29 January 2015

Vedanta Resources plc
Sesa Sterlite announces Third Quarter Financial Results
for the period ended 31 December 2014

29 January 2015

Sesa Sterlite Limited Consolidated Results for the third Quarter and nine months ended 31 December 2014

Attributable PAT* at Rs. 1,588 crore

Mumbai, India: Sesa Sterlite Limited ("Sesa Sterlite" or the "Company") today announced its unaudited consolidated results for the third quarter (Q3) ended 31 December 2014.

·    Q3 FY2015 Revenues at Rs. 19,128 crore

·    EBITDA at Rs. 6,234 crore; EBITDA margin of 43%¹

·    Attributable PAT excluding exceptional items at Rs. 1,588 crore

·    Gross debt reduced by Rs. 1,470 crore in 9 months

·    Strong balance sheet with Cash & Cash equivalents of Rs. 47,000 crore

·     Strong mined metal production at Zinc - India

·   Gross daily average production of 219 kboepd at Oil & Gas; production at Rajasthan normalised following planned maintenance shutdown in Q2

·    Strong operating performance at Aluminium and  newly commissioned  pot-lines ramping up

·    Received approval to start the BALCO 1,200 MW power plant; trial runs to start in Q4

·   First 660MW unit of 1,980 MW Talwandi Sabo Power Plant commenced commercial operations

·    Iron Ore mining leases renewed at Goa and Karnataka

·   Reviewing  capex & opex plans across businesses to maximize cash flows in light of recent commodity price declines

 Mr. Tom Albanese, Group CEO: "We have delivered sustained performance in the third quarter despite the challenging markets. Strong operating performance of Aluminium and Zinc businesses led to the reduction in gross debt by Rs. 400 crore.  We are focused on disciplined capital allocation, coupled with deferred and phased development spending in Zinc, Oil & Gas and other businesses which will help optimize our assets and drive strong cash flow in the near future."

*Excluding exceptional items

¹Excludes custom smelting at Zinc and Copper India operations
 

The Sesa Sterlite merger and the Vedanta Group consolidation was completed in August 2013, hence Q3 and nine months FY2015 performance is compared with the adjusted proforma numbers of respective periods, which are more representative of the performance during the period.

(In Rs. crore, except as stated)

1.     Excludes custom smelting at Zinc and Copper India operations

2.     Exceptional items for the quarter is reflected net of tax

Revenue

Revenue in Q3 was at Rs 19,128 crore. Revenue for the quarter decreased marginally q-o-q by  2%,driven by the decline in oil prices (down ~25%) partly offset by higher oil production (up 13%); and weaker copper, zinc and lead and silver prices,  mostly offset by higher production volumes of aluminium and zinc.

Revenue was marginally down by 1%(Rs. 300 crore) in the quarter as compared to Q3 FY 2014. It was driven by decline in prices:  oil 29%, copper 7%, lead 5%, and silver 21%, whereas Zinc  and Aluminium prices were stronger by 17% and 11% respectively. The premia in Aluminium and Zinc were higher as compared to corresponding prior period.

EBITDA and EBITDA Margin

EBITDA margin (excluding custom smelting) in Q3 was strong at 43% with EBITDA at Rs. 6,234 crore on the back of higher volumes and lower cost. The better operating performance and benefit of currency depreciation was more than offset by lower brent and commodity prices.

Depreciation and Amortisation

Depreciation was higher at Rs. 1,782 crore compared with Rs. 1,415 crore in Q3FY2014, and Rs. 1,534 crore in Q2 FY 2015. Most of the increase is due to higher depreciation charge in Cairn India on account of change in depreciation method from Straight Line Method (SLM) to Unit of Production (UOP) on tangible assets in line with Indian Company's Act requirement. Also, Capitalisation of one unit of Talwandi Sabo Power Limited (TSPL) and 84 pots at the Korba-II aluminium smelter,  had impact on increase of depreciation in Q3 FY 2015.

During the quarter there was lower amortisation of goodwill by Rs. 132 crore due to lower charge by Rs. 100 crore in Lisheen at Zinc International as it was amortised in previous year at accelerated rate. Amortisation was lower at CMT as there was no production from the Australian mines. Sequentially, it is higher with better volume at Oil & Gas business.

Finance Cost

Foreign Currency Convertible bonds (FCCB) of US$717 million were repaid in the month of October through a combination of internal cash and refinancing leading to reduction in cost. Further, project loans in aluminium business were refinanced at lower interest rates in the first half of the year and started accruing benefits in finance cost during the quarter.

Non-Operational Forex Loss/Gain

In Q3, rupee depreciated by 2.8% and closed at Rs.63.3 on 31st December 2014. This resulted in higher forex gain in Cairn India on dollar denominated investments and debtors.

Tax

Tax rate in Q3 was 14.4% similar to that in Q2 FY 2015. However, it is  higher than Q3 FY 2014, on account of one time deferred tax asset of Rs. 452 crore  being created in the corresponding quarter of the earlier year. Excluding the deferred tax asset, the current tax rate is comparable to that of Q3 FY 2014.

Borrowings and Investments

Gross debt reduced by ~Rs. 1,470 crore to Rs. 79,096 crore as on 31 December 2014 which was at Rs. 80,566  crore as on 31 March 2014.

Out of total loan of Rs. 79,096 crore the loan in INR currency is Rs.35,219 crore and balance Rs. 43,877 crore is in US dollar. The short term loans maturing by March 2015 taken at lower interest rates have been largely used for project finance and with easing interest rate scenario, these will be refinanced and will be converted gradually to long term maturity.

Out of the company's cash, cash equivalents and liquid investments of Rs. 46,806 crore, Rs. 34,745 crore was invested in debt mutual funds, Rs. 7,895 crore in bonds, and Rs. 4,166 crore in bank deposits. Net debt was marginally lower at Rs. 32,290 crore.

The company continues to follow a conservative investment policy and invests in high quality debt instruments with the mutual funds, bonds and fixed deposits with banks.

The Company has its long-term rating at AA+/Negative from CRISIL. 

Debt and Cash

(inRs. Crore)

1.     As on 31 December 2014, debt at Cairn acquisition SPV comprises Rs.10,766 crore of bank debt and Rs.16,378 crore of inter-company  debt from Vedanta Resources Plc. The accrued interest of Rs 120 crore on inter-company debt as on 31 December 2014

2.     Others include MALCO Energy, CMT, VGCB, Sesa Resources, Fujairah Gold, and Sesa Sterlite investment companies.

Debt Maturity Profile

 (inRs. Crore)

¹Maturity profile excludes working capital facilities of Rs.13,457 crore.

Note:Debt numbers in the tables above are at book value. Figures in previous periods have been regrouped or restated, wherever necessary to make them comparable to current period.

Results Conference Call

Please note that the results presentation is available in the Investor Relations section of  the company website www.sesasterlite.com

The results call will be at 6:00 PM (IST) on Thursday, 29 January 2015, where we will refer to the abovementioned presentation. The dial-in numbers for the call are:

For further information, please contact:

About Vedanta Resources plc

Vedanta Resources plc ("Vedanta") is a London listed diversified global natural resources major. 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.