety aspects.
Technical audits are being
carried out by independent
agencies.
Reputed contractors have
been engaged to ensure completion
of the project on indicated
time lines.
These mines will be developed
using best-in-class technology
and equipment, and ensuring
the highest level of productivity
and safety.
We are inducting employees
and contractors in our system
with underground mining expertise.
Our employees are also gaining
experience working abroad
in underground mines to accentuate
skill development.
Stage gate process is in
place to ensure we frequently
review risk and remedy. Robust
quality control procedures
have also been implemented
to check safety and quality
of services, design, and
actual physical work.
Additional output from cut
V of the open pit as well
as ramp up from some of the
mines is expected to smoothen
this transition.
--------------------------------- ----------------------------------------
Our Zinc and Lead
mining operations
in India are transitioning
from an open pit mining
operation to underground
mining operation.
Difficulties in managing
this transition may
result in challenges
in achieving stated
business milestones.
--------------------------------- ----------------------------------------
Operational turnaround We are reviewing our operations
at KCM and engaging with all stakeholders
in light of operating challenges,
issues in VAT refunds and
a new Mineral Royalty Tax
regime. We are committed
to improving KCM operating
performance.
We are implementing the pivot
strategy at Konkola to focus
on profitable areas of production
and reviewing operations
and engaging with all stakeholders.
Government authorities are
proceeding in resolving policy
tangles in the resources
industry and enabling faster
approvals.
Our focus is on improving
equipment availability to
increase extraction rates,
and experienced operators
are being introduced into
critical positions.
Several cost-saving initiatives
and restructuring reviews
are also underway at KCM
to preserve cash
--------------------------------- ----------------------------------------
Lower production and
higher cost at KCM
may impact our profitability
--------------------------------- ----------------------------------------
Discovery risk Our strategic priority is
to add to our reserves and
resources by extending resources
at a faster rate than we
deplete them, through continuous
focus on drilling and exploration
programmes.
In order to achieve this
we have developed an appropriate
organisation and allocated
adequate financial resources
for exploration. International
technical experts and agencies
are working closely with
our exploration team to build
on this target.
We continue to work towards
long-term supply contracts
with mines.
--------------------------------- ----------------------------------------
The increased production
rates from our growth
oriented operations
places demand on exploration
and prospecting initiatives
to replace reserve
and resources at a
pace faster than depletion.
A failure in our ability
to discover new reserves,
enhance existing reserves
or develop new operations
in sufficient quantities
to maintain or grow
the current level
of our reserves could
negatively affect
our prospects. There
are numerous uncertainties
inherent in estimating
ore and oil and gas
reserves, and geological,
technical and economic
assumptions that are
valid at the time
of estimation. These
may change significantly
when new information
becomes available.
--------------------------------- ----------------------------------------
Extension of Production We are in continuous dialogue
Sharing Contract of with the Indian Government
Cairn beyond 2020 and relevant stakeholders.
or extension at less The Production-Sharing Contract
favourable terms has certain in-built options
for extension; Cairn has
already applied for an extension
and the matter is being pursued
with all stakeholders.
--------------------------------- ----------------------------------------
Cairn India has 70%
participating interest
in Rajasthan Block.
The Production-Sharing
Contract (PSC) of
Rajasthan Block runs
till 2020. Challenges
in extending Cairn's
Production-Sharing
Contract beyond 2020,
or extension at less
favourable terms,
may have implications.
--------------------------------- ----------------------------------------
Reliability and predictability Asset utilisation and cost
in operational performance of production ('CoP') continues
to be a priority. We carry
out periodic benchmarking
of cost of production and
other operational efficiencies
with the objective of being
in the top decile in all
the businesses on CoP. We
have employed reputable consultancy
firms to advise on improving
overall operational efficiencies.
A structured asset optimisation
programme operates in the
Group, and the role of the
asset optimisation function
in each business has been
enlarged and elevated in
the organisation structure.
We are also pursuing savings
and synergy initiatives in
procurement and marketing
in order to reduce costs
and improve performance of
our operations. The procurement
initiatives include aspects
such as optimising supplier
portfolio and combing purchasing
at Group level, combining
logistics activities, improve
asset flexibility to process
a wider range of commodities
and develop closer relationships
with key vendors to get benchmark
performance.
--------------------------------- ----------------------------------------
Our operations are
subject to conditions
and events beyond
our control that could,
among other matters,
increase our mining,
transportation or
production costs,
disrupt or halt operations
at our mines, smelters
and power plants and
production facilities
for varying lengths
of time or even permanently.
These conditions and
events include disruptions
in mining and production
due to equipment failures,
unexpected maintenance
problems and other
interruptions, non-availability
of raw materials of
appropriate quantity
and quality for our
energy requirements,
disruptions to or
increased cost of
transport services
or strikes and industrial
actions or disputes.
--------------------------------- ----------------------------------------
Fluctuation in commodity The Group has a well-diversified
prices (including portfolio which acts as a
Oil) hedge against fluctuations
in commodities and delivers
cash flows through the cycle.
Vedanta considers exposure
to commodity price fluctuations
to be an integral part of
the Group's business and
its usual policy is to sell
its products at prevailing
market prices and not to
enter into price hedging
arrangements other than for
businesses of custom smelting
and purchased Alumina, where
back-to-back hedging is used
to mitigate pricing risks.
In exceptional circumstances
we may enter into strategic
hedging but only with prior
approval of the Executive
Committee. The Group monitors
the commodity markets closely
to determine the effect of
price fluctuations on earnings,
capital expenditure and cash
flows. The CFO Committee
reviews all commodity-related
risks and suggests necessary
courses of action as needed
by business divisions. Our
focus is on cost control
and cost reduction.
--------------------------------- ----------------------------------------
Prices and demand
for the Group's products
are expected to remain
volatile / uncertain
and strongly influenced
by global economic
conditions. Volatility
in commodity prices
and demand may adversely
affect our earnings,
cash flow and reserves.
--------------------------------- ----------------------------------------
Currency exchange Vedanta does not speculate
rate fluctuations in forex. We have developed
robust controls in forex
management to hedge currency
risk liabilities on a back-to-back
basis.
The CFO Committee reviews
our forex-related matters
periodically and suggests
necessary courses of action
as may be needed by businesses
from time to time, and within
the overall framework of
our forex policy.
We seek to mitigate the impact
of short-term movements in
currency on the businesses
by hedging short-term exposures
progressively based on their
maturity. However, large
or prolonged movements in
exchange rates may have a
material adverse effect on
the Group's businesses, operating
results, financial condition
and/or prospects.
--------------------------------- ----------------------------------------
Our assets, earnings
and cash flows are
influenced by a variety
of currencies due
to the diversity of
the countries in which
we operate. Fluctuations
in exchange rates
of those currencies
may have an impact
on our financials.
Although the majority
of the Group's revenue
is tied to commodity
prices that are typically
priced by reference
to the US dollar,
a significant part
of its expenses are
incurred and paid
in local currency.
Moreover Group borrowings
are significantly
denominated in US
dollars while a large
percentage of cash
and liquid investments
are held in other
currencies, mainly
in the Indian rupee.
Any material fluctuations
of these currencies
against the US dollar
could result in lower
profitability or in
higher cash outflows
towards debt obligations.
--------------------------------- ----------------------------------------
Political, legal and Vedanta, together with its
regulatory risk business divisions, monitors
regulatory and political
developments on continuous
basis. Our focus has been
on communicating responsible
mining credentials through
representations two Government
and industry associations.
We continue to demonstrate
the Group's commitment to
sustainability through actively
engaging with proactive environmental,
safety and CSR practices,
including local community,
media and NGOs.
We are SOX and SEC-related
compliant organisations.
We have an online portal
for compliance monitoring.
Appropriate escalation and
review mechanisms are in
place. Competent in-house
legal organisation exists
at all the businesses. A
Framework for monitoring
against Anti Bribery and
Corruption guidelines is
also in place.
--------------------------------- ----------------------------------------
We have operations
in many countries
around the globe,
which have varying
degrees of political
and commercial stability.
The political, legal
and regulatory regimes
in the countries we
operate in may result
in higher operating
costs, restrictions
such as the imposition
or increase in royalties
or taxation rates,
export duty, impact
on mining rights /
ban and change in
legislation pertaining
to repatriation of
money.
We may also be affected
by the political acts
of governments including
resource nationalisation
and legal cases in
these countries over
which we have no control.
--------------------------------- ----------------------------------------
Tax related matters Vedanta has a robust organization
in place at business and
Group level to handle tax-related
matters. We engage, consult
and take opinion from reputed
tax consulting firms. Reliance
is placed on appropriate
legal opinion and precedence.
Recently the Government has
taken an aggressive stance
against some of our Group
companies in regards to their
tax matters.
We continue to take appropriate
legal opinions and actions
on these matters to mitigate
the impact of these actions
on the Group and its subsidiaries.
--------------------------------- ----------------------------------------
Our businesses are
in tax regime and
change in any tax
structure may impact
our profitability
--------------------------------- ----------------------------------------
Breaches in Information Appropriate organisation
/ IT security in place at respective businesses
for information and IT security.
IT security policies and
procedures are defined at
individual businesses.
We seek to manage cyber security
risk through increased standards,
ongoing monitoring of threats
and awareness initiatives
throughout the organisation.
An IT system is in place
to monitor logical access
controls.
We continue to carry out
IT security reviews by experts
periodically and improve
IT security standards.
--------------------------------- ----------------------------------------
Like many other global
organisations, our
reliance on computers
and network technology
is increasing. These
systems could be subject
to security breaches
resulting in theft,
disclosure or corruption
of key / strategic
information. Security
breaches could also
result in misappropriation
of funds or disruptions
to our business operations.
A cyber security breach
could have an impact
on business operations.
--------------------------------- ----------------------------------------
Community relations Establishing and maintaining
close links with stakeholders
is an essential part of our
journey as a sustainable
business. Our endeavour is
to integrate our sustainability
objectives into long-term
planning.
Vedanta's approach to community
development is holistic,
long-term, integrated and
sustainable, and is governed
by two key considerations;
the needs of the local people,
and the development plan
in line with the UN Millennium
Development Goals.
The Board's Corporate Social
Responsibility (CSR) Committee
decides the focus areas of
all CSR activities, budget
and programs to be undertaken
by businesses.
Our business leadership teams
have periodic engagements
with all local communities
to establish relations based
on trust and mutual bene
t. Our focus is on local
consent prior to accessing
resources. We seek to identify
and minimise potential negative
operational impacts and risks
through responsible behaviour
- acting transparently and
ethically, promoting dialogue
and complying with commitments
to stakeholders.
We implement sustainability
controls through the Vedanta
Sustainability Framework
aligned to IFC, ICMM and
OECD Standards. We work with
and partner with global think
tanks and institutional bodies
such as WBCSD, CII and IUCN,
and have introduced structured
community development programmes
to reduce Water, Energy and
Carbon consumption.
We help communities identify
their priorities through
need assessment programmes
and then work closely with
them to design programmes
that seek to make progress
towards improvement in quality
of life of the local communities.
Further details of the Group's
CSR activities are included
in the Sustainability section.
--------------------------------- ----------------------------------------
The continued success
of our existing operations
and future projects
are in part dependent
upon broad support
and a healthy relationship
with the respective
local communities.
Failure to identify
and manage local concerns
and expectations can
have a negative impact
on relations with
local communities
and therefore affect
the organisation's
reputation and social
licence to operate
and grow.
--------------------------------- ----------------------------------------
Health, safety and Health, Safety and Environment
environment (HSE) (HSE) is a high priority
for Vedanta. Compliance with
international and local regulations
and standards, and protecting
our people, communities and
the environment from harm
and our operations from business
interruptions, are our key
focus areas.
Vedanta's Board Sustainability
Committee is chaired by a
non-executive director and
includes the Group Chief
Executive Officer, and meets
periodically to discuss HSE
performance.
We have appropriate policies
and standards in place to
mitigate and minimise any
HSE-related occurrences.
Structured monitoring and
a review mechanism and system
of positive compliance reporting
is in place.
We have implemented a set
of standards to align our
sustainability framework
in line with international
practices. A structured sustainability
assurance programme continues
to operate in all business
divisions. It covers environment,
health, safety, community
relations and human rights
aspects, and embeds our operational
commitment to HSE.
HSE experts are also inducted
from reputed Indian and global
organisations to bring in
best-in-class practices.
Each business has an appropriate
policy in place for occupational
health-related matters, supported
by structured processes,
controls and technology.
Our operations ensure the
issue of operational health
and consequential potential
risk/obligations are carefully
handled. Depending on the
nature of the exposure and
surrounding risk, our operations
have different levels of
processes, controls and monitoring
mechanisms. There is a strong
focus on safety during project
planning / execution with
adequate thrust on contract
workmen safety.
Fatal accidents and injury
rates have declined. We are
implementing programs to
eliminate fatalities and
control injuries. Our leadership
remains focused on a Zero-Harm
culture across the organisation.
Consistent application of
'Life-Saving' performance
standards and quantitative
risk assessments for all
the critical areas / formal
identification of process
safety risks and focusing
on the management of controls.
We continue to improvise
on our safety investigations
and follow-up processes.
Further details of our HSE-related
activities are included in
the Sustainability section.
--------------------------------- ----------------------------------------
The resources sector
is subject to extensive
health, safety, and
environmental laws,
regulations and standards.
Evolving regulations,
standards and stakeholder
expectations could
result in increased
cost, litigation or
threaten the viability
of operations in extreme
cases.
--------------------------------- ----------------------------------------
Talent / skill shortage Mitigation Plan
risk We continue to invest in
initiatives to widen our
talent pool. We have a talent
management system in place
to identify and develop internal
candidates for critical management
positions and processes to
identify suitable external
candidates.
Our performance management
system is designed to provide
reward and remuneration structures
and personal development
opportunities to attract
and retain key employees.
A structured programme maps
critical positions and ensures
all such positions are filled
with competent resources.
Our progressive HR policies
and strong HR leadership
have ensured that career
progression, job rotation
and job enrichment are focus
areas for our businesses.
We have established the Mining
Academy in Rajasthan to develop
an employee pool with enhanced
underground mining skills.
We also have a structured
program to develop a technically
proficient employee pool.
--------------------------------- ----------------------------------------
The Company's efforts
to continue its growth
and efficient operations
will place significant
demand on its management
resources. Our highly
skilled workforce
and experienced management
team is critical to
maintaining its current
operations, implementing
its development projects
and achieving longer-term
growth. Any significant
loss or diminution
in the collective
pool of Vedanta's
executive management
or other key team
members could have
a material effect
on its businesses,
operating results
and future prospects.
--------------------------------- ----------------------------------------
Loss of assets or Vedanta has taken appropriate
profit due to natural Group insurance cover to
calamities. mitigate this risk. We have
appointed an external agency
to review the risk portfolio
and adequacy of this cover
and to assist us in our insurance
portfolio. Our underwriters
are reputed institutions
and have capacity to underwrite
our risk. There is an established
mechanism of periodic insurance
review place at all entities.
However, any occurrence not
fully covered by insurance
could have an adverse effect
on the Group's business.
--------------------------------- ----------------------------------------
Our operations may
be subject to a number
of circumstances not
wholly within the
Group's control. These
include damage to
or breakdown of equipment
or infrastructure,
unexpected geological
variations or technical
issues, extreme weather
conditions and natural
disasters, any of
which could adversely
affect production
and/or costs.
--------------------------------- ----------------------------------------
The Group's reported We maintain a close watch
results could be adversely on various business drivers
affected by the impairment that could impact impairment
of assets assessment. There is continuous
focus, monitoring and periodic
review of our assets.
We also periodically review
the assumptions, carry out
testing and re-assess the
useful life of these assets
with help of reputable firms.
Vedanta reviews the carrying
value of its assets and long
-term price assumptions.
In view of steep drop in
oil prices, the company has
impaired US$4.5 billion (net
of tax) of carrying values.
--------------------------------- ----------------------------------------
The change in carrying
value of assets depends
on various assumptions.
The change in any
of those assumptions
may impact the useful
life and its carrying
value
--------------------------------- ----------------------------------------
Liquidity risk The Group generates sufficient
cash flows from current operations
which, together with the
available cash and cash equivalents
and liquid financial asset
investments, provide short-term
and long-term liquidity.
The volume ramp up and our
efforts to optimise Opex
and Capex are expected to
provide cash flow that will
reduce gearing in the medium
term. Cairn India has announced
a reduction in capex, which
will help to maintain positive
free cash flows at current
oil prices and retain the
flexibility to invest in
growth projects as oil price
improves and costs are further
optimised.
Anticipated future cash flows
and undrawn committed facilities
are expected to be sufficient
to meet the ongoing capital
investment programme and
liquidity requirement of
the Group in the foreseeable
future. The group has sufficient
experience in raising and
refinancing debt (c$35 billion
over the past decade) and
has in the past been able
to tap diverse sources of
funding to meet its needs.
This will help mitigate the
execution risk around this
risk.
The Group has a strong Balance
Sheet that gives sufficient
flexibility to raise further
debt should the need arise.
The Group is further committed
to further simplify the structure
which will help improve cash
fungibility and hence lower
liquidity risk.
--------------------------------- ----------------------------------------
The Group may not
be able to meet its
payment obligations
when due or unable
to borrow funds in
the market at an acceptable
price to fund actual
or proposed commitments.
A sustained adverse
economic downturn
and/or suspension
of its operation in
any business, effecting
revenue and free cash
flow generation, may
cause some stress
on the Company's financing
and covenant compliance
and its ability to
raise financing at
competitive terms.
Any constraints on
up streaming of funds
from the subsidiaries
to the Group may affect
the liquidity position
at the Group level.
--------------------------------- ----------------------------------------
CONSOLIDATED INCOME STATEMENT
(US$ million except as stated)
Year ended 31 Year ended 31
March 2015 March 2014(1)
------------------------- ----- ------------------------------------ ----------------------------------
Before Before
Special Special Special Special
Note items items Total items items Total
------------------------- ----- ----------- ---------- ----------- ----------- -------- -----------
Revenue 5 12,878.7 - 12,878.7 12,945.0 - 12,945.0
Cost of sales (10,463.9) - (10,463.9) (10,043.2) - (10,043.2)
------------------------- ----- ----------- ---------- ----------- ----------- -------- -----------
Gross profit 2,414.8 - 2,414.8 2,901.8 - 2,901.8
Other operating
income 104.0 - 104.0 84.0 - 84.0
Distribution costs (245.2) - (245.2) (237.6) - (237.6)
Administrative
expenses (538.1) - (538.1) (460.1) - (460.1)
Special items 6 - (6,744.2) (6,744.2) - (138.0) (138.0)
------------------------- ----- ----------- ---------- ----------- ----------- -------- -----------
Operating profit/
(loss) 1,735.5 (6,744.2) (5,008.7) 2,288.1 (138.0) 2,150.1
Investment revenue 7 832.6 - 832.6 687.7 - 687.7
Finance costs 8 (1,387.2) - (1,387.2) (1,439.8) - (1,439.8)
Other gains and
(losses) [net] 9 (76.9) - (76.9) (279.9) - (279.9)
------------------------- ----- ----------- ---------- ----------- ----------- -------- -----------
Profit/ (loss)
before taxation
(a) 1,104.0 (6,744.2) (5,640.2) 1,256.1 (138.0) 1,118.1
Tax credit- special
items 10 - 2,205.1 2,205.1 - 29.4 29.4
Net tax expense-
others 10 (352.6) - (352.6) (158.1) - (158.1)
------------------------- ----- ----------- ---------- ----------- ----------- -------- -----------
Net tax credit/
(expense) (b) 10 (352.6) 2,205.1 1,852.5 (158.1) 29.4 (128.7)
------------------------- ----- ----------- ---------- ----------- ----------- -------- -----------
Profit/ (loss)
for the year from
continuing operations
(a+b) 751.4 (4,539.1) (3,787.7) 1,098.0 (108.6) 989.4
------------------------- ----- ----------- ---------- ----------- ----------- -------- -----------
Attributable to:
Equity holders
of the parent (74.7) (1,723.9) (1,798.6) (123.0) (73.0) (196.0)
Non-controlling
interests 826.1 (2,815.2) (1,989.1) 1,221.0 (35.6) 1,185.4
------------------------- ----- ----------- ---------- ----------- ----------- -------- -----------
Profit/ (loss)
for the year from
continuing operations 751.4 (4,539.1) (3,787.7) 1,098.0 (108.6) 989.4
------------------------- ----- ----------- ---------- ----------- ----------- -------- -----------
Loss per share
(US cents)
Basic loss per
ordinary share 11 (27.2) (627.3) (654.5) (45.0) (26.7) (71.7)
Diluted loss per
ordinary share 11 (27.2) (627.3) (654.5) (45.0) (26.7) (71.7)
------------------------- ----- ----------- ---------- ----------- ----------- -------- -----------
(1) Restricted refer note 1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(US$ million)
Year ended Year ended
31March 31 March
2015 2014
-------------------------------------------- ------------ -----------
(Loss)/ profit for the year from
continuing operations (3,787.7) 989.4
-------------------------------------------- ------------ -----------
Income and expenses recognised
directly in equity:
Items that will not be reclassified
subsequently to income statement:
Remeasurement of net defined
benefit plans (14.0) (4.2)
Tax effects on items recognised
directly in equity 4.6 1.5
-------------------------------------------- ------------ -----------
Total (a) (9.4) (2.7)
Items that may be reclassified
subsequently to income statement:
Exchange differences arising
on translation of foreign operations (582.0) (1,239.6)
Change in fair value of available-for-sale
financial assets 2.1 (0.1)
Change in fair value of cash
flow hedges deferred in reserves (27.4) (47.1)
Tax effects arising on cash flow
hedges deferred in reserves 0.8 (3.7)
Change in fair value of cash
flow hedges transferred to income
statement (17.8) (0.9)
Tax effects arising on cash flow
hedges transferred to income
statement 6.0 0.3
Total (b) (618.3) (1,291.1)
-------------------------------------------- ------------ -----------
Other comprehensive loss for
the year (a+b) (627.7) (1,293.8)
-------------------------------------------- ------------ -----------
Total comprehensive loss for
the year (4,415.4) (304.4)
-------------------------------------------- ------------ -----------
Attributable to:
Equity holders of the parent (2,089.8) (773.8)
Non-controlling interests (2,325.6) 469.4
-------------------------------------------- ------------ -----------
Total comprehensive loss for
the year (4,415.4) (304.4)
-------------------------------------------- ------------ -----------
CONSOLIDATED BALANCE SHEET
As at
As at Year Year ended
ended 31 31 March
(US$ million) Note March 2015 2014
----------------------------- ----- ------------ ------------
Assets
Non-current assets
Goodwill 16.6 16.6
Intangible assets 101.9 108.6
Property, plant and
equipment 23,352.0 31,043.5
Financial asset investments 4.2 1.7
Non-current tax assets 394.0 -
Other non-current
assets 156.0 132.1
Financial instruments
(derivatives) 0.2 16.2
Deferred tax assets 1,252.6 1,223.7
----------------------------- ----- ------------ ------------
25,277.5 32,542.4
----------------------------- ----- ------------ ------------
Current assets
Inventories 1,605.7 1,742.5
Trade and other receivables 1,839.2 1,739.9
Financial instruments
(derivatives) 16.6 54.0
Current tax assets 40.1 357.6
Liquid investments 7,856.1 8,568.5
Cash and cash equivalents 353.7 369.4
----------------------------- ----- ------------ ------------
11,711.4 12,831.9
----------------------------- ----- ------------ ------------
Total assets 36,988.9 45,374.3
----------------------------- ----- ------------ ------------
Liabilities
Current liabilities
Short term borrowings 13 (3,179.2) (2,437.0)
Convertible bonds - (1,921.5)
Trade and other payables (4,730.0) (4,690.0)
Financial instruments
(derivatives) (45.7) (118.7)
Retirement benefits (12.7) (4.8)
Provisions (140.8) (88.7)
Current tax liabilities (74.2) (29.3)
----------------------------- ----- ------------ ------------
(8,182.6) (9,290.0)
----------------------------- ----- ------------ ------------
Net current assets 3,528.8 3,541.9
----------------------------- ----- ------------ ------------
Non-current liabilities
Medium and long-term
borrowings 13 (12,385.6) (12,512.7)
Convertible bonds (1,103.0) -
Trade and other payables (194.3) (203.3)
Financial instruments
(derivatives) (0.1) (27.4)
Deferred tax liabilities (2,588.7) (4,960.1)
Retirement benefits (61.9) (58.1)
Provisions (203.4) (336.0)
Non equity non-controlling
interests (11.9) (11.9)
----------------------------- ----- ------------ ------------
(16,548.9) (18,109.5)
----------------------------- ----- ------------ ------------
Total liabilities (24,731.5) (27,399.5)
----------------------------- ----- ------------ ------------
Net assets 12,257.4 17,974.8
----------------------------- ----- ------------ ------------
Equity
Share capital 30.0 29.8
Share premium 198.5 198.5
Treasury shares (556.9) (556.9)
Share-based payment
reserve 27.4 46.9
Convertible bond reserve 38.4 80.1
Hedging reserve (74.7) (50.4)
Other reserves 339.9 471.6
Retained earnings 1,600.5 3,790.8
----------------------------- ----- ------------ ------------
Equity attributable
to equity holders
of the parent 1,603.1 4,010.4
Non-controlling interests 10,654.3 13,964.4
----------------------------- ----- ------------ ------------
Total equity 12,257.4 17,974.8
============================= ===== ============ ============
Financial Statements of Vedanta Resources plc, registration number 4740415 were approved by the Board of Directors on 13 May 2015 and signed on behalf by
Tom Albanese - Chief Executive Officer
CONSOLIDATED CASH FLOW STATEMENT
(US$ million)
Year ended Year ended
31 March 31 March
Note 2015 2014(1)
----------------------------------- ----- ------------ ------------
Operating activities
(Loss)/ profit before taxation (5,640.2) 1,118.1
Adjustments for:
Depreciation and amortisation 2,005.7 2,203.1
Investment revenue (832.6) (687.7)
Finance costs 1,387.2 1,439.8
Other gains and (losses)
[net] 76.9 279.9
Loss on disposal of property,
plant and equipment 4.6 4.4
Write-off of unsuccessful
exploration costs 128.7 10.8
Share-based payment charge 28.6 32.9
Impairment of mining reserves
and assets 6,694.4 81.6
Other non-cash items 40.8 48.3
----------------------------------- ----- ------------ ------------
Operating cash flows before
movements in working capital 3,894.1 4,531.2
Decrease in inventories 40.0 75.0
Increase in receivables (134.5) (123.4)
Increase in payables 225.2 678.8
----------------------------------- ----- ------------ ------------
Cash generated from operations 4,024.8 5,161.6
Dividends received 0.3 1.0
Interest income received 587.7 337.8
Interest paid (1,334.0) (1,115.3)
Income taxes paid (601.7) (861.6)
Dividends paid (171.3) (162.5)
----------------------------------- ----- ------------ ------------
Net cash inflow from operating
activities 2,505.8 3,361.0
----------------------------------- ----- ------------ ------------
Cash flows from investing
activities
Purchases of property,
plant and equipment and
intangibles (2,289.1) (2,185.3)
Proceeds on disposal of
property, plant and equipment 25.7 9.3
Sale/ (purchase) of liquid
investments 14 671.7 (2,857.0)
Sale of financial asset
investments - 18.2
----------------------------------- ----- ------------ ------------
Net cash used in investing
activities (1,591.7) (5,014.8)
----------------------------------- ----- ------------ ------------
Cash flows from financing
activities
Issue of ordinary shares 0.2 0.0
Dividends paid to non-controlling
interests of subsidiaries (340.4) (345.9)
Acquisition of additional -
interests in subsidiaries/
Share buyback by subsidiary (819.1)
Decrease in short-term
borrowings 14 (818.8) (2,832.7)
Proceeds from long term
borrowings 14 3,748.1 5,429.7
Repayment of long term
borrowings 14 (2,698.0) (2,299.0)
----------------------------------- ----- ------------ ------------
Net cash used in financing
activities (928.0) (47.9)
----------------------------------- ----- ------------ ------------
Net decrease in cash and
cash equivalents 14 (13.9) (1,701.7)
Effect of foreign exchange
rate changes 14 (1.8) (129.1)
Cash and cash equivalents
at beginning of year 369.4 2,200.2
----------------------------------- ----- ------------ ------------
Cash and cash equivalents
at end of year 14 353.7 369.4
=================================== ===== ============ ============
(1) Restated refer note 1
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(US$ million)
Attributable to equity holders of the Company
---------------------------------------------------------------------------------------------------------
Share-based Convertible
Share Share Treasury payment bond Hedging Other Retained Non-controlling Total
capital premium Shares reserves reserve reserve reserves(1) earnings Total Interests equity
--------------- -------- -------- --------- ------------ ------------ -------- ------------ ---------- ---------- ---------------- ----------
At 1 April
2014 29.8 198.5 (556.9) 46.9 80.1 (50.4) 471.6 3,790.8 4,010.4 13,964.4 17,974.8
Profit for the
year - - - - - - - (1,798.6) (1,798.6) (1,989.1) (3,787.7)
Other
comprehensive
income for
the
year - - - - - (24.3) (266.9) - (291.2) (336.5) (627.7)
--------------- -------- -------- --------- ------------ ------------ -------- ------------ ---------- ---------- ---------------- ----------
Total
comprehensive
income for
the
year - - - - - (24.3) (266.9) (1,798.6) (2,089.8) (2,325.6) (4,415.4)
Convertible
bond
transfer - - - - (41.7) - - 41.7 - - -
Transfers (1) - - - - - - 135.2 (135.2) - - -
Dividends paid
(note 12) - - - - - - - (171.3) (171.3) (340.4) (511.7)
Additional
investment
in
subsidiary/
Share buyback
by
subsidiary - - - - - - - (175.0) (175.0) (644.1) (819.1)
Exercise of
LTIP
awards 0.2 - - (48.1) - - - 48.1 0.2 - 0.2
Recognition of
share-based
payment - - - 28.6 - - - - 28.6 - 28.6
At 31 March
2015 30.0 198.5 (556.9) 27.4 38.4 (74.7) 339.9 1,600.5 1,603.1 10,654.3 12,257.4
--------------- -------- -------- --------- ------------ ------------ -------- ------------ ---------- ---------- ---------------- ----------
(US$ million)
Attributable to equity holders of the Company
------------------------------------------------------------------------------------------------------
Share-based Convertible
Share Share Treasury payment bond Hedging Other Retained Non-controlling Total
capital premium Shares reserves reserve reserve reserves(1) earnings Total Interests equity
----------------- -------- -------- --------- ------------ ------------ -------- ------------ --------- -------- ---------------- ----------
At 1 April 2013 29.8 196.8 (556.9) 29.0 302.9 (22.2) 789.3 3,632.6 4,401.3 14,467.7 18,869.0
Profit for the
year - - - - - - - (196.0) (196.0) 1,185.4 989.4
Other
comprehensive
income for the
year - - - - - (28.2) (549.6) - (577.8) (716.0) (1,293.8)
----------------- -------- -------- --------- ------------ ------------ -------- ------------ --------- -------- ---------------- ----------
Total
comprehensive
income for the
year (28.2) (549.6) (196.0) (773.8) 469.4 (304.4)
Convertible bond
transfers - - - - (110.7) - - 110.7 - - -
Repayment of
Convertible
bond - - - - (111.6) - - (3.9) (115.5) - (115.5)
Conversion of
convertible
bond 0.0 1.7 - - (0.5) - - - 1.2 1.2
Transfers (1) - - - - - - 231.9 (231.9) - - -
Dividends paid
(note 12) - - - - - - - (162.5) (162.5) (345.9) (508.4)
Change in
non-controlling
interests due
to
merger - - - - - - - 626.8 626.8 (626.8) -
Exercise of LTIP
awards 0.0 - - (15.0) - - - 15.0 0.0 - 0.0
Recognition of
share-based
payment - - - 32.9 - - - - 32.9 - 32.9
At 31 March 2014 29.8 198.5 (556.9) 46.9 80.1 (50.4) 471.6 3,790.8 4,010.4 13,964.4 17,974.8
----------------- -------- -------- --------- ------------ ------------ -------- ------------ --------- -------- ---------------- ----------
(1) OTHER RESERVES COMPRISE
(US$ million)
Currency Investment
translation Merger revaluation General
reserve reserve(2) reserve reserves Total
---------------------- ------------------ ----------------- ----------------- ----------------- -----------------
At 1 April 2013 (1,064.2) 4.4 1.2 1,847.9 789.3
Exchange differences
on translation
of foreign
operations (548.5) - - - (548.5)
Remeasurements - - - (1.1) (1.1)
Transfer from
retained earnings
(1) - - - 231.9 231.9
At 31 March 2014 (1,612.7) 4.4 1.2 2,078.7 471.6
---------------------- ------------------ ----------------- ----------------- ----------------- -----------------
Exchange differences
on translation
of foreign
operations (263.8) - - - (263.8)
Revaluation of
available-for-sale
investments - - 1.4 - 1.4
Remeasurements - - - (4.5) (4.5)
Transfer from
retained earnings
(1) - - - 135.2 135.2
---------------------- ------------------ ----------------- ----------------- ----------------- -----------------
At 31 March 2015 (1,876.5) 4.4 2.6 2,209.4 339.9
---------------------- ------------------ ----------------- ----------------- ----------------- -----------------
(1) Under Indian law, a general reserve is created through an annual transfer of net income to general reserves at a specified percentage in accordance with applicable regulations. The purpose of these transfers is to ensure that the total dividend distribution is less than the total distributable results for that year. Transfer to General reserves also includes US$30 million of debenture redemption reserve and US$4.5 million of remeasurement reserve.
(2) The merger reserve arose on incorporation of the Company during the year ended 31 March 2004. The investment in Twin Star had a carrying amount value of US$20.0 million in the accounts of Volcan.As required by the Companies act 1985, Section 132, upon issue of 156,000,000 Ordinary shares to Volcan, Twin Star's issued share capital and share premium account have been eliminated and a merger reserve of US$4.4 million arose, being the difference between the carrying value of the investment in Twin Star in Volcan's accounts and the nominal value of the shares issued to Volcan.
NOTES TO PRELIMINARY ANNOUNCEMENT
1. General information and accounting policies
This preliminary results announcement is for the year ended 31 March 2015. While the financial information contained in this preliminary results announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS"), this announcement does not itself contain sufficient information to comply with IFRS. For these purposes, IFRS comprise the Standards issued by the International Accounting Standards Board ("IASB") and Interpretations issued by the IFRS Interpretations Committee ("IFRIC") that have been endorsed by the European Union. The financial information contained in the preliminary announcement has been prepared on the same basis of accounting policies as set out in the previous financial statements.
Restatement
The Group has revised the presentation of forward premium on the forward covers within finance costs rather than other gains and losses, as these more appropriately reflects the substance of the transaction. US$84.1 million for the comparative year ended 31 March 2014 have been reclassified.
Going Concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Operational and Financial Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Finance Review on pages 14 to 23.
The Group requires funds both for short-term operational needs as well as for long-term investment programmes mainly in growth projects. The Group generates sufficient cash flows from its current operations which, together with the available cash and cash equivalents and liquid financial asset investments, provide liquidity both in the short term as well as in the long term. Anticipated future cash flows and undrawn committed facilities of US$1,221 million, together with cash and liquid investments of US$8,210 million as at 31 March 2015, are expected to be sufficient to meet the ongoing capital investment programme and liquidity requirement of the Group in the foreseeable future.
The Group has a strong Balance Sheet that gives sufficient headroom to raise further debt should the need arise. The Group's current ratings from Standard & Poor's and Moody's are BB- and Ba1 respectively. These ratings support the necessary financial leverage and access to debt or equity markets at competitive terms, taking into consideration current market conditions. The Group generally maintains a healthy gearing ratio and retains flexibility in the financing structure to alter the ratio when the need arises. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.
2. Compliance with applicable law and IFRS
The financial information contained in this preliminary results announcement has been prepared on the going concern basis. This preliminary results announcement does not constitute the Group's statutory accounts as defined in section 434 of the Companies Act 2006(the "Act") but is derived from those accounts. The statutory accounts for the year ended 31 March 2015 have been approved by the Board and will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held on
3 August 2015. The auditors have reported on those accounts and their report was unqualified, with no matters by way of emphasis, and did not contain statements under section 498(2) of the Act (regarding adequacy of accounting records and returns) or under section 498(3) (regarding provision of necessary information and explanations).
The information contained in this announcement for the year ended 31 March 2015 also does not constitute statutory accounts. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, with no matters by way of emphasis, and did not contain statements under sections 498(2) or (3) of the Companies Act 2006.
3. Critical accounting judgment and estimation uncertainty
The preparation of financial information in conformity with IFRS requires management to make judgments, estimates and assumptions, that affect the application of accounting policies and the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of this announcement and the reported amounts of revenues and expenses for the years presented. Actual results may differ from these estimates under different assumptions and conditions.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods affected. Vedanta considers the following areas as the key sources of estimation uncertainty:
(i) Oil and gas reserves
Oil and gas reserves are estimated on a proved and probable entitlement interest basis. Proven and probable reserves are estimated using standard recognised evaluation techniques. The estimate is reviewed regularly. Future development costs are estimated taking into account the level of development required to produce the reserves by reference to operators, where applicable, and internal engineers.
Net entitlement reserves estimates are subsequently calculated using the Group's current oil price and cost recovery assumptions, in line with the relevant agreements.
Changes in reserves as a result of factors such as production cost, recovery rates, grade of reserves or commodity prices could impact the depreciation rates, carrying value of assets and environmental and restoration provisions.
(ii) Carrying value of exploration and evaluation fixed assets
Where a project is sufficiently advanced the recoverability of IFRS 6 Exploration assets are assessed by comparing the carrying value to higher of fair value less cost of disposal or value in use. The amounts for exploration and evaluation assets represent active exploration projects. These amounts will be written off to the income statement as exploration costs unless commercial reserves are established or the determination process is not completed and there are no indications of impairment. The outcome of ongoing exploration, and therefore whether the carrying value of exploration and evaluation assets will ultimately be recovered, is inherently uncertain.
Details of impairment charge and the assumptions used are disclosed in note 6.
(iii) Carrying value of developing / producing oil and gas assets
Management perform impairment tests on the Group's developing / producing oil and gas assets at least annually with reference to indicators in IAS 36.
The impairment assessments are based on a range of estimates and assumptions, including:
Estimates/assumptions Basis
---------------------- --------------------------------------------
Future production proved and probable reserves, resource
estimates and, in certain cases, expansion
projects
---------------------- --------------------------------------------
Commodity management's best estimate benchmarked
prices with external sources of information,
to ensure they are within the range
of available analyst forecast
---------------------- --------------------------------------------
Exchange management best estimate benchmarked
rates with external sources of information
---------------------- --------------------------------------------
Discount cost of capital risk-adjusted for the
rates risk specific to the asset/ CGU
---------------------- --------------------------------------------
Extension assumed that PSC for Rajasthan block
of PSC would be extended till 2030 on the
same commercial terms
---------------------- --------------------------------------------
Other key assumptions in the impairment models based on management expectations are that government approval will be received to further increase production rates and that the Enhanced Oil Recovery programme will be successfully implemented.
Any subsequent changes to cash flows due to changes in the above mentioned factors could impact the carrying value of the assets.
Details of impairment charge and the assumptions used are disclosed in note 6.
(iv) Mining properties and leases
The carrying value of mining property and leases is arrived at by depreciating the assets over the life of the mine using the unit of production method based on proved and probable reserves. The estimate of reserves is subject to assumptions relating to life of the mine and may change when new information becomes available. Changes in reserves as a result of factors such as production cost, recovery rates, grade of reserves or commodity prices could thus impact the carrying values of mining properties and leases and environmental and restoration provisions.
Details of impairment charge are disclosed in note 6.
(v) Useful economic lives and impairment of other assets
Property, plant and equipment other than mining properties, oil and gas properties, and leases are depreciated over their useful economic lives. Management reviews the useful economic lives at least once a year and any changes could affect the depreciation rates prospectively and hence the asset carrying values. The Group also reviews its property, plant and equipment, including mining properties and leases, for possible impairment if there are events or changes in circumstances that indicate that carrying values of the assets may not be recoverable. In assessing the property, plant and equipment for impairment, factors leading to significant reduction in profits such as changes in commodity prices, the Group's business plans and changes in regulatory environment are taken into consideration. The carrying value of the assets of a cash generating unit (CGU) is compared with the recoverable amount of those assets, that is, the higher of fair value less costs of disposal and value in use. Recoverable value is based on the management estimates of commodity prices, market demand and supply, economic and regulatory climates, long-term plan, discount rates and other factors. Any subsequent changes to cash flow due to changes in the abovementioned factors could impact the carrying value of the assets.
(vi) Assessment of impairment at Lanjigarh Refinery
The Group has considered that the delay in obtaining environment clearances for the expansion of the alumina refinery at Lanjigarh and regulatory approval for bauxite mining as an indication of impairment. Hence, the Group have reviewed the carrying value of its property, plant and equipments at Lanjigarh as at balance sheet date, estimated the recoverable amounts of these assets and concluded that there was no impairment because the recoverable amount (estimated based on value in use) exceeded the carrying amounts.
The key assumptions and estimates used in determining the value in use of these assets were:
n The State of Odisha has abundant bauxite resources and under the terms of the Memorandum of understanding ('MOU') with the Government of Odisha, management is confident that bauxite will be made available in the short to medium term. The company has entered into agreements with various suppliers internationally and domestically to ensure the availability of bauxite to run its refinery. In the initial years, the Company has assumed that bauxite will be purchased from third party suppliers in India and other countries, till the bauxite is sourced from own mines.
n The State of Odisha has taken certain measures including reservation of areas for mining operations or undertaking prospecting and constitution of Ministerial Committee for formulation of policy for supply of ores to Odisha based industries on long term basis. On 12 January 2015, GOI has come out with an ordinance to amend the existing MMDR act. The major change is in the process of grant of concessions i.e. from First come First serve basis to more transparent process of auction and to expedite the grant process.
n The management expects that the conditions for construction of the alumina refinery will be fulfilled and it is assumed that the approval for the expansion of the refinery would be received for commencement of production by fiscal 2018.
Management expects that the mining approvals for mining and the statutory approvals for the expansion project will be received as anticipated. Additionally the Group carries out impairment assessment for carrying value of these assets, every half year and challenges these assumptions.
As at March 31, 2015 the carrying amount of property plant and equipment related to alumina refinery operations at Lanjigarh and related mining assets is US$1,165 million (31 March 2014 :US$1,231million).
(vii) Assessment of Impairment of Karnataka and Goa iron ore mines:
Karnataka mining
The mining ban in Karnataka was lifted on 17 April 2013 and the mining operations resumed in December 2013. The mining operations were suspended since August 2014 for want of environment clearances. On execution of Mining Lease Deed and final forest clearance, the operations were resumed towards the end of February 2015. The carrying value of assets as at 31 March 2015 is US$168.1 million (31 March 2014: US$180.3 million).
Goa mining
The Ministry of Environment and Forest revoked its earlier order which had kept the environment clearances for iron ore mines in Goa in abeyance. The State Government has issued a mining policy and has lifted the ban on Iron ore mining in Goa. We have been allocated with an interim annual mining quantity of 5.5 million tonnes (out of the total cap of 20 million tonnes for FY2015) of saleable ore which is expected to progressively increase in coming years.
The State Government of Goa, has renewed the mining leases and Vedanta expects to start mining activities at iron ore mines at Goa in the second half of fiscal 2016, after receipt of all other regulatory clearances. The carrying value of assets affected as at 31 March 2015 is US$736.3 million (31 March 2014: US$709.9 million).
Management has reviewed the carrying value of the assets as at the balance sheet date, estimated the recoverable amounts of these assets and concluded that there was no impairment as the recoverable amount (estimated based on fair value less costs of disposal) exceeded the carrying amounts.
(viii) Assessment of Impairment at Western Cluster Limited (WCL)
The Project in Liberia is at exploratory stage and the Group has considered the suspension of exploration in Liberia due to Ebola epidemic and falling iron ore prices as indication for impairment. The Group expects to start mining activities at iron ore mines at Liberia during fiscal 2020, after receipt of all regulatory clearances and approval of mining leases. Hence, the Group has reviewed the carrying value of its property, plant and equipment's at WCL as at balance sheet date, estimated the recoverable amounts of these assets and concluded that there was no impairment because the recoverable amount (estimated based on fair value less costs of disposal) exceeded the carrying amounts. The carrying value of assets as at 31 March 2015 is
US$224.8 million.
(ix) Assessment of Impairment at Konkola Copper Mines (KCM)
The KCM operations in Zambia have experienced operational challenges, a more challenging price environment, combined with rising electricity costs and increases in mining royalties. Due to these factors, the Group has reviewed the carrying value of its property, plant and equipment's at KCM as at balance sheet date, estimated the recoverable amounts of the assets and concluded that other than the specific assets identified and disclosed in note 6, there was no impairment because the recoverable amount (estimated based on fair value less costs of disposal) exceeded the carrying amounts. The carrying value of assets as at 31 March 2015 is US$2,010.3 million.
(x) Restoration, rehabilitation and environmental costs
Provision is made for costs associated with restoration and rehabilitation of mining sites as soon as the obligation to incur such costs arises. Such restoration and closure costs are typical of extractive industries and they are normally incurred at the end of the life of the mine. The costs are estimated on the basis of closure plans and the estimated discounted costs of dismantling and removing these facilities and the costs of restoration are capitalised as soon as the obligation to incur such costs arises. A corresponding provision is created on the liability side. The capitalised asset is charged to the income statement over the life of the operation through the depreciation of the asset and the provision is increased each period via unwinding the discount on the provision. Management estimates are based on local legislation and / or other agreements. The actual costs and cash outflows may differ from estimates because of changes in laws and regulations, changes in prices, analysis of site conditions and changes in restoration technology.
(xi) Provisions and liabilities
Provisions and liabilities are recognised in the period when it becomes probable that there will be a future outflow of funds resulting from past operations or events that can be reasonably estimated. The timing of recognition requires the application of judgement to existing facts and circumstances which may be subject to change especially when taken in the context of the legal environment in India. The actual cash outflows may take place over many years in the future and hence the carrying amounts of provisions and liabilities are regularly reviewed and adjusted to take into account the changing circumstances and other factors that influence the provisions and liabilities.
(xii) Contingencies and commitments
In the normal course of business, contingent liabilities may arise from litigation, taxation and other claims against the Group. Where it is management's assessment that the outcome cannot be reliably quantified or is uncertain the claims are disclosed as contingent liabilities unless the likelihood of an adverse outcome is remote. Such liabilities are disclosed in the notes but are not provided for in the financial statements.
While considering the possible, probable and remote analysis of taxation, legal and other claims, there is always a certain degree of judgement involved pertaining to the application of the legislation which in certain cases is supported by views of tax experts and/or earlier precedents in similar matters. Although there can be no assurance regarding the final outcome of the legal proceedings, the Group does not expect them to have a materially adverse impact on the Group's financial position or profitability.
(xiii) The HZL and BALCO call options
The Group had exercised its call option to acquire the remaining 49% interest in BALCO and 29.5% interest in HZL. The Government of India has however, contested the validity of the options and disputed their valuation performed in terms of the relevant agreements. In view of the lack of resolution on the options, the non-response to the exercise and valuation request from the Government of India, the resultant uncertainty surrounding the potential transaction and the valuation of the consideration payable, the Group considers the strike price of the options to be at fair value, accordingly, the value of the option would be nil, and hence, the call options have not been recognised in the financial statements.
4. Segment information
The Group is diversified natural resources group engaged in exploring, extractive and processing minerals and oil and gas. We produce Zinc, Lead, Silver, Copper, Aluminium, Iron ore, Oil and gas and commercial power and have presence across India, South Africa, Namibia, Ireland, Australia, Liberia and Sri Lanka. The Group is also in the business of port operations in India.
The Group's reportable segments defined in accordance with IFRS 8 are as follows:
n Zinc- India
n Zinc-International
n Oil and gas
n Iron Ore
n Copper-India/Australia
n Copper-Zambia
n Aluminium
n Power
The components not meeting the quantitative threshold for reporting are being reported as 'Others'.
Management monitors the operating results of reportable segments for the purpose of making decisions about resources to be allocated and for assessing performance. Segment performance is evaluated based on the EBITDA of each segment. Business segment financial data includes certain corporate costs, which have been allocated on an appropriate basis. Intersegment sales are charged based on prevailing market prices.
The following tables present revenue and profit information and certain asset and liability information regarding the Group's reportable segments for the year ended 31 March 2015 and 31 March 2014. Items after operating profit are not allocated by segment.
(a) Reportable segments
Year ended 31 March 2015
(US$ million)
Oil Total
and Iron Copper-India/ reportable Elimination/ Total
Zinc-India Zinc-International gas Ore Australia Copper-Zambia Aluminium Power segment Others operations
----------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
REVENUE
Sales to
external
customers 2,357.0 586.9 2,397.5 311.4 3,682.7 883.5 2,078.1 552.8 12,849.9 28.8 12,878.7
Inter-segment
sales(3) - - - 15.1 18.0 193.6 3.8 119.1 349.6 (349.6) -
----------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
Segment revenue 2,357.0 586.9 2,397.5 326.5 3,700.7 1,077.1 2,081.9 671.9 13,199.5 (320.8) 12,878.7
----------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
Segment Result
EBITDA(1) 1,192.5 180.8 1,476.8 31.4 281.0 (3.8) 415.5 153.8 3,728.0 13.2 3,741.2
Depreciation and
amortisation(2) (2,005.7)
Special items
(note
6) (6,744.2)
----------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
Operating profit (5,008.7)
Investment
revenue 832.6
Finance costs (1,387.2)
Other gains and
losses (net) (76.9)
----------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
PROFIT BEFORE
TAXATION (5,640.2)
----------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
Segments assets 7,356.8 694.1 12,948.8 1,924.3 1,357.8 2,387.1 6,653.8 3,235.5 36,558.2 58.4 36,616.6
Unallocated
assets 372.3
-----------
TOTAL ASSETS 36,988.9
-----------
Segment
liabilities (277.9) (253.0) (3,105.7) (1,329.8) (1,286.6) (1,474.2) (5,220.2) (2,339.9) (15,287.3) (113.9) (15,401.2)
Unallocated
liabilities (9,330.3)
-----------
TOTAL
LIABILITIES (24,731.5)
----------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
Other segment
information
Additions to
property,
plant and
equipment 217.7 34.4 1,079.6 42.1 29.7 58.2 148.9 140.3 1,750.9 1.1 1,752.0
Depreciation and
amortisation (133.2) (111.1) (1,270.3) (42.3) (51.6) (187.2) (140.2) (65.8) (2,001.7) (4.0) (2,005.7)
Impairment
losses
(note 6) - - (6,642.1) - - (52.3) - - (6,694.4) - (6,694.4)
----------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
(1) EBITDA is a non-IFRS measure and represents operating profit before special items, depreciation and amortisation.
(2) Depreciation and amortisation is also provided to the chief operating decision maker on a regular basis.
(3) Transfer prices between operating segment sales are on an arm's length basis in a manner similar to transactions with third parties except sales from power segment amounting to US$83.8 million for the year ended 31 March 2015 (March 2014: US$36.6million), which is at cost, within same legal entity.
Year ended 31 March 2014
(US$ million)
Oil Total
and Iron Copper-India/ reportable Elimination/ Total
Zinc-India Zinc-International gas Ore Australia Copper-Zambia Aluminium Power segment Others operations
--------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
REVENUE
Sales to
external
customers 2,181.7 661.4 3,092.8 266.4 3,399.8 964.5 1,782.1 579.4 12,928.1 16.9 12,945.0
Inter-segment
sales 13.7 - - 0.7 5.0 306.9 3.3 42.3 371.9 (371.9) -
--------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
Segment
revenue 2,195.4 661.4 3,092.8 267.1 3,404.8 1,271.4 1,785.4 621.7 13,300.0 (355.0) 12,945.0
--------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
Segment Result
EBITDA 1,145.0 213.4 2,347.0 (24.2) 197.9 156.3 287.3 168.4 4,491.1 0.1 4,491.2
Depreciation
and
amortisation (2,203.1)
Special items
(note 6) (138.0)
--------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
Operating
profit 2,150.1
Investment
revenue 687.7
Finance costs (1,439.8)
Other gains
and
losses (net) (279.9)
--------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
PROFIT BEFORE
TAXATION 1,118.1
--------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
Segments
assets 6,557.8 902.2 21,094.4 2,043.6 1,642.6 2,422.8 6,976.4 3,184.3 44,824.1 104.2 44,928.3
Unallocated
assets 446.0
-----------
TOTAL ASSETS 45,374.3
-----------
Segment
liabilities (258.7) (310.7) (5,142.9) (1,104.2) (2,123.0) (1,458.8) (5,121.5) (2,115.9) (17,635.7) (85.2) (17,720.9)
Unallocated
liabilities (9,678.6)
-----------
TOTAL
LIABILITIES (27,399.5)
--------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
Other segment
information
Additions to
property,
plant and
equipment 345.7 44.2 649.1 43.6 56.1 150.5 165.2 289.4 1,743.8 1.5 1,745.3
Depreciation
and
amortisation (114.8) (137.3) (1,413.4) (45.8) (42.1) (171.5) (174.7) (99.1) (2,198.7) (4.4) (2,203.1)
Impairment
losses
(note 6) - (47.5) - - - (23.1) (11.0) - (81.6) - (81.6)
--------------- ----------- ------------------- ---------- ---------- -------------- ------------- --------- --------- ----------- ------------ -----------
4. Segmental information (continued)
(b) Geographical segmental analysis
The Group's operations are located in India, Zambia, Namibia, South Africa, Liberia, Ireland, Australia, UAE and Sri Lanka (refer note 6). The following table provides an analysis of the Group's sales by country in which the customer is located, irrespective of the origin of the goods.
(US$ million)
Year ended Year ended
31 March 31 March
2015 Percentage 2014 Percentage
--------------- ----------- ----------- ----------- -----------
India 7,872.0 61.1% 8,234.1 63.6%
China 1,314.2 10.2% 1,742.0 13.5%
Far East Asia 1,168.4 9.1% 1,003.2 7.7%
Middle East 1,143.7 8.9% 724.2 5.6%
Europe 643.3 5.0% 537.0 4.1%
Africa 192.3 1.5% 213.0 1.6%
Asia Others 118.9 0.9% 83.8 0.6%
UK 2.2 0.0% 19.1 0.1%
Others 423.7 3.3% 388.6 3.0%
Total 12,878.7 100.0% 12,945.0 100.0%
--------------- ----------- ----------- ----------- -----------
The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment, analysed by the country in which the assets are located No material non-current assets are located in the United Kingdom and no significant additions to property, plant and equipment have been made there.
(US$ million)
Carrying amount
of non-current Additions to property,
assets(1) plant and equipment
-------------- ---------------------- -------------------------
As at As at Year ended Year ended
31 March 31 March 31 March 31 March
2015 2014 2015 2014
-------------- ---------- ---------- ------------ -----------
Australia 13.4 24.3 3.8 8.1
India 20,996.2 27,548.7 1,635.7 1,497.7
Zambia 1,905.4 2,091.7 58.2 150.9
Namibia 128.5 204.6 21.5 13.4
Ireland 37.7 69.7 12.7 19.6
South Africa 335.9 375.2 5.9 27.5
Sri Lanka - 787.6 2.7 -
Other 213.6 200.7 11.5 28.1
-------------- ---------- ---------- ------------ -----------
Total 23,630.7 31,302.5 1,752.0 1,745.3
-------------- ---------- ---------- ------------ -----------
(1) Non-current assets do not include deferred tax assets, non-current tax assets and derivative receivables.
Information about major customer
Included in revenue from Oil and gas segment are revenues of US$1,393.2 million (US$1,742.6 million year ended 31 March 2014), which arose from sales to the Group's largest customer. No other customer contributed 10% or more to the Group's revenue during the year ended 31 March 2015.
5. Total Revenue
(US$ million)
Year ended Year ended
31 March 31 March
2015 2014
----------------------------- ----------- -----------
Revenue from sales of goods 12,878.7 12,945.0
Other operating income 104.0 84.0
Investment revenue 832.6 687.7
13,815.3 13,716.7
----------------------------- ----------- -----------
6. Special items
(US$ million)
Year ended 31 Year ended 31
March 2015 March 2014
------------------------------ --------------------------------- -------------------------------
Tax
effect
of
Special Tax
items/ Special effect Special
Special items of items
Special tax after Special Special after
items items tax items items tax
------------------------------ ---------- --------- ---------- -------- --------- --------
Impairment of oil
& gas assets(1)(a) (6,642.1) 2,138.0 (4,504.1) - - -
Impairment of mining
reserves and assets(1)(b) (52.3) - (52.3) (81.6) 17.8 (63.8)
------------------------------- ---------- --------- ---------- -------- --------- --------
Total impairment
charge (6,694.4) 2,138.0 (4,556.4) (81.6) 17.8 (63.8)
Voluntary retirement
schemes (redundancy
costs) (2) - - (15.1) 5.1 (10.0)
Provision for receivables(3) (36.6) 12.5 (24.1) - - -
Provision for investment
in coal blocks(4) (5.4) 1.8 (3.6) - - -
Acquisition & restructuring
related costs(5) 0.4 - 0.4 (2.6) - (2.6)
Land regularisation
fee(6) - - - (16.6) - (16.6)
Provision for contractor
dispute(7) (8.2) - (8.2) (22.1) 6.5 (15.6)
Special tax item(8) - 52.8 52.8 - - -
------------------------------- ---------- --------- ---------- -------- --------- --------
Special items (6,744.2) 2,205.1 (4,539.1) (138.0) 29.4 (108.6)
------------------------------- ---------- --------- ---------- -------- --------- --------
1. Impairment charge
During the year ended 31 March 2015, the Group has recognised:
a) Impairment charge on its oil and gas assets of US$6,642.1 million mainly relating to Rajasthan block and Sri Lanka block, triggered by the significant fall in the crude oil prices. Of this charge, US$2,162.1 million has been recorded against oil and gas properties and US$4,480.0 million against exploratory and evaluation assets. The valuation remains sensitive to price and further deterioration in long term prices may result in additional impairment.
For oil and gas properties, CGUs identified are on the basis of a PSC ('Production Sharing Contract') level as it is the smallest group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets.
The recoverable amount of the CGU, US$5,825.5 million, was determined based on the fair value less costs of disposal approach, a level-3 valuation technique in the fair value hierarchy, as it more accurately reflect the recoverable amount based on our view of the assumptions that would be used by a market participant. This is based on the cash flows expected to be generated by the projected oil or natural gas production profiles up to the expected dates of cessation of production sharing contract (PSC)/cessation of production from each producing field based on current estimates of reserves and risked resources. Reserves assumptions for fair value less costs of disposal discounted cash flow tests consider all reserves that a market participant would consider when valuing the asset, which are usually broader in scope than the reserves used in a value-in-use test. Discounted cash flow analysis used to calculate fair value less costs of disposal uses assumption for short term (five years) oil price and the long term nominal price of US$84 per barrel derived from a consensus of various analyst recommendations. Thereafter, these have been inflated at a rate of 2.5%. The cash flows are discounted using the post-tax nominal discount rate of 10.32% derived from the Group's post-tax weighted average cost of capital.
The impairment loss relates to the 'Oil and Gas' business reportable segments, however this has been shown as special items and does not form part of the segment result for the purpose of segment reporting.
The impairment charge of US$4,480.0 million of exploratory and evaluation assets also includes US$788.1 million impairment charge relating to exploratory wells in Sri Lanka, as the development of hydrocarbons in the said block is not commercially viable at the current prices.
b) US$52.3 million impairment charge relating to underground assets in Nchanga in Konkola Copper Mines Plc on account suspension of operations and the fall in the copper prices. Of this charge, US$47.2 million has been recorded against mining property and leases and US$5.1 million against plant and equipment.
Impairment for the year ended 31 March 2014 includes:
n US$47.5 million, impairment of mining reserve and Land assets at Lisheen. This is as a result of fall in the forecasted LME prices of Zinc and Lead.
n US$11.0 million, impairment of mining assets of Jharsuguda Aluminium at Lanjigarh as the MOEF has rejected the Stage II forest clearance for the Niyamgiri mining project.
n US$23.1 million, impairment of COP F&D mining assets of KCM at Nchanga, Zambia as the mine has been put under maintenance following a dispute with the mining contractor.
2. During the year ended 31 March 2014, voluntary retirement schemes were considered by management to be one off in nature and therefore classified as special items. Following management's review, non material voluntary retirement scheme costs incurred during the year have been deemed as operational costs not classified as special items.
3. In respect of Iron ore mining at Goa, the Supreme Court has ruled that, out of the sale proceeds of inventory of excavated ore lying unsold, the leaseholder would be paid only the average cost of excavation. However, the carrying value includes the amortisation based on the fair value of mining reserves determined at the time of acquisition. Consequently, the excess of the carrying value of receivables over the net realisable value has been written off.
4. Relates to provision recognised in respect of expenditure incurred on cancelled coal blocks allotted to Company's subsidiaries, pursuant to the order of the Supreme Court of India.
5. Acquisition related costs include costs of Group simplification and restructuring and other acquisition related costs.
6. Payments made pursuant to amendment during the year ended 31 March 2014 under the Land Revenue Code for regulating mining dumps at Goa.
7. Relates to a provision recognised following a dispute with a mining contractor at KCM Zambia.
8. As a result of amendments to the Zambian Mining Tax regime, effective from 1 January 2015, the tax rate on mining operations (excluding 'mineral processing' activities) was reduced from 30% to 0%. The deferred tax liability in relation to mining operations was therefore reversed in the period, resulting in a credit to the income statement of US$52.8 million. An announcement from the Zambian cabinet on April 20, 2015 stated that further amendments will be made to the Zambian Mining Tax regime, effective from 1 July 2015. The changes will include reinstating the tax rate on mining operations from 0% to 30%, and increasing the tax rate on mineral processing to 35%. These rates were not enacted as at 31 March 2015 and therefore have not been used to measure deferred tax balances at 31 March 2015. Further guidance is being sought from the Government to determine the impact of the proposed amendment.
7. Investment revenue
(US$ million)
Year ended Year ended
31 March 31 March
2015 2014
----------------------------------- -------------------- -----------
Interest income on loans
and receivables 29.3 31.3
Interest income on cash and
bank balances 139.9 202.3
Change in fair value of financial
assets held for trading 250.8 383.5
Profit on disposal of financial
assets held for trading 406.1 65.1
Dividend income on financial
assets held for trading 0.3 0.9
Foreign exchange gain on
cash and liquid investments 6.2 4.8
Capitalisation of interest
income - (0.2)
------------------------------------ -------------------- -----------
832.6 687.7
----------------------------------- -------------------- -----------
8. Finance costs
(US$ million)
Year ended Year ended
31 March 31 March
2015 2014(1)
----------------------------------- ----------- -----------
Interest on loans, overdrafts
and bonds (a) 1,116.8 1,115.2
Coupon interest on convertible
bonds 86.8 108.7
Accretive interest on convertible
bonds 76.6 187.2
----------- -----------
Total Interest charge on
convertible bonds (b) 163.4 295.9
Other borrowing and finance
costs (c) 194.1 83.5
------------------------------------ ----------- -----------
Total interest cost (a+b+c) 1,474.3 1,494.6
------------------------------------ ----------- -----------
Unwinding of discount on
provisions 36.8 21.8
Net interest on defined benefit
arrangements 9.2 6.8
Capitalisation of borrowing
costs(2) (133.1) (83.4)
------------------------------------ ----------- -----------
1,387.2 1,439.8
----------------------------------- ----------- -----------
1. Restated refer note 1
2. All borrowing costs are capitalised using rates based on specific borrowings with the interests ranging between of 1.9% to 12.2% per annum except at Aluminium segment where general borrowing costs were capitalised at a rate of 9.0% per annum.
9. Other gains and (losses) (net)
(US$ million)
Year ended Year ended
31 March 31 March
2015 2014(1)
---------------------------------------- ----------- -----------
Gross foreign exchange gains
and losses (80.8) (360.3)
Qualifying exchange losses capitalised 14.4 73.0
----------- -----------
Net foreign exchange gains and
losses (66.4) (287.3)
Change in fair value of financial
liabilities measured at fair
value (1.1) (1.1)
Change in fair value of embedded
derivative on convertible bonds - 4.7
Net (loss)/ gain arising on qualifying
hedges and non-qualifying hedges (9.4) 3.8
---------------------------------------- ----------- -----------
(76.9) (279.9)
---------------------------------------- ----------- -----------
1. Restated refer note 1
10. Tax
(US$ million)
Year ended Year ended
31 March 31 March
2015 2014
----------------------------------- ----------- -----------
Current tax:
UK Corporation tax (19.3) 19.3
Foreign tax
- India 562.7 494.4
- Zambia 1.0 -
- Australia (0.1) (0.8)
- Africa and Europe 22.1 37.7
- Other 4.4 3.7
------------------------------------ ----------- -----------
570.8 554.3
----------------------------------- ----------- -----------
Deferred tax:
Deferred tax impact on impairment -
on Oil and gas assets (note
6) (2,138.0)
Deferred tax reversal due to -
change in tax regime at Zambia
(note 6) (52.8)
Deferred tax others (232.5) (425.6)
------------------------------------ ----------- -----------
(2,423.3) (425.6)
----------------------------------- ----------- -----------
Net tax (credit)/ charge* (1,852.5) 128.7
------------------------------------ ----------- -----------
Effective tax rate 32.8% 11.5%
------------------------------------ ----------- -----------
* Includes tax credit on special items and tax credit -special items of US$2,204.9 million during the year ended 31 March 2015 (31 March 2014: US$29.4 million)
The deferred tax benefit recycled from equity to the income statement is US$6.0 million (2014: US$0.3 million).
During year ended March 31, 2014, consequent to group restructuring, the income tax returns of the Indian subsidiaries subject to the merger were refiled on a combined basis as the newly amalgamated Indian subsidiary, Vedanta Limited (formerly known as Sesa Sterlite Limited). The effective date of the merger was 1 January 2011 and refiling the tax returns from this date resulted in a lower tax liability through offsetting previously unutilised losses which arose in some merged entities in these years against taxable profits which arose in other merged entities. This resulted in a reversal of the current tax provision of US$257 million partially offset by the related net reversal of deferred tax assets of US$81.1 million. Since this was not directly related to the equity restructuring, the net tax credit of US$175.9 million was recognized in the income statement.
Tax expense
Year ended Year ended
31 March 31 March
2015 2014
-------------------------------- ----------- -----------
Tax effect of Special items
(note 6) (2,152.3) (29.4)
Special tax item-Deferred -
tax reversal due to change
in tax regime at Zambia (note
6) (52.8)
Net tax credit - Special items (2,205.1) (29.4)
Tax expense- others 352.6 158.1
--------------------------------- ----------- -----------
Net tax (credit)/ expense (1,852.5) 128.7
--------------------------------- ----------- -----------
Deferred Tax recognised in the income statement:
(US$ million)
Year ended Year ended
31 March 31 March
2015 2014
------------------------------------- ----------- -----------
Accelerated capital allowances
(including fair value adjustments) (2,634.1) (463.1)
Unutilised tax losses 203.4 517.1
Other temporary differences 7.4 371.6
-------------------------------------- ----------- -----------
(2,423.3) 425.6
------------------------------------- ----------- -----------
No deferred tax has been recognised in respect of temporary differences associated with investments in subsidiaries where the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. The aggregate amount of temporary differences associated with such investments in subsidiaries is represented by the contribution of those investments to the Group's retained earnings and amounted to US$5,768.3 million (2014: US$6,662.7 million).
A reconciliation of income tax expense applicable to accounting profit before tax at the Indian statutory income tax rate to income tax expense at the Group's effective income tax rate for the year ended 31 March 2015 is as follows:
(US$ million)
Year ended Year ended
31 March 31 March
2015 2014
------------------------------------ ----------- -----------
Accounting profit before tax (5,640.2) 1,118.1
------------------------------------ ----------- -----------
At Indian statutory income tax
rate of 33.99% (2014: 33.99%) (1,917.1) 380.0
Unrecognised tax losses 107.6 110.6
Disallowable expenses /Other
permanent differences 86.5 69.0
Dividend Distribution tax 68.1 64.4
Non-taxable income (73.0) (63.0)
Impact of tax rate difference 118.8 256.4
Impact of increase in income
tax surcharge(1) - 151.0
Impact of change in tax regime -
(note 6) (52.8)
Tax holiday and similar exemptions (238.8) (642.0)
Minimum Alternative Tax - (31.3)
Adjustments in respect of previous
years 48.2 9.5
Vedanta Limited merger impact(2) - (175.9)
------------------------------------ ----------- -----------
At effective income tax rate
of 32.8% (2014: 11.5%) (1,852.5) 128.7
------------------------------------ ----------- -----------
(1) The deferred tax liability arising in respect of the fair values uplift of Cairn India increased due to increase in the surcharge payable by Indian companies from 5% to 10%.
(2) Relates to reversal of Current tax provision of US$257 million consequent to Group restructuring, partially offset by the related net reversal of deferred tax assets of US$81.1 million.
Certain businesses of the Group within India are eligible for specified tax incentives in the form of tax exemptions. Most of such tax exemptions are relevant for the companies operating in India. These are briefly described as under:
The location based exemption
In order to boost industrial and economic development in undeveloped regions, provided certain conditions are met, profits of newly established undertakings located in certain areas in India may benefit from a tax holiday. Such a tax holiday works to exempt 100% of the profits the first five years from the commencement of the tax holiday, and 30% of profits for the subsequent five years. This deduction is available only for units established up to 31 March 2012. However, such undertaking would continue to be subject to the Minimum Alternative tax ('MAT').
The Group has such types of undertakings at Haridwar and Pantnagar, which are part of Hindustan Zinc Limited (Zinc India).
Sectoral Benefit - Power Plants
To encourage the establishment of certain power plants, provided certain conditions are met, tax incentives exist to exempt 100% of profits and gains for any ten consecutive years within the 15 year period following commencement of the power plant's operation. The Group currently has total operational capacity of 5039 MW of thermal based power generation facilities and wind power capacity of 273 MW. However, such undertakings generating power would continue to be subject to the MAT provisions.
The Group has power plants which benefit from such deductions, at various locations of Hindustan Zinc Limited and Bharat Aluminium Company Limited (where such benefits has been drawn) and Vedanta Limited (where no benefit has been drawn).
Sectoral Benefit-Oil and gas
Provided certain conditions are met, profits of newly constructed industrial undertakings engaged in the oil and gas sector may benefit from a deduction of 100% of the profits of the undertaking for a period of seven consecutive years. This deduction is only available to blocks licensed prior to 31 March 2011. However, such businesses would continue to be subject to the MAT provisions.
In the Group, Cairn India Limited benefits from such deductions.
In addition, the subsidiaries incorporated in Mauritius are eligible for tax credit to the extent of 80% of the applicable tax rate on foreign source income.
The total effect of such tax holidays and exemptions was US$238.8 million for the year ended 31 March 2015 (31 March 2014: US$642.0 million).
11. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.
24,206,816 treasury shares are excluded from the total outstanding shares for the calculation of EPS.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year (adjusted for the effects of dilutive options and the Group's convertible bonds). The following reflects the income and share data used in the basic and diluted earnings per share computations:
(US$ million)
Year ended Year ended
31 March 31 March
2015 2014
--------------------------------- ----------- -----------
Net loss attributable to equity
holders of the parent (1,798.6) (196.0)
--------------------------------- ----------- -----------
(US$ million except as stated)
Year ended Year ended
31 March 31 March
2015 2014
------------------------------------- ----------- -----------
Weighted average number of ordinary
shares
for basic earnings per share
(million) 274.8 273.5
Effect of dilution:
Share options 4.0 8.0
Adjusted weighted average number
of ordinary shares
for diluted earnings per share 278.8 281.5
------------------------------------- ----------- -----------
Loss per share based on loss for the year
Basic loss per share on loss for the year
(US$ million except as stated)
Year ended Year ended
31 March 31 March
2015 2014
------------------------------------ ----------- -----------
Loss for the year attributable
to equity holders of the parent
(US$ million) (1,798.6) (196.0)
Weighted average number of shares
of the Company in issue (million) 274.8 273.5
------------------------------------ ----------- -----------
Loss per share on loss for the
year (US cents per share) (654.5) (71.7)
------------------------------------ ----------- -----------
Diluted loss per share on loss for the year
(US$ million except as stated)
Year ended Year ended
31 March 31 March
2015 2014
------------------------------------ ----------- -----------
Loss for the year attributable
to equity holders of the parent
(US$ million) (1,798.6) (196.0)
Loss for the year after dilutive
adjustment (US$ million) (1,798.6) (196.0)
------------------------------------ ----------- -----------
Adjusted weighted average number
of shares of the Company in issue
(million) 274.8 273.5
------------------------------------ ----------- -----------
Diluted loss per share on loss
for the year (US cents per share) (654.5) (71.7)
------------------------------------ ----------- -----------
The effect of 4 million (2014: 8 million) potential ordinary shares, which relate to share option awards under the LTIP scheme, on the attributable loss for the year is anti-dilutive and thus these shares are not considered in determining diluted loss per share. However, the effect of these awards on underlying attributable earnings is dilutive for the year ended 31 March 2014, and hence the potential ordinary shares are considered in determining underlying EPS below.
The loss for the year would be decreased if holders of the convertible bonds in Vedanta exercised their right to convert their bond holdings into Vedanta equity. The impact on loss for the year of this conversion would be the reduction in interest payable on the convertible bond.
The adjustment in respect of convertible bonds has an anti-dilutive impact on earnings and is thus not considered in determining diluted EPS.
Earnings/ (loss) per share based on Underlying profit/(loss) for the year (Non-GAAP)
Underlying earnings is an alternative earnings measure, which the management considers to be a useful additional measure of the Group's performance. The Group's Underlying profit/ (loss) is the profit/(loss) for the year after adding back special items, other losses / (gains) [net] (note 9) and their resultant tax (including taxes classified as special items) and non-controlling interest effects. This is a Non-GAAP measure.
(US$ million)
Year ended Year ended
31 March 31 March
Note 2015 2014
--------------------------------------- ----- ------------ -----------
Loss for the year attributable
to equity holders of the parent (1,798.6) (196.0)
Special items 5 6,744.2 138.0
Other losses / (gains) [net] 76.9 279.9
Tax and non-controlling interest
effect of special items (including
taxes classified as special
items) and other losses / (gains) (5,061.4) (181.7)
--------------------------------------- ----- ------------ -----------
Underlying attributable (loss)/profit
for the year (38.9) 40.2
--------------------------------------- ----- ------------ -----------
Basic (loss)/ earnings per share on Underlying (loss)/profit for the year (Non-GAAP)
(US$ million except as stated)
Year ended Year ended
31 March 31 March
2015 2014
------------------------------------- ----------- -----------
Underlying (loss)/ profit for
the year (US$ million) (38.9) 40.2
Weighted average number of shares
of the Company in issue ( million) 274.8 273.5
------------------------------------- ----------- -----------
(Loss)/ earnings per share on
Underlying (loss)/ profit for
the Year (US cents per share) (14.2) 14.7
------------------------------------- ----------- -----------
Diluted (loss)/ earnings per share on Underlying (loss)/profit for the year (Non-GAAP)
(US$ million except as stated)
Year
ended Year ended
31 March 31 March
2015 2014
------------------------------------- ---------- -----------
Underlying (loss)/profit for the
year (US$ million) (38.9) 40.2
Adjusted weighted average number
of shares of the Company (million) 274.8 281.5
------------------------------------- ---------- -----------
Diluted (loss)/ earnings per share
on Underlying (loss)/ profit for
the year (US cents per share) (14.2) 14.3
------------------------------------- ---------- -----------
12. Dividends
(US$ million)
Year
ended Year ended
31 March 31 March
2015 2014
-------------------------------------- ---------- -----------
Amounts recognised as distributions
to equity holders:
Equity dividends on ordinary shares:
Final dividend for 2013-14: 39.0
US cents per share
(2012-13: 37.0 US cents per share) 107.5 101.8
Interim dividend paid during the
year: 23.0 US cents per share
(2013-14: 22.0 US cents per share) 63.8 60.7
-------------------------------------- ---------- -----------
171.3 162.5
Proposed for approval at AGM
Equity dividends on ordinary shares:
Final dividend for 2014-15: 40
US cents per share
(2013-14: 39 US cents per share) 110.8 107.5
-------------------------------------- ---------- -----------
13. Borrowings
(US$ million)
As at As at
31 March 31 March
2015 2014
----------------------------------- ---------- ----------
Bank loans 11,474.9 10,916.2
Bonds 4,075.4 4,017.9
Other loans 14.5 15.6
----------------------------------- ---------- ----------
Total 15,564.8 14,949.7
----------------------------------- ---------- ----------
Borrowings are repayable as:
Within one year (shown as current
liabilities) 3,179.2 2,437.0
More than one year 12,385.6 12,512.7
Total 15,564.8 14,949.7
----------------------------------- ---------- ----------
14. Movement in net debt(1)
(US$ million)
Debt due
within Debt due after
one year one year
------------- ------------- ------------------------------ ----------
Total cash
Cash and Debt Debt
and cash Liquid liquid carrying carrying Debt-related Total
equivalents investments investments value value derivatives(2) Net Debt
-------------- ------------- ------------- ------------- ------------- ------------- --------------- ----------
At 1 April
2013 2,200.2 5,781.5 7,981.7 (4,400.1) (12,192.7) (4.5) (8,615.6)
Cash flow (1,701.7) 2,857.0 1,155.3 2,832.7 (3,130.7) 857.3
Other
non-cash
changes (3) - 344.4 344.4 (2,942.3) 2,385.7 18.3 (193.9)
Foreign
exchange
differences (129.1) (414.4) (543.5) 151.2 425.0 32.7
-------------- ------------- ------------- ------------- ------------- ------------- --------------- ----------
At 1 April
2014 369.4 8,568.5 8,937.9 (4,358.5) (12,512.7) 13.8 (7,919.5)
-------------- ------------- ------------- ------------- ------------- ------------- --------------- ----------
Cash flow (13.9) (671.7) (685.6) 818.8 (1,050.1) - (916.9)
Other
non-cash
changes (3) - 250.8 250.8 294.8 (46.7) (16.1) 482.8
Foreign
exchange
differences (1.8) (291.5) (293.3) 65.7 120.9 - (106.7)
-------------- ------------- ------------- ------------- ------------- ------------- --------------- ----------
At 31 March
2015 353.7 7,856.1 8,209.8 (3,179.2) (13,488.6) (2.3) (8,460.3)
-------------- ------------- ------------- ------------- ------------- ------------- --------------- ----------
(1) Net (debt)/ cash being total debt reduced by cash and cash equivalents and liquid investments, as carried at fair value under IAS 32 and 39.
(2) Debt related derivatives exclude derivative financial assets and liabilities relating to commodity contracts and forward foreign currency contracts.
(3) Other non-cash changes comprises of mark to market of embedded derivatives, interest accretion on convertible bonds and amortisation of borrowing costs for which there is no cash movement. It also includes US$250.8 million (2014: US$344.4 million) of fair value movement in investments.
GLOSSARY AND DEFINITIONS
5S
A Japanese concept laying emphasis on housekeeping and occupational safety in a sequential series of steps as Sort (Seiri); Set in Order (Seiton); Shine (Selso); Standardise (Seiketsu); and Sustain (Shitsuke)
Adapted Comparator Group
The new comparator group of companies used for the purpose of comparing TSR performance in relation to the LTIP, adopted by the Remuneration Committee on 1 February 2006 and replacing the previous comparator group comprising companies constituting the FTSE Worldwide Mining Index (excluding precious metals)
AGM or Annual General Meeting
The annual general meeting of the Company which is scheduled to be held on 3 August 2015
AE
Anode effects
AIDS
Acquired Immune Deficiency Syndrome
Aluminium Business
The aluminium business of the Group, comprising of its fully-integrated bauxite mining, alumina refining and aluminium smelting operations in India, and trading through the Bharat Aluminium Company Limited and Jharsuguda Aluminium (a division of Vedanta Limited), in India
Articles of Association
The articles of association of Vedanta Resources plc
Attributable Profit
Profit for the financial year before dividends attributable to the equity shareholders of Vedanta Resources plc
ASARCO
American smelting and refining company, incorporated in United States.
BALCO
Bharat Aluminium Company Limited, a company incorporated in India.
BMM
Black Mountain Mining Pty
Board or Vedanta Board
The board of directors of the Company
Board Committees
The committees reporting to the Board: Audit, Remuneration, Nominations, and Health, Safety and Environment, each with its own terms of reference
Businesses
The Aluminium Business, the Copper Business, the Zinc, lead, silver, Iron ore, Power and Oil and Gas Business together
Cairn India Group
Cairn India Limited and its subsidiaries
Capital Employed
Net assets before Net (Debt) / Cash
Capex
Capital expenditure
Cash Tax Rate
Current taxation as a percentage of profit before taxation
CEO
Chief executive officer
CII
Confederation of Indian Industries
CLZS
Chanderiya lead and zinc smelter
CO2
Carbon dioxide
CMT
Copper Mines of Tasmania Pty Limited, a company incorporated in Australia
Combined Code or the Code
The Combined Code on Corporate Governance published by the Financial Reporting Council in June 2008 & updated them from time to time.
Company or Vedanta
Vedanta Resources plc
Company financial statements
The audited financial statements for the Company for the year ended 31 March 2013 as defined in the Independent Auditors' Report on the individual Company Financial Statements to the members of Vedanta Resources plc
Convertible Bonds
$1,250million 5.5% guaranteed convertible bonds due 2016, issued by a wholly owned subsidiary of the Company, Vedanta Resource Jersey Limited ("VRJL") and guaranteed by the Company, the proceeds of which are to be applied for to support its organic growth pipeline, to increase its ownership interest in its subsidiaries and for general corporate purposes.
$883million 4.0% guaranteed convertible bonds due 2017, issued by a wholly owned subsidiary of the Company, Vedanta Resource Jersey II Limited ("VRJL-II") and guaranteed by the Company, the proceeds of which are to be applied for to refinance debt redemptions and for general corporate purposes.
$500million 4.0% guaranteed convertible bonds due 2014, issued by a subsidiary of the Company, Vedanta Limited, Sterlite Copper, the proceeds of which are to be applied for to for expansion of copper business, acquisition of complementary businesses outside of India and any other permissible purpose under, and in compliance with, applicable laws and regulations in India, including the external commercial borrowing regulations specified by the RBI.
$500million 5.0% guaranteed convertible bonds due 2014, issued by a subsidiary of the Company, Vedanta Limited, Iron ore Sesa, the proceeds of which are to be applied for to expand the Issuer's mining operations, for exploration for new resources, and to further develop its pig iron and metallurgical coke operation
Copper Business
The copper business of the Group, comprising:
n A copper smelter, two refineries and two copper rod plants in India, trading through Vedanta Limited, a company incorporated in India;
n One copper mine in Australia, trading through Copper Mines of Tasmania Pty Limited, a company incorporated in Australia; and
n An integrated operation in Zambia consisting of three mines, a leaching plant and a smelter, trading through Konkola Copper Mines PLC, a company incorporated in Zambia
CREP
Corporate responsibility for environmental protection
Cents/lb
US cents per pound
CRRI
Central Road Research Institute
CRISIL
CRISIL Limited is a rating agency incorporated in India
CSR
Corporate social responsibility
CTC
Cost to company, the basic remuneration of executives in India, which represents an aggregate figure encompassing basic pay, pension contributions and allowances
CY
Calendar year
Deferred Shares
Deferred shares of GBP1.00 each in the Company
DGMS
Director General of Mine Safety in the Government of India
Directors
The Directors of the Company
Dollar or $
United States Dollars, the currency of the United States of America
DRs
Depositary receipts of 10 US cents, issuable in relation to the $725million 4.6% guaranteed convertible bonds due 2026
EBITDA
Earnings before interest, taxation, depreciation, goodwill amortisation / impairment and special items
EBITDA Margin
EBITDA as a percentage of turnover
EBITDA interest cover
EBITDA divided by gross finance costs excluding accretive interest on convertible bonds, unwinding of discount on provisions, interest on defined benefit arrangements less investment revenue
EBITDA Margin excluding custom smelting
EBITDA Margin excluding EBITDA and turnover from custom smelting of Copper India, Copper Zambia and Zinc India businesses
Economic Holdings or Economic Interest
The economic holdings / interest are derived by combining the Group's direct and indirect shareholdings in the operating companies. The Group's Economic Holdings / Interest is the basis on which the Attributable Profit and net assets are determined in the consolidated accounts
E&OHSAS
Environment and occupational health and safety assessment standards
E&OHS Environment and occupational health and safety management system
EPS
Earnings per ordinary share
ESOP
Employee share option plan
ESP
Electrostatic precipitator
Executive Committee
The Executive Committee to whom the Board has delegated operational management. It comprises of the Executive Directors and the senior management of the Group
Executive Directors
The Executive Directors of the Company
Expansion Capital Expenditure
Capital expenditure that increases the Group's operating capacity
Financial Statements or Group financial statements
The consolidated financial statements for the Company and the Group for the year ended 31 March 2012 as defined in the Independent Auditor's Report to the members of Vedanta Resources plc
Fund Flow post capex
FY
Financial year i.e. April to March.
GAAP, including UK GAAP and Indian GAAP
Generally Accepted Accounting Principles, the common set of accounting principles, standards and procedures that companies use to compile their financial statements in their respective local territories
GDP
Gross domestic product
Gearing
Net Debt as a percentage of Capital Employed
GJ
Giga joule
GRMC
Group Risk Management Committee,
Government or Indian Government
The Government of the Republic of India
Gratuity
A defined contribution pension arrangement providing pension benefits consistent with Indian market practices
Group
The Company and its subsidiary undertakings and, where appropriate, its associate undertaking
Gross finance costs
Finance costs before capitalisation of borrowing costs
HSE
Health, safety and environment
HZL
Hindustan Zinc Limited, a company incorporated in India
IAS
International Accounting Standards
ICMM
International Council on Mining and Metals
IFRIC
IFRS Interpretations Committee
IFRS
International Financial Reporting Standards
INR
Indian Rupees
Interest Cover
EBITDA divided by finance costs
ISO 9001
An international quality management system standard published by the International Organisation for Standardisation
ISO 14001
An international environmental management system standard published by the International Organisation for Standardisation
Iron Ore Sesa
Iron ore Division of Vedanta Limited, comprising of a Iron ore mines in Goa and Karnataka in India.
Jharsuguda 2400 mw Power plant
Power Division of Vedanta Limited, comprising of a 2400 MW power plant in Jharsuguda in Odisha in India.
Jharsuguda Aluminium
Aluminium Division of Vedanta Limited, comprising of an aluminium refining and smelting facilities at Jharsuguda and Lanjigarh in Odisha in India.
KCM or Konkola Copper Mines
Konkola Copper Mines PLC, a company incorporated in Zambia
KDMP
Konkola deep mining project
Key Result Areas or KRA s
For the purpose of the remuneration report, specific personal targets set as an incentive to achieve short-term goals for the purpose of awarding bonuses, thereby linking individual performance to corporate performance
KLD
Kilo litres per day
KPI s
Key performance indicators
Kwh
Kilo-watt hour
Kwh/d
Kilo-watt hour per day
LIBOR
London inter bank offered rate
LIC
Life Insurance Corporation
Listing or IPO (Initial Public Offering)
The listing of the Company's ordinary shares on the London Stock Exchange on 10 December 2003
Listing Particulars
The listing particulars dated 5 December 2003 issued by the Company in connection with its Listing or revised listing filled in 2011.
Listing Rules
The listing rules of the Financial Services Authority, with which companies with securities that are listed in the UK must comply
LME
London Metals Exchange
London Stock Exchange
London Stock Exchange plc
Lost time injury
An accident / injury forcing the employee / contractor to remain away from his / her work beyond the day of the accident
LTIFR
Lost time injury frequency rate: the number of lost time injuries per million man hours worked
LTIP
The Vedanta Resources Long-Term Incentive Plan or Long-Term Incentive Plan
MALCO
The Madras Aluminium Company Limited, a company incorporated in India
Management Assurance Services (MAS)
The function through which the Group's internal audit activities are managed
MAT
Minimum alternative tax
MIS
Management information system
MOEF
The Ministry of Environment & Forests of the Government of the Republic of India
mt or tonnes
Metric tonnes
MU
million Units
MW
Megawatts of electrical power
NCCBM
National Council of Cement and Building Materials
Net (Debt) / Cash
Total debt after fair value adjustments under IAS 32 and 39, cash and cash equivalents and liquid investments
NGO
Non-governmental organisation
NIHL
Noise induced hearing loss
Non-executive Directors
The Non-Executive Directors of the Company
OHSAS 18001
Occupational Health and Safety Assessment Series (standards for occupational health and safety management systems)
Oil and gas business
The Group's subsidiary, Cairn India Limited is involved in the business of exploration, development and production of Oil and gas.
Ordinary Shares
Ordinary shares of 10 US cents each in the Company
ONGC
Oil and Natural Gas Corporation Limited, a company incorporated in India
PBT
Profit before tax
PFC
Per fluorocarbons
PHC
Primary health centre
PPE
Personal protective equipment
Provident Fund
A defined contribution pension arrangement providing pension benefits consistent with Indian market practices
PSC
A "production sharing contract" by which the Government of India grants a license to a company or consortium of companies (the 'Contractor") to explore for and produce any hydrocarbons found within a specified area and for a specified period, incorporating specified obligations in respect of such activities and a mechanism to ensure an appropriate sharing of the profits arising there from (if any) between the Government and the Contractor.
Recycled water
Water released during mining or processing and then used in operational activities
Relationship Agreement
The agreement dated 5 December 2003 between the Company, Volcan Investments Limited and members of the Agarwal family that regulates the ongoing relationship between them, the principal purpose of which is to ensure that the Group is capable of carrying on business independently of Volcan, the Agarwal family and their associates
Return on Capital Employed or ROCE
Profit before interest, taxation, special items, tax effected at the Group's effective tax rate as a percentage of Capital Employed
The Reward Plan
The Vedanta Resources Share Reward Plan, a closed plan approved by shareholders on Listing in December 2003 and adopted for the purpose of rewarding employees who contributed to the Company's development and growth over the period leading up to Listing in December 2003
RO
Reverse osmosis
SA 8000
Standard for Social Accountability based on international workplace norms in the International Labour Organisation ('ILO') conventions and the UN's Universal Declaration of Human Rights and the Convention on Rights of the Child
Senior Management Group
For the purpose of the remuneration report, the key operational and functional heads within the Group
Vedanta Limited (formerly known as Sesa Sterlite Limited/ Sesa Goa Limited)
Vedanta Limited, a company incorporated in India engaged in the business of Copper smelting, Iron Ore mining, Aluminium mining, refining and smelting and Energy generation.
SEWT
Sterlite Employee Welfare Trust, a long-term investment plan for Sterlite senior management
Sterlite Copper
Copper Division of Vedanta Limited comprising of a copper smelter, two refineries and two copper rod plants in India.
The Share Option Plan
The Vedanta Resources Share Option Plan, a closed plan approved by shareholders on Listing in December 2003 and adopted to provide maximum flexibility in the design of incentive arrangements over the long term
SHGs
Self help groups
SID
Senior Independent Director
SO2
Sulphur dioxide
SBU
Strategic Business Unit
STL
Sterlite Technologies Limited, a company incorporated in India
Special items
Items which derive from events and transactions that need to be disclosed separately by virtue of their size or nature
SPM
Suspended particulate matter. Fine dust particles suspended in air
Sterling, GBP or GBP
The currency of the United Kingdom
Superannuation Fund
A defined contribution pension arrangement providing pension benefits consistent with Indian market practices
Sustaining Capital Expenditure
Capital expenditure to maintain the Group's operating capacity
TCM
Thalanga Copper Mines Pty Limited, a company incorporated in Australia
TC / RC
Treatment charge / refining charge being the terms used to set the smelting and refining costs
TGS
Tail gas scrubber
TGT
Tail gas treatment
TLP
Tail Leaching Plan
tpa
Metric tonnes per annum
TPM
Tonne per month
TSPL
Talwandi Sabo Power Limited, a company incorporated in India
TSR
Total shareholder return, being the movement in the Company's share price plus reinvested dividends
Turnbull Guidance
The revised guidance on internal control for directors on the Combined Code issued by the Turnbull Review Group in October 2005
Twin Star
Twin Star Holdings Limited, a company incorporated in Mauritius
Twin Star Holdings Group
Twin Star and its subsidiaries and associated undertaking
Underlying EPS
Underlying earnings per ordinary share
Underlying Profit
Profit for the year after adding back special items and other gains and losses and their resultant tax and Non-controlling interest effects
US cents
United States cents
VFD
Variable frequency drive
VFJL
Vedanta Finance (Jersey) Limited, a company incorporated in Jersey
VGCB
Vizag General Cargo Berth Private Limited, a company incorporated in India
Volcan
Volcan Investments Limited, a company incorporated in the Bahamas
VRCL
Vedanta Resources Cyprus Limited, a company incorporated in Cyprus
VRFL
Vedanta Resources Finance Limited, a company incorporated in the United Kingdom
VRHL
Vedanta Resources Holdings Limited, a company incorporated in the United Kingdom
VSS
Vertical Stud Söderberg
Water Used for Primary Activities
Total new or make-up water entering the operation and used for the operation's primary activities; primary activities are those in which the operation engages to produce its product
WBCSD
World Business Council for Sustainable Development
ZCI
Zambia Copper Investment Limited, a company incorporated in Bermuda
ZCCM
ZCCM Investments Holdings plc, a company incorporated in Zambia
ZRA
Zambia Revenue Authority
This information is provided by RNS
The company news service from the London Stock Exchange
END
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