TIDMVED
RNS Number : 9513O
Vedanta Resources PLC
23 May 2018
Vedanta Resources plc
16 Berkeley Street
London W1J 8DZ
Tel: +44 (0) 20 7499 5900
Fax: +44 (0) 20 7491 8440
www.vedantaresources.com
"This announcement contains inside information which is
disclosed in accordance with the EU Market Abuse Regulation." Upon
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public domain.
23 May 2018
Vedanta Resources plc
Preliminary results for the year ended 31 March 2018
Financial highlights
n Revenue increased by 33% to US$15.4 billion (FY2017: US$11.5
billion) driven by firmer commodity prices and volume ramp-ups
n EBITDA at US$4.1 billion, up 27% (FY2017: US$3.2 billion)
n Robust adjusted EBITDA margin of 35% (FY2017: 36%)
n Underlying profit per share of US cents 58.3 (FY2017: US cents
16.1 per share)
n Basic earnings per share of US cents 84.8 (FY2017: a loss of
US cents 8.2), mainly due to higher EBITDA and reversal of a
previously recorded non-cash impairment charge at Oil & Gas.
This was offset by a non-cash impairment charge at Iron Ore Goa
n ROCE improved by 2.1% to 14.9% (FY2017: 12.8%)
n Free cash flow (FCF) post-capex of US$0.9 billion (FY2017:
US$1.5 billion)
n Gross debt at US$15.2 billion (FY2017: US$18.2 billion), a
reduction of US$3 billion in 12 months (including repayment of $1.2
billion of temporary borrowing at Zinc India)
n Net debt at US$ 9.6 billion (FY2017: US$ 8.5 billion)
n A proactive refinancing of US$2.4 billion through a bond
issuance and bank loans improved average maturity at Vedanta
Resources plc to about four years at March 2018 (March 2017:
approx. three years)
n Moody's upgraded the Corporate Family Rating (CFR) by one
notch from 'B1/Stable' to 'Ba3/Stable'
n Final dividend announced of US cents 41 per share (total
dividend of US cents 65 per share), with a yield of 6%
n Vedanta Limited announced a record interim dividend of c.
US$1.2 billion in March 2018, of which c. $600 million was received
by Vedanta Resources plc and used for deleveraging
n Contribution to the exchequer of US$5.4 billion in FY2018
n Vedanta Limited's resolution plan to acquire Electrosteel
Steels Limited approved by NCLT, the acquisition, subject to
completion of due processes, will complement the Group's existing
Iron Ore business through vertical integration.
Business highlights
Oil & Gas
n March 2018 exit run-rate of over 200kboepd
n Growth projects on track with contracts of US$1.3 billion
(gross) awarded
Zinc India
n Record annual production of refined zinc-lead at 960kt
n Record annual production of refined silver at 17.9 million
ounces
n On track for ramp-up of mined metal to 1.2mt by FY2020
Zinc International
n Annual production in line with guidance
n Gamsberg project on track with production expected by mid-CY
2018
Iron Ore
n Mining cap allocation for Karnataka increased from 2.3mt to
4.5mt
n Goa mining operations shut due to state-wide ban
Copper India[1]
n Record annual production
Copper Zambia
n Annual mined metal production at 91kt, 3% lower y-o-y
n New contractor-partnering model getting into place
Aluminium
n Record annual production at 1.7mt, with an exit run-rate of
c.2.0mtpa
Power
n 1,980MW Talwandi Sabo power plant achieved 93% availability in
Q4 FY2018 (FY2018: 74%)
Anil Agarwal, Chairman of Vedanta Resources plc, commented:
"It has been another successful year for Vedanta as we continued
to deliver across our strategic priorities. We reached record
production levels at several of our businesses. We transformed our
approach to developing our assets, which gives me confidence of
efficient and productive ramp-ups across our world class assets. We
continue to stay focused on optimising capital allocation and
strengthening our balance sheet and deliver superior shareholder
returns. Vedanta remains well positioned to capitalise on India's
growing resources demand. I look forward to another strong year for
the company."
Consolidated Group results
(US$ million, unless stated)
FY2018 FY2017
---------------------------------------------- -------- --------
Revenue 15,359 11,520
EBITDA 4,051 3,191
EBITDA margin 26% 28%
Adjusted EBITDA margin 35% 36%
Operating profit before special items 2,781 2,161
Profit/(loss) attributable to equity holders
of the parent 236 (23)
Underlying attributable profit/(loss) 162 45
Basic earnings/(loss) per share (US cents) 84.8 (8.2)
Profit/(loss) per share on underlying profit
(US cents) 58.3 16.1
ROCE % * 14.9% 12.8%
Dividend (US cents per share) 65 55
---------------------------------------------- -------- --------
Indicates alternative performance measures that are defined in
detail in "Other information".
* Recomputed on the basis of operating profit before special
items and net of tax outflow, as a ratio of average capital
employed
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Investors
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About Vedanta Resources
Vedanta Resources plc ("Vedanta") is a London-listed diversified
global natural resources company. The Group produces aluminium,
copper, zinc, lead, silver, iron ore, oil and gas, and commercial
energy. Vedanta has operations in India, Zambia, Namibia and South
Africa. With an empowered talent pool globally, Vedanta places
strong emphasis on partnering with all its stakeholders based on
the core values of trust, sustainability, growth, entrepreneurship,
integrity, respect and care. To access the Vedanta Sustainable
Development Report 2017, please visit
http://www.vedantaresources.com/media/214366/vedanta_sd_report_2016-17.pdf.
For more information on Vedanta Resources, 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
I am delighted to report another excellent year delivered by
Vedanta to our stakeholders in FY2018. In our operations,
productivity and financial results, we can look back on a year of
real progress.
Equally, we are proud of the positive contribution that Vedanta
continues to make in supporting people and local communities,
operating as a responsible corporate citizen, creating jobs,
generating value throughout our supply chain, and contributing to
the exchequer.
While the Group made considerable progress in strengthening its
health, safety and environment (HSE) practices, I deeply regret
that the year saw nine fatalities. The safety of our colleagues is
a top priority for me personally as well as that of the Board, and
our CEO Kuldip Kaura addresses this further in his statement.
Performance
Our focus on all-round improvement was complemented by improving
markets; the strengthening of commodity prices evident in 2017
gained further momentum in 2018. Our teams across the Group's
businesses worked hard to capitalise on this favourable market
environment, maximising productivity and gearing up activities to
achieve record breaking levels of output at several business
segments.
These increased volumes and prices underpinned a 33% increase in
revenues to reach US$15.4 billion, as well as a 27% growth in
EBITDA to US$4.1 billion. We also delivered strong free cash flow
of c. US$0.9 billion. These robust results are testament to the
capability, commitment and expertise of all our employees.
Our contribution to society
I believe that a company's performance should be measured by its
contribution to society as well as by financial metrics. It is
encouraging to see that social and responsible ways of working are
appreciated and increasingly valued by investors. Vedanta's ethos
of business with a purpose is fundamental to the Company, and
investors increasingly understand that this is a core part of our
long-term growth story.
Over the course of the last year, Vedanta invested over US$39
million in social programmes. Our efforts have touched the lives of
3.4 million people, in over 1,400 villages. This includes our
participation in India's 'Nand Ghar' programme in rural India,
which involves setting up and transforming 4,000 state of the art
child welfare centres across the country, to support women and
children by providing the nutrition, education, skill development
and healthcare they need. Vedanta, through the Vedanta Medical
Research Foundation, also inaugurated Central India's first
world-class cancer facility in Raipur, Chhattisgarh in the past
year. This initiative aligns with the larger vision of Vedanta
Group's commitment to give back to society and I look forward to
many more research & development initiatives from the
foundation going forward.
Other diverse schemes we supported during the year included
training and placing over 3,300 youth; working with about 85,000
farmers to enhance productivity; helping over 0.26 million people
with access to clean drinking water and sanitation; improving the
lives of about 28,000 women through self-help groups and skill
development initiatives; providing healthcare services to about 2.5
million people through various healthcare initiatives and health
camps and touching the lives of over 0.2 million children through
our Nand Ghars and other education projects. We are committed to
these programmes and will continue to invest in their
development.
Our people
Last summer saw the departure of our CEO Tom Albanese, who
stepped down after over three years with Vedanta. In April this
year, I was very pleased that after conducting a rigorous search
for several months, we were able to announce the appointment of
Srinivasan Venkatakrishnan (Venkat) as our new CEO. His tenure
begins in August, and he joins us with an impressive track record
in the key markets of Africa, India and the United Kingdom. Until
then, Kuldip Kaura, who has previously held the role of CEO and has
over 15 years' experience of working with Vedanta, will continue as
CEO, a role he assumed in September 2017.
As we announced earlier in the year, Aman Mehta retired from the
Board after nearly 13 years of service. I would like to thank him
for his dedication to the Group during his tenure. We appointed a
new non-executive Director, Ed Story who also became a member of
the Audit Committee. Mr Story will significantly enhance our
ability to grow and develop our Oil & Gas business, drawing on
extensive experience in that sector worldwide.
I would like to thank all of our employees whose energy and
talents came to such fine fruition in FY2018. None of our
achievements would have been possible without their dedication,
commitment and hard work.
The Indian opportunity
India has an abundance of opportunities. It is one of the
fastest-growing G20 economies, and by 2030 forecasts suggest it
will be worth US$6 trillion with a population of over 1.5
billion.
Over 80% of India's demand for oil and minerals is currently met
by imports, and the consumption of metals per capita remains around
70% below the global average. As the country's sole diversified
natural resource group, Vedanta is uniquely placed to help power
India's growth, and we are committed to investing in its
future.
The potential for our commodities is evident, and I am also
pleased that the Indian Government has introduced important
pro-business reforms that will attract global investments and be a
catalyst for growth. The amended MMDRA (Mines and Mineral
Development and Regulation Act) in 2015 has brought increased
clarity on the licencing around mining. Key regulatory reforms
around opening commercial coal mining to the private sector and the
launch of Open Acreage Licensing (OALP) in the oil & gas sector
to improve exploration, are some of the steps in the past year
towards creating a more favourable business environment. I would
particularly like to mention the new insolvency code for the
efficient resolution of distressed companies. We have participated
in this process and are very pleased at the smooth and transparent
way in which it was run. I am happy with the outcome and look
forward to the integration of Electrosteel, post completion of due
processes, with our Iron Ore business in Jharkhand as we focus on
avenues to create value.
Outlook
We look forward to FY2019 with confidence as we set out on our
next phase of growth. Our portfolio has demonstrated its resilience
through the commodity cycle, with the current market pointing to
strong demand for our commodities.
Alongside future growth, I am committed to Vedanta operating
under the highest standards of corporate governance. Indeed, I
believe it is our governance structures that underpin our ability
to deliver our strategy.
As we embark on a fresh year, we will continue our goal of
increasing output from our existing asset base to profit from the
favourable market conditions, whilst also embarking on new projects
and expansions. These initiatives will be positive for all of us -
employees, investors, communities and India - and give us a
stronger platform from which to benefit from the exceptional
opportunities ahead.
ANIL AGARWAL
Chairman
23 May 2018
CEO STATEMENT
2018 saw Vedanta deliver a robust performance creating a clear
pathway for sustainable growth. I am pleased to report significant
revenue and EBITDA growth, driven by a supportive market coupled
with strong production through the year. The record volumes at our
Zinc and Aluminium businesses resulted in an excellent financial
performance and ensured strong shareholder returns.
This upward trajectory in production is expected to continue
into FY2019 with ramp-ups at our Zinc India operations, the
commissioning of Gamsberg and growth in our Oil & Gas
business.
Commodity prices saw solid appreciation over the year, fuelled
by supply-related reforms and disruptions, stable demand, a
weakening dollar and bullish global growth indicators. Our
commodity basket benefitted from the favourable price movement and
we further capitalised on this opportunity by increasing our
value-added production in segments such as Aluminium. However,
alongside improving prices we have experienced inflationary
headwinds for input commodities. These impacted our costs,
especially at Aluminium and in response we are focusing on
operational improvements and have implemented a structured approach
to optimize controllable costs which will yield results in the
coming year, barring further cost inflationary pressures.
The year gone by has paved the way for an exciting 2019. We
remain committed to developing all the growth opportunities
available to us, especially in the Oil & Gas and Zinc
businesses which will add significantly to volumes. With a strong
balance sheet and the continued focus on disciplined capital
allocation, we are confident of delivering yet another strong
year.
Health, safety and the environment
We have a workforce of over 70,000 people, and our overriding
goal is that every one of them goes home safe every single day. Our
'zero harm' policy puts health and safety firmly at the forefront
of our operations.
It is therefore with great sadness that we reported a total of
nine fatalities during the year which is discouraging to our safety
programme. No injury, much less a loss of life, is ever acceptable
and we continue to invest in training and skill enhancement to
prevent accidents before they can happen. The need for improvement,
and our determination to achieve zero harm, means that this
priority is receiving the direct attention of the Executive
Committee. Specifically, we have:
n strengthened visible leadership, with rigorous implementation
of safety standards and management of high-risk areas;
n reinforced our HSE organisation by recruiting HSE experts with
global experience. We have hired 10 such experts during the year;
and provided training to both employees and contractors. Last year,
both groups underwent around 921,550 hours in safety training. Our
training programmes have focused on getting our employees make
better risk decisions so that they can start to identify those
behaviours that result in injuries and fatalities.
In FY2017, we rolled out performance standards and targets for
water, energy and carbon management, and in FY2018 we achieved or
exceeded them:
n We achieved 188% of our water savings target, saving 4.1
million m3 of water.
n We surpassed our energy savings target, achieving a savings of
2.63 million GJ, 189% of the expected target
n Last year, we stated that we had targeted reducing our
greenhouse gas (GHG) intensity by 16%[2] by 2020, from a 2012
baseline. I am pleased to inform you that nearly two years before
the target date, we are already at 14% and have built real momentum
towards achieving our goal.
On the Dow Jones Sustainability Index for the Metal and Mining
sector, Hindustan Zinc improved its overall ranking to 11th and was
inducted into the prestigious Dow Jones Yearbook. In the
Environmental Category, Hindustan Zinc moved from 11th to 3rd place
and Vedanta Limited improved its ranking from 17th to 15th.
FY2018: a productive year
At Vedanta, our portfolio ranks alongside some of the best
Tier-1 assets in the world. In FY2018, we displayed our ability to
deliver record production across those assets while maintaining our
place in the lower half of the cost curve across most of our
businesses.
At Zinc India, record production exceeded our guidance for the
year, with Rampura Agucha successfully transitioning to underground
production. Record silver production also surpassed our original
guidance with excellent output at Sindesar Khurd.
Record production also continued at Copper India and in
Aluminium, where we exited with a run rate of around 2.0mt.
However, our strong progress in increasing volumes was to some
extent offset by rising raw material input costs; in particular,
for coal and alumina. We are actively engaging in enhancing
operating efficiencies, through producing more captive alumina,
achieving better materialisation of coal linkages, and thereby
working towards reducing the controllable costs.
Other challenges included the slower than expected turnaround
initiatives at KCM, and the shutdown of operations in Goa and
Tuticorin.
At KCM, we had hoped to report more progress by the year-end.
However, this asset is now at an inflection point as the business
model has been comprehensively reappraised. Our business-partnering
approach is getting into place and is framed on clear end-to-end
responsibility and performance incentives for service providers.
Therefore, I am confident of a stronger FY2019 for KCM.
At Goa, our iron ore operations are currently shutdown. The
Honourable Supreme Court of India directed to halt all mining
operations in the state, effective 16 March 2018, pending the
granting of fresh mining leases and environmental clearances. Given
our commitment in the region, and the considerable impact on the
local economy, we continue to engage with Government to provide
clarity around restarting of mining operations at Goa. Due to the
uncertainty around this process, the Company has taken an
impairment of US$534 million (net of taxes) in FY2018.
At Tuticorin, our copper smelting operations were halted at the
end of March, initially for scheduled maintenance activities. The
shutdown has since been extended as the Company's annual renewal of
its consent to operate was rejected by the Tamil Nadu State
Pollution Control Board, pending additional clarifications. The
Company is working with the relevant regulatory authorities to
expedite the restart of the operations.
Our growth agenda
This year, we also invested in the next phase of our growth, and
have made delivering on our various growth opportunities a
strategic priority as detailed below:
Oil & Gas
n Our vision is to contribute 50% of the country's domestic
crude oil production by increasing our gross production to
500kboepd. Working towards this goal, we announced growth projects
including enhanced oil recovery (EOR), tight oil and gas projects,
upgrade of liquid handling facilities, and exploration, for which
key contracts have been awarded to world-class partners. These
projects, along with an exit run rate of 200kboepd in March 2018,
will pave the way to achieve 300kboepd in the near-term and will
progress our journey to 500kboepd in the medium-term.
Zinc
n Our current expansion will take us to over 1.5mt p.a. of zinc
production with Zinc India ramping up to 1.2mt and Gamsberg to
250kt in the near-term. Our expanding reserve and resource base at
both Zinc India and Gamsberg provides us with an opportunity to
increase production beyond this level to about 2mt in the
medium-term. With this in mind, the Zinc India board has approved
the expansion from 1.2mt to 1.35mt and corresponding silver
production potential of over 32 million ounces.
Aluminium
n We achieved a record run-rate of c.2mt as we exited the year
and are now focused on delivering a steady production of 2mt. We
also hope to proceed with expansion of the Lanjigarh refinery,
subject to further clarity on bauxite supply.
Copper
n We are continuing our Tuticorin II expansion by 400KTpa. When
complete (target: FY2020) we will be one of the world's largest
single-location copper smelters.
Iron Ore & steel
n We moved to acquire Electrosteel towards the end of the year,
the completion of which is subject to due processes. We see
favourable market dynamics for steel in India and, together with
integration efficiencies with our iron ore business, we regard this
acquisition to be value-accretive for Vedanta.
As we deliver on growth across our various businesses, we
continue to maintain our disciplined approach to investment:
potential projects will be evaluated against a range of metrics,
including operational and technical factors, pricing and market
considerations and robust return on capital.
Deleveraging and strengthening our balance sheet
In FY2018 we also delivered on our strategic priority to
deleverage our balance sheet, with the reduction of standalone debt
at Vedanta plc falling from US$6.2 to US$5.9 billion. On a
consolidated basis, the gross debt for the Group reduced by US$3
billion to US$15.2 billion as a result of strong cash flows and
productive utilisation of cash and investment balances.
However, the increased shareholder returns both at Hindustan
Zinc and Vedanta Limited, and the acquisition of ASI, resulted in
higher net debt. This year, a strategic priority will be to
optimise capital allocation and strengthen our balance sheet
through strong business cash flows.
During the year, we also worked proactively on liability
management through refinancing our near-term maturities through a
bond issuance and bank loans; this successfully extended the
average maturity profile of the debt at Vedanta plc to about four
years. We were pleased to see our ratings improve as a result, with
Moody's upgrading our Corporate Family Rating by one notch, from
'B1 stable outlook' to 'Ba3 stable outlook'. Vedanta Limited's
rating outlook was also raised from 'stable' to 'positive' (by
CRISIL, an S&P company), with a current rating of
'AA/positive'.
Operational excellence
In FY2018, we also delivered on our strategic priority of asset
optimisation. We focused on debottlenecking our assets, adopting
technology and digitalisation, strengthening people-practices,
enhancing the vendor and customer base, and spend-base
optimisation. We are making concerted efforts to drive all-round
operational excellence, benchmarking our operations with global
leaders to ensure we attain the true potential of our assets and
have made this one of our strategic priorities.
Achieving the lowest cost, with no compromise on safety or
quality, is our operating philosophy and there is an ongoing focus
on asset optimisation and process innovation. For example, in the
Oil & Gas business, we have partnered with global oil field
service providers and have provided our partners with end-to-end
responsibility for project management, providing incentives on
measurable outcomes of production, delivery and safety.
Digitalisation is opening up exciting opportunities at several
of our leading mines. At Gamsberg, for example, the project will
have leading edge systems that report the state of the mine, the
quality of ore, the conditions of the concentrator and the quality
of the concentrate, all in real-time to enable minute-by-minute
decisions. We also completed piloting digital technology at
Sindesar Khurd, transforming it into a fully automated mine that
will reduce costs while elevating safety.
Reaching out to communities
My personal experience of Vedanta stretches over 15 years, and I
have always been proud to work with a company so focused on
contributing to the communities around it. In FY2018 we invested,
and helped to achieve, more than ever before in the areas of
childcare, health, education and development, empowerment for women
and other social programmes.
These activities, in India and Africa both, are covered in more
detail in the Chairman's statement on page 6.
In India, the Nand Ghar project, one of our most focused
initiatives is working towards building and transforming
state-of-the-art, grassroots day care centres with multi-media
facilities to support education for children. To date, we have
built 154 centres in Rajasthan, Uttar Pradesh and Madhya Pradesh,
and we are perfecting the pilot. Vedanta has committed to
constructing 4,000 modernised Anganwadis (child care centres)
across the country and we are working with resolve towards
achieving this goal.
Outlook FY2019
With various growth opportunities in the pipeline, our
performance in FY2019 will be even stronger, with a further
improvement in volumes and reduced costs. Our focus on efficiency,
cost control and operational excellence will yield results during
the year as we build a strong foundation for our next phase of
growth. We will also continue to set the bar higher for ourselves
in critical areas such as safety, and in corporate governance.
We believe that the market environment we enjoyed in FY2018 will
also characterise FY2019, giving us a supportive climate as we
continue to ramp up production and advance our growth agenda. We
expect to increase investments year-on-year, in a measured and
reasoned way and focus on organic growth in areas where we have
deep expertise: principally, oil & gas, and zinc. Equally, we
continue to monitor markets and make our decisions with a strong
sense of realism. Our investments are largely self-funded and are
not market-dependent; we are always ready for cyclical volatility,
and meanwhile we focus on factors within our control such as costs
and safe expansion.
Our ability to meet these commitments comes entirely from the
effort, skills and vision of our people, and I compliment all our
employees for their dedication and hard work. Together, we will
continue to benefit from, and contribute to, one of the fastest
growing economies in the world, and add value for our
shareholders.
We entered FY2019 with the welcome news of the appointment of
Srinivasan Venkatakrishnan (Venkat) as CEO. He brings with him a
wealth of experience in global resources and I look forward to
handing over the reins to him on 31 August 2018.
KULDIP KAURA
Chief Executive Officer
23 May 2018
Strategic Overview
Over the last few years, our strategic priorities have remained
consistent with a focus on delivering growth and long-term value to
our stakeholders while upholding operational excellence and
sustainable development through our diversified portfolio.
In FY2018, we invested in the next phase of growth and announced
expansion projects in Oil & Gas and Copper India. These
projects in addition to the ramp-ups already underway in other
businesses, will provide Vedanta with significant growth in its
production capacities. At the same time, we continually strive to
improve our operations to achieve benchmark performance, optimise
costs and improve realisations. With this enhanced focus, we have
made delivering on various growth opportunities and operational
excellence as separate strategic priorities for the current year.
We continue to be steadfast on our strategic priorities on
responsible mining, capital allocation and exploration focus.
Summary of strategic priorities below:
Operational excellence:
We are focused on all-round operational excellence to achieve
benchmark performance across our business by debottlenecking our
assets, adopting technology and digitalisation, strengthening
people-practices, enhancing the vendor and customer bases,
optimising the spend base and improving realisations.
Preserve our licence to operate:
We operate as a responsible business, focusing on achieving zero
harm, minimising our environmental impact and promoting social
inclusion across our operations. We put management systems and
processes in place to ensure our operations create sustainable
value for our stakeholders.
Optimise capital allocation and maintain a strong balance
sheet:
Our focus is on generating strong business cash flows, capital
discipline, proactive liability management and maintaining a strong
balance sheet. We will also review all investments (organic and
inorganic) based on our strict capital allocation framework, with a
view to maximising returns to shareholders.
Delivering on growth opportunities:
We are focused on growing our operations organically by
developing brownfield opportunities in our existing portfolio, and
by acquiring attractive, complementary assets in the natural
resources segment that add value to our portfolio.
Augment our reserves & resources (R&R) base:
We are looking at ways to expand our R&R base through
targeted and disciplined exploration programmes. Our exploration
teams aim to discover mineral and oil deposits in a safe and
responsible way, to replenish the resources that support our future
growth.
FINANCE REVIEW
Executive summary: a strong operational performance complemented
by firm commodity prices
We recorded a strong operational and financial performance in
FY2018.
Favourable price environment coupled with volume growth resulted
in EBITDA of $4.1 billion, up 27% y-o-y with a robust margin of
35%. (FY2017: US$ 3.2 billion, margin 36%).
Market factors resulted in net incremental EBITDA of US$ 591
million compared to FY2017. The increase was driven by improved
commodity prices, but partially offset by an increase in raw
material cost (primarily alumina, coal and carbon) and unfavourable
foreign exchange impacts.
A strong volume performance contributed to an incremental EBITDA
of US$ 297 million, driven by record volumes at our Zinc India and
Aluminium businesses, following a ramp-up of capacities. This was
partially offset by some lower volumes, mainly at our Iron Ore
business.
During FY2018, gross debt was reduced by c.US$3 billion, from
US$18.2 billion at 31 March 2017 to US$15.2 billion at 31 March
2018. This includes repayment of US$1.2 billion of temporary
borrowing at Zinc India.
Net debt increased to US$9.6 billion at 31 March 2018 from
US$8.5 billion at 31 March 2017, driven by significant dividend
payments from our listed subsidiaries, Zinc India and Vedanta
Limited, in April 2017 and March 2018, and the acquisition of
AvanStrate Inc.
Debt maturities at Vedanta Resources plc were managed through
proactive refinancing of US$2.4 billion. This extended Vedanta
Resources plc's debt maturity to c.4 years at 31 March 2018,
compared to c.3 years at 31 March 2017.
The Balance sheet of Vedanta Limited, an Indian listed
subsidiary of Vedanta Resources, continue to remain strong with
cash and liquid investments of c.US$5.6 billion and net debt to
EBITDA ratio at 0.9x.
Consolidated operating profit before special items
Operating profit before special items increased by US$620
million to US$ 2,781 million in FY2018. This was driven by a strong
operating performance and firm commodity prices, but partially
offset by input commodity inflation, unfavourable foreign exchange
impacts and higher depreciation and amortisation expenses.
Consolidated operating profit summary before special items
(US$ million, unless stated)
Consolidated operating profit before special FY2018 FY2017 % change
items
--------------------------------------------- ------- ------- --------
Zinc 1,861 1,385 34%
-India 1,670 1,274 31%
-International 191 111 73%
Oil & Gas 388 186 -
Iron Ore (11) 124 -
Copper 137 116 18%
-India/Australia 176 223 (21%)
-Zambia (39) (107) -
Aluminium 195 203 (4%)
Power 184 157 17%
Others 27 (10) -
--------------------------------------------- ------- ------- --------
Total Group operating profit before special
items 2,781 2,161 29%
--------------------------------------------- ------- ------- --------
Consolidated operating profit bridge before special items
(US$ million)
Operating profit before special items for FY2017 2,161
---------------------------------------------------- ------
Market and regulatory: US$591 million
a) Prices, Premium / Discount 1,320
b) Direct raw material inflation (646)
c) Foreign exchange movement (99)
d) Profit petroleum to GOI at Oil & Gas 37
e) Regulatory changes (21)
Operational: US$269 million
f) Volume 297
g) Product and market mix (14)
h) Cost (14)
Depreciation and amortisation (240)
Operating profit before special items for FY2018 2,781
---------------------------------------------------- ------
a) Prices
Commodity price fluctuations have a significant impact on the
Group's business. During FY2018, we saw a positive impact on
operating profit of US$ 1,320 million.
Zinc, lead and silver: Average zinc LME prices during FY2018
increased to US$3,057 per tonne, up 29% y-o-y; lead LME prices
increased to US$2,379 per tonne, up 19% y-o-y; and silver prices
decreased to US$16.9 per ounce, down 5% y-o-y. The collective
impact of these price fluctuations and premium increased operating
profits by US$575 million.
Aluminium: Average aluminium LME prices increased to US$2,046
per tonne in FY2018, up 21% y--o--y and higher premium, positively
impacting operating profit by US$588 million.
Copper: Average copper LME prices increased to US$6,451 per
tonne in FY2018, up 25% y--o--y, positively impacting Copper
Zambia's operating profit by US$103 million. (Copper India's
profits, as a custom smelting business, are driven by prevailing
TC/RC rather than LME prices.)
Oil & Gas: The average Brent price for the year was US$58
per barrel, higher by 18% compared with US$49 per barrel during
FY2017, but partially offset by a higher discount to Brent during
the year (FY2018: 12.3%; FY2017: 10.8%). This positively impacted
operating profit by US$128 million.
Iron Ore: Iron Ore Goa's price realisation for FY2018 was lower
33% y-o-y, mainly due to the widening discount for our 56% Fe grade
material, compared to the benchmark price of 62% Fe iron grade.
This was partially offset by higher realisation at our Iron Ore
business in Karnataka, which primarily caters for the domestic
steel industry in the state. The collective impact resulted in a
decrease in operating profit of US$69 million.
Our usual policy is to sell products at prevailing market prices
and not to enter into price hedging arrangements. However, during
the period, Zinc India entered into a forward contract to sell
220,000 tonnes of zinc and 30,000 tonnes of lead at average prices
of US$3,084 per tonne and US$2,418 per tonne respectively, for the
period from January 2018 to June 2018. As at 31 March 2018, open
quantities stood at 70,000 tonnes of Zinc and 15,000 of lead, at
average prices of US$3,075 per tonne and US$ 2,374 per tonne
respectively for the period from April 2018 to June 2018.
b) Direct raw material inflation
Prices of key raw materials such as alumina, thermal coal,
carbon and metallurgical coke increased significantly in FY2018,
with an adverse impact on operating profit of US$646 million.
c) Foreign exchange fluctuation
Most of our operating currencies appreciated against the US
dollar during FY2018. Stronger currencies are unfavourable to the
Group, given the local cost base and predominantly US dollar-linked
pricing.
Adverse currency movements decreased operating profits by US$99
million compared to FY2017.
Information regarding key exchange rates against the US
dollar
Average Average
year ended year ended As at As at
31 March 31 March 31 March 31 March
2018 2017 % change 2018 2017
---------------- ------------ ------------ --------- ---------- ----------
Indian rupee 64.45 67.09 (4%) 65.04 64.84
South African
rand 13.00 14.07 (8%) 11.83 13.41
Zambian kwacha 9.54 9.95 (4%) 9.50 9.66
---------------- ------------ ------------ --------- ---------- ----------
d) Profit petroleum to GOI at Oil & Gas
The profit petroleum outflow to the Government of India (GOI),
as per the production sharing contract (PSC), decreased by US$37
million. The reduction was primarily due to the higher capital
expenditure over the previous year.
e) Regulatory
During FY2018, the Group encountered increased regulatory
headwinds, with an additional entry tax provision created at BALCO
for US$10 million, pursuant to a Supreme Court order, and higher
electricity duty (ED) in our Aluminium business. This had an
adverse impact on operating profit of US$21 million.
f) Volumes
Higher volumes contributed to the increased operating profit of
US$297 million, generated by these key Group businesses:
n Zinc India (positive US$231 million)
- FY2018 was a year of records, with an all-time high in
integrated metal production of 960kt in FY2018, an increase of 18%
over FY2017, and record silver volumes of 17.9 million ounces, up
23% on the previous year.
n Aluminium (positive US$188 million)
- Our Aluminium business achieved record production of 1.7mt and
exited the year with a run-rate of c. 2mtpa, driven by the steady
ramp-up of capacities at Jharsuguda and Balco.
n Copper Zambia (negative US$54 million)
-The integrated production at Copper Zambia was at 84kt, a
decrease of 12% over FY2017
n Iron Ore (negative US$42 million)
-Sales were down due to a low pricing environment and a
state-wide ban on Goa mining operations with effect from 16 March
2018.
g) Product and market mix
During FY2018, incremental aluminium production was sold in
export markets, which realise lower premiums than the domestic
Indian market. This mainly resulted in an adverse impact from the
marketing mix of US$14 million.
h) Cost
Costs in the year increased by US$14 million over FY2017,
primarily due to lower ore grade at Zinc India, higher development
costs, rehabilitation and the refurbishment cost of equipment at
KCM. This was partially offset by volume-led absorption, mainly at
HZL.
Depreciation and amortisation
Depreciation and amortisation increased by US$240 million
against the previous year. This was driven by higher capitalisation
at our Aluminium business, higher depreciation at Oil & Gas
with the start of growth projects, and higher production at Zinc
India.
Income statement
(US$ million, unless stated)
FY2018 FY2017 % change
------------------------------------------------ -------- ------- --------
Revenue 15,359 11,520 33%
EBITDA 4,051 3,191 27%
EBITDA margin (%) 26% 28% -
EBITDA margin without custom smelting (%) 35% 36% -
Special items 683 (17) -
Depreciation (1,263) (928) 36%
Amortisation (7) (102) (93%)
------------------------------------------------ -------- ------- --------
Operating profit 3,464 2,143 62%
------------------------------------------------ -------- ------- --------
Operating profit without special items 2,781 2,161 29%
Net interest expense (878) (698) 26%
Interest cost-related special items (108) (42) -
Other gains /(losses) special items 5 - -
Other gains /(losses) (1) (24) (96%)
Profit before taxation 2,482 1,380 80%
Profit before taxation without special items 1,902 1,439 32%
Income tax expense (675) (495) 36%
Income tax (expense)/credit (special items) (338) (5) -
Effective tax rate without special items (%) 35% 34% -
------------------------------------------------ -------- ------- --------
Profit for the period /year 1,469 880 67%
------------------------------------------------ -------- ------- --------
Profit for the period /year without special
items 1,227 943 30%
Non-controlling interest 1,233 902 37%
Non-controlling interest without special items 1,065 909 17%
Attributable profit / (loss) 236 (23) -
Attributable profit/loss without special items 163 35 -
Underlying attributable profit/(loss) 162 45 -
Basic earnings / (loss) per share (US cents
per share) 84.8 (8.2) -
Basic earnings/(loss) per share without special
items (US cents per share) 58.5 12.6 -
Underlying earnings/(loss) per share (US cents
per share) 58.3 16.1 -
------------------------------------------------ -------- ------- --------
Consolidated revenue
Revenue for FY2018 increased by 33% to US$15,359 million
(FY2017: US$ 11,520 million). This was mainly driven by firmer
commodity prices and record volumes at Zinc India, Copper India and
Aluminium, but was partially offset by a lower volume at Iron Ore
Goa.
(US$ million, unless stated)
Net revenue
Consolidated revenue FY2018 FY2017 % change
--------------------- ------- ------- -----------
Zinc 3,903 2,857 37%
India 3,369 2,525 33%
International 535 332 61%
Oil & Gas 1,480 1,223 21%
Iron Ore 487 615 (21%)
Copper 5,116 4,008 28%
India/Australia 3,833 3,134 22%
Zambia 1,283 874 47%
Aluminium 3,588 2,040 76%
Power 877 836 5%
Others (1) (92) (59) -
--------------------- ------- ------- -----------
Revenue 15,359 11,520 33%
--------------------- ------- ------- -----------
1. Includes port business and eliminations of inter-segment
sales, which were lower in the current period.
Consolidated EBITDA
The consolidated EBITDA by segment is set out below:
(US$ million, unless stated)
EBITDA EBITDA
% margin margin
FY2018 FY2017 change Key drivers % FY2018 % FY2017
--------------------- ------ ------ ------- --------------------------- ---------- ----------
Zinc 2,122 1,562 36% 54% 55%
-India 1,903 1,423 34% Record volumes and LME 56% 56%
-International 219 138 59% Higher sales and LME 41% 42%
Oil & Gas 849 597 42% Brent price 57% 49%
Lower volume and higher
Iron Ore 57 194 (71%) discount 12% 32%
Copper 274 258 6% 5% 6%
-India/Australia 201 252 (20%) Lower TC/RC and premia 5% 8%
-Zambia 73 6 LME offset by lower volume 6% 1%
Record volume offset by
Aluminium 452 344 31% higher COP 13% 17%
Power 259 245 6% 25%(2) 29%
Others (1) 37 (9) - - -
--------------------- ------ ------ ------- --------------------------- ---------- ----------
Total 4,051 3,191 27% EBITDA margin 26% 28%
--------------------- ------ ------ ------- --------------------------- ---------- ----------
Adjusted EBITDA margin 35% 36%
--------------------- ------ ------ ------- --------------------------- ---------- ----------
1. Includes port business and elimination of inter-segment transactions.
2. Excluding one-offs
EBITDA AND EBITDA MARGIN
EBITDA for FY2018 increased to US$4,051 million, up 27% y-o-y.
This was primarily driven by firmer commodity prices supported by
record volumes at Zinc India and Aluminium, partially offset by
input commodity inflation, adverse foreign exchange movement impact
and lower volumes at Iron Ore and integrated volumes at KCM. (See
'Operating profit variance' for more details.)
In FY2018, EBITDA margin stood at 26%, and adjusted EBITDA
margin was robust at 35%.
Special items (including interest cost related, and others)
In FY2018 special items included:
n At the Oil & Gas business, a reversal of previously
recorded non-cash impairment charge of US$1,464 million (US$888
million net of taxes). This followed the progress of key growth
projects which are expected to result in enhanced recovery of
resources in a commercially viable manner, leading to a higher than
forecast oil production, and cost savings
n A non-cash impairment charge of US$758 million (US$534 million
net of tax) at Iron Ore Goa, pursuant to a Supreme Court order to
cancel all mining leases in Goa, effective 16 March 2018
n Special items related to interest cost stood at US$108 million
in FY2018, due to a loss incurred on bond buy-back activity in May
and August 2017, and a one-time arbitration of an historical vendor
claim in the Aluminium business.
Further analysis of special items is set out in notes 5, 7 and 8
of the financial statement.
Net interest
Finance costs (excluding special items) was flat y-o-y at
US$1,343 FY2018 (FY2017: US$ 1,341 million). This was primarily due
to:
n Commissioning and capitalisation of new capacities at our
Aluminium and Power businesses (c. US$46 million); and
n The issuance of 7.5% preference shares of US$464 million to
non-controlling shareholders of Oil & Gas, pursuant to the
merger with Vedanta Limited in April 2017 (c.US$39 million).
These increased finance costs were partially offset by lower
gross debt and a lower cost of borrowing at 7.2% (FY2017:
7.5%).
Investment revenue in FY2018 decreased to US$465 million
(FY2017: US$643 million). This was mainly due to lower cash and
liquid investments following special dividend pay-outs and our
gross debt reduction, as well as a lower return on investments due
to a sharp rise in G-Sec yields that resulted in mark-to-market
losses on investments.
The average post-tax return on the Group's investments was 5.85%
(FY2017: 7.55%), and the average pre-tax return was 7.4 % (FY2017:
9.4%).
The combination of marginally higher finance costs and lower
investment revenues led to an increase of US$180 million in net
interest expense (excluding interest cost-related special items)
during the period.
Other gains / (losses) excluding special items
Other gains / (losses) excluding special items for FY2018
amounted to US$(1) million, compared to US$(24) million in
FY2017.
Taxation
The effective tax rate (ETR) in FY2018 (excluding special items)
was 35% compared to 34% in FY2017. This was mainly due to the
phasing out of investment allowance claims, a change in the cess
rate from 3% to 4% as per the Finance Act 2018, and a change in the
profit mix.
Attributable profit/(loss)
The attributable profit before special items for the year was
US$163 million (FY2017: US$35 million). This was mainly driven by
higher EBITDA , but partially offset by higher expenses from net
interest and depreciation.
Earnings/(loss) per share
Basic earnings per share for the period were US cents 84.8
(FY2017: a loss of US cents 8.2). The underlying profit was US
cents 58.3 per share (FY2017: profit of US cents 16.1 per
share).
Fund flow post-capex
The Group generated free cash flow (FCF) post-capex of US$925
million (FY2017: US$1,544 million). This was driven by a strong
operating performance and disciplined capital expenditure outflow,
partially offset by higher interest expenses and proactive
adjustments to managing the working capital funding.
Fund flow and movement in net debt
Fund flow and movement in net debt in FY2018 are set out
below.
(US$ million, unless stated)
Details FY2018 FY2017
---------------------------------------------- -------- ---------
EBITDA 4,051 3,191
Operating exceptional items 33 -
Working capital movements (611) 295
Changes in non-cash items 28 29
Sustaining capital expenditure (385) (145)
Movements in capital creditors 42 (158)
Sale of property, plant and equipment 10 25
Net interest (including interest cost-related
special items) (925) (701)
Tax paid (498) (324)
Expansion capital expenditure (820) (668)
---------------------------------------------- -------- ---------
Free cash flow (FCF) post capex 925 1,544
---------------------------------------------- -------- ---------
Dividend paid to equity shareholders (164) (138)
Dividend paid to non-controlling interests (1,414) (1,393)
Tax on dividend from Group companies (69) (455)
Acquisition of subsidiary(1) (240) -
Other movements(2) (122) (732)(3)
---------------------------------------------- -------- ---------
Movement in net debt (1,084) (1,175)
---------------------------------------------- -------- ---------
1.Includes net debt on acquisition of US$72million and
acquisition expenses of US$7million
2. Includes foreign exchange movements.
3. Includes preference shares of US$464 million issued in
relation to the Cairn merger.
Debt, maturity profile and refinancing
In line with our stated financial priorities to deleverage and
strengthen the balance sheet, the Group reduced gross debt
year-on-year by c. US$3 billion, from US$18.2 billion to US$15.2
billion. This includes repayment of US$1.2 billion of temporary
borrowing at Zinc India.
During FY2018, net debt increased from US$8.5 billion to US$9.6
billion y-o-y. This was due to significant dividend payments from
our listed subsidiaries, Zinc India and Vedanta Limited, and the
acquisition of AvanStrate Inc.
Our total gross debt of US$15.2 billion comprises:
n US$11.3 billion as term debt (March 2017: US$13.8
billion);
n US$2.7 billion of short-term borrowings (March 2017: US$2.3
billion);
n US$0.5 billion preference shares issued pursuant to the Cairn
merger (March 2017: US$0.5 billion); and
n US$0.7 billion of working capital loans (March 2017: US$0.4
billion).
Gross debt as at 31 March 2017 included a US$1.2 billion
temporary borrowing at Zinc India, which was repaid during
FY2018.
The Group has been proactively managing its debt maturities at
Vedanta Resources plc and various operating entities. This included
proactive refinancing of US$2.4 billion at Vedanta Resources plc,
which was comprised of a bond and term loans. These transactions
have collectively extended average debt maturity to c. 4 years at
31 March 2018, compared to c. 3 years at 31 March 2017.
The maturity profile of term debt of the Group (totalling
US$11.3 billion) is summarised below:
As at As at
31 March 31 March Beyond
Particulars 2017 2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2023
------------------------------ --------- --------- ------ --------- ------ ------ ------ -------
Debt at Vedanta Resources plc 6.2 5.9 0.4 0.4 0.2 1.4 1.8 1.7
Debt at subsidiaries 7.6 5.4 1.2 1.0 1.4 0.7 0.2 0.9
------------------------------ --------- --------- ------ --------- ------ ------ ------ -------
Total term debt(1) 13.8 11.3 1.6 1.4 1.6 2.1 2.0 2.6
------------------------------ --------- --------- ------ --------- ------ ------ ------ -------
1. Term debt excluding preference shares.
Term debt at our subsidiaries was US$5.4 billion, with the
balance at Vedanta Resources plc. The total undrawn fund-based
credit limit was c.US$0.6 billion as at 31 March 2018.
The Group has been successful in extending its maturing debts
through rollovers, new debts and repayment from internal accruals
during the period, both at Vedanta Resources plc and
subsidiaries.
Cash and liquid investments stood at US$5.6 billion at 31 March
2018 (31 March 2017: US$9.7 billion). The portfolio continues to be
conservatively invested in debt mutual funds, and in cash and fixed
deposits with banks.
GOING CONCERN
The Directors have considered the Group's cash flow forecasts
for the next 12-month period, from the date of signing the
financial statements for the year ending 31 March 2018. The Board
is satisfied that the forecasts and projections show that the Group
will be able to operate within the level of its current facilities
for the foreseeable future. This takes into account the effect of
reasonably possible changes in trading performance on cash flows
and forecast covenant compliance; the transferability of cash
within the Group; the flexibility that the Group has over the
timings of its capital expenditure; and other uncertainties. For
these reasons, the Group continues to adopt the 'going concern'
basis in preparing its financial statements.
LONGER-TERM VIABILITY STATEMENT
In accordance with provision C.2.1 of the UK Corporate
Governance Code, the Directors have assessed the long-term
viability of the Group taking into account the Group's principle
risks and its approach to manage them, together with the latest
financial forecasts and three-year plan.
Period of viability statement
As per provision C2.2 of the UK Corporate Governance Code the
Directors have reviewed the length of time to be covered by the
Viability Statement, particularly given its primary purpose of
providing investors with a view of financial viability that goes
beyond the period of the Going Concern statement.
The Board of Directors have considered a three-year period to be
appropriate for the longer-term viability testing on account of
following key reasons:
n Commodity prices which are key to Group's viability are
difficult to forecast beyond three years;
n Capital allocation and refinancing plans are prepared for
period of three years;
n Completion of Growth projects from feasibility study generally
requires three years
n Conversion of exploration projects to mining typically
requires three to five years;
n Internal financial modelling is performed over three-year
period; and
In assessing the Group's longer-term viability, the going
concern assumptions and financial model were used as the starting
position. Severe but plausible risks were subsequently quantified
both individually and in combination, to apply additional
stress-testing into the viability model.
Details of the Group's principle risks and uncertainties are
documented in Principle Risk and Uncertainties part of this report.
The Directors have considered the following risks as particularly
relevant for assessing the longer-term viability:
n Decline in commodity prices;
n Delay in execution of key growth projects;
n Operational turnaround at KCM operations;
n Raw Material Security at Aluminium business;
n Access to capital/ refinancing risk; and
n Adverse outcomes of material legal and tax cases.
The Group remains viable under these severe but plausible
scenarios taking into consideration the specific mitigations which
include capital allocation, dividend policy flexibility, readily
available access to lines of credit and assumption around the
continued availability of funding or refinancing, by way of capital
markets and bank debt.
Conclusion
While it is impossible to foresee all risks, and the
combinations in which they could manifest, based on the results of
this assessment and taking into account the Group's current
position and principle risks, the Directors have assessed the
prospects of the Group, over the next three years, and have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over a period
of three years from 1 April 2018.
Covenants
The Group is in compliance with its covenants relating to all
facilities for the testing period ending 31 March 2018.
Credit rating
The Group's credit rating by Moody's is at 'Ba3/outlook stable'
for CFR Rating and 'B2' for Senior Unsecured notes. Both the CFR
and Senior Unsecured rating by S&P is at 'B+/outlook
stable'.
We are targeting a further strengthening of our credit profile
to attain investment-grade ratings, through our continuous focus on
operations to generate increased cashflows, and on financial
policies.
Balance sheet
(US$ million, unless stated)
31 March 2018 31 March 2017
------------------------------------------ ------------- -------------
Goodwill 12 17
Intangible assets 123 96
Property, plant and equipment 17,727 16,751
Other non-current assets 2,179 2,157
Cash and liquid investments 5,606 9,725
Other current assets 3,591 2,759
Total assets 29,238 31,503
Gross debt (15,194) (18,229)
Other current and non-current liabilities (7,523) (7,260)
Net assets 6,521 6,015
Shareholders' equity (339) (409)
Non-controlling interests 6,860 6,423
Total equity 6,521 6,015
------------------------------------------ ------------- -------------
Shareholders' (deficit)/equity was US$(339) million at 31 March
2018 compared with US$(409) million at 31 March 2017. This mainly
reflects the attributable profit for FY2018 and dividend pay-out of
US$164 million (US cents 59 per share).
Non-controlling interests increased to US$6,860 million at 31
March 2018 (from US$6,423 million at 31 March 2017) mainly driven
by the profit for the year offset by dividend payments during the
year.
Property, plant and equipment (PPE)
During FY2018, PPE increased to US$17,727 million (FY2017: US$
16,751 million), mainly due to investment of $820 million on
expansion projects and US$385 million sustaining capital
expenditure, the acquisition of AvanStrate Inc., and a non-cash
reversal of previously recorded impairment charge at our Oil &
Gas business. However, this was partially offset by an impairment
charge at Iron Ore Goa and depreciation charge during the year.
Contribution to the exchequer
The Group contributed c. US$5.4 billion to the exchequer in
FY2018 compared to US$6.0 billion in FY2017 through direct and
indirect taxes, levies, royalties and dividend.
Project capex
(US$ million)
Cumulative Unspent
spend up as at
Total capex to March Spent 31 March
Capex in progress Status approved(5) 2017(6) in FY2018 20187
Oil & Gas (a)
Mangala infill and
ASP, Aishwariya & Bhagyam
EOR, tight oil & gas
etc. 1,863 56 127 1,680
Aluminium
BALCO - Korba-II 325ktpa
smelter and 1200MW Smelter: fully
power plant (4x300MW)1 operational 1,872 1,965 (1)(3) (92)
Line 3 and 4:
fully capitalised
Jharsuguda 1.25mtpa Line 5: two sections
smelter capitalised 2,920 2,746 100 74
Zinc India
Phase-wise by
1.2mtpa mine expansion(2) FY2020 1,600 967 299 335
Others 150 12 60 77
Zinc International
First production
Gamsberg mining Project(4) by mid-CY2018 400 68 173 159
----------------------------- ------------------------ ------------ ---------- ---------- ---------
Copper India
Tuticorin smelter To complete by
400ktpa Q3 FY 2020 717 139 50 528
Capex flexibility
----------------------------- ------------------------ ------------ ---------- ---------- ---------
Under evaluation,
Lanjigarh Refinery subject to bauxite
(Phase II) - 5mtpa availability 1,570 822 14 734
Skorpion refinery Currently deferred
conversion till pit 112 extension 156 14 - 142
Zinc India (1.2mtpa In principle Board
to 1.35mtpa mine expansion) approval 698 - - 698
----------------------------- ------------------------ ------------ ---------- ---------- ---------
1. Cost over-run due to changes in exchange rate. The total
over-run is expected to be US$120 million up to FY2019.
2. Zinc India total spent to March 2017, adjusted for re-grouping of projects.
3. Positive on account of sale of trial run production.
4. Capital approved US$400 million excludes interest during construction (IDC).
5. Based on exchange rate prevailing at time of approval.
6. Based on exchange rate prevailing at the time of incurrence.
7. Unspent capex represents the difference between total
projected capex and cumulative spend as at March 31, 2018.
OPERATIONAL REVIEW
OIL & GAS
The year in summary:
During FY2018, we delivered a strong operational and financial
performance alongside the award of key contracts to reactivate the
capital expenditure cycle.
In pursuit of our vision to contribute 50% of India's domestic
crude oil production, we have targeted investments in a
high-potential set of projects comprising enhanced oil recovery,
tight oil and tight gas and exploration prospects.
We exited FY2018 with a gross production run-rate of over
200,000boepd in March which, along with the upside from these
growth projects, will trigger significant volume growth for
FY2019.
SAFETY
We made significant progress towards the goal of zero harm by
reducing our lost time injuries (LTIs) to five, from the previous
year's seven. The LTI frequency rate stood at 0.19 (against 0.30 in
FY2017).
Building on several safety improvement initiatives, the Oil
& Gas business received recognitions for excellence in our
safety management systems:
n Vedanta Limited: Cairn Oil & Gas received the Golden
Peacock Award for Sustainability for the year 2017.
n Mangala, Bhagyam, Aishwariya and pipeline operations each
achieved a Five Star Rating in the OHSMS Audit by British Safety
Council (BSC).
n The Ravva offshore asset received first prize in the
CII-SR-EHS Excellence Award 2017, as well as a 5 Star award and the
Golden Peacock Occupational Health & Safety Award for the year
2017.
n The Mangala field in the Rajasthan asset received the Oil
Industry Safety Award 2015-16 from OISD, MOPNG in the Oil & Gas
Onshore asset category.
ENVIRONMENT
We have initiated co-processing for all types of non-recyclable
hazardous waste, which can be used in cement industries as an
alternative fuel and raw material. This completely eliminates the
need for incineration and ensures that zero-waste is sent to
landfill. To date, around 4,592 MT of non-recyclable hazardous
waste has been safely and sustainably handled using the
co-processing route.
The Oil & Gas business has also carried out a fugitive
emission monitoring study for all its operating assets. This
revealed that there has been no significant leakage of fugitive
emissions to the atmosphere, and that we are succeeding in
minimising our greenhouse gas emissions.
Production performance
Unit FY2018 FY2017 % change
---------------------------------- ------- ------- ------- --------
Gross production boepd 185,587 189,926 (2%)
Rajasthan boepd 157,983 161,571 (2%)
Ravva boepd 17,195 18,602 (8%)
Cambay boepd 10,408 9,753 7%
Oil bopd 177,678 184,734 (4%)
Gas mmscfd 47.4 31.2 52%
Net production - working interest boepd 118,620 121,186 (2%)
Oil bopd 114,774 118,976 (4%)
Gas mmscfd 23.1 13.3 74%
Gross production mmboe 67.7 69.3 (2%)
Working interest production mmboe 43.3 44.2 (2%)
---------------------------------- ------- ------- ------- --------
Operations
Average gross production for FY2018 was 185,587 barrels of oil
equivalent per day (boepd), 2% lower year-on-year primarily due to
natural field decline, partially offset by volume ramp-up from
infill wells in Mangala and Cambay and continued effective
reservoir management practices across assets. All three blocks -
Rajasthan, Ravva and Cambay - continued to record a plant uptime of
over 99% (FY2017: 99%).
Production details by block are summarised below.
Rajasthan block
Rajasthan block production was 2% lower at an average rate of
157,983boepd. This reduction was due to natural decline in the
field. However, the decline was partially offset by encouraging
results from the new wells added as part of the Mangala infill
activity, the ramp-up of Raageshwari Deep Gas (RDG) Phase I and the
continuing efficacy of our reservoir management practices.
At Rajasthan, the drilling programme of 15 infill wells at the
Mangala field started during Q2 FY2018. Of these, 13 wells have
been brought online with the remaining two wells to be completed in
Q1 FY2019.
In order to boost volumes from satellite fields, we began an
eight-well drilling campaign. Four wells in NI and NE have been
brought online and the remainder are expected to be completed in Q1
FY2019.
RDG Phase I ramped up fully to 45 million standard cubic feet
per day (mmscfd) during FY2018. Gas production from Raageshwari
Deep Gas (RDG) in Rajasthan increased to an average of 37mmscfd in
FY2018 (44mmscfd in Q4), with gas sales post-captive consumption of
22mmscfd from an average production of 26mmscfd in FY2017, with gas
sales post-captive consumption at 10mmscfd.
Ravva block
Production from the Ravva block was down by 8% at an average
rate of 17,195boepd, owing to natural decline. Closing of the
water-producing zones in two wells, and gas lift optimisation, has
helped to enhance production rates from the field, partially
offsetting the natural decline.
Cambay block
Production from the Cambay block was up by 7% at an average rate
of 10,408boepd. This was primarily due to the start of the infill
drilling campaign, together with effective reservoir management
practices.
At Cambay, we began the four-well infill campaign in January
2018 to enhance production volumes. Drilling of the first well was
completed successfully and production began in February 2018.
Drilling and completion of the remaining three wells also completed
till date.
Prices
FY2018 FY2017 % change
---------------------------------- ------ ------ --------
Average Brent prices - US$/barrel 57.5 48.6 18%
---------------------------------- ------ ------ --------
The latter half of FY2018 saw a substantial recovery in crude
oil prices, with Brent peaking at US$71 per barrel in January for
the first time since December 2014. The increase was supported by
healthy crude demand during the winter season and consistency in
OPEC-led output cuts. Brent crude oil averaged US$58 per barrel,
with a closing rate of US$67 per barrel as at 29 March 2018. The
year ended on a positive note as OPEC looked set to continue
withholding output for the rest of the year.
Financial performance
(US$ million, unless stated)
FY2018 FY2017 % change
-------------------------------------- ------ ------ --------
Revenue 1,480 1,223 21%
EBITDA 849 597 42%
EBITDA margin 57% 49% -
Depreciation and amortisation 461 411 12%
Operating profit before special items 388 186 -
Share in Group EBITDA % 21% 19% -
Capital expenditure 137 62 -
Sustaining 10 6 -
Projects 127 56 -
-------------------------------------- ------ ------ --------
Revenue for FY2018 was 21% higher y-o-y at US$1,480 million
(after profit and royalty sharing with the Government of India),
supported by a recovery in oil price realisation. EBITDA for FY2018
was higher at US$849 million, up 42% y-o-y, due to higher revenue.
The Rajasthan water flood operating cost was US$4.6 per barrel in
FY2018 compared to US$4.3 per barrel in the previous year,
primarily driven by increased interventions and production
enhancement initiatives. Overall, the blended Rajasthan operating
costs increased to US$6.6 per barrel during FY2018 compared with
US$6.2 per barrel in the previous year, due to the ramp-up in
polymer injection volumes.
In Q4 FY2018, reversal of previously recorded non-cash
impairment charge of US$1,464 million (US$888 million net of taxes)
taken, following the progress on the key growth projects which are
expected to result in enhanced recovery of resources in
commercially viable manner leading to a higher forecast to oil
production and savings in the cost.
In FY2018 capital expenditure was US$127 million, which was
primarily focused on growth projects including the Mangala infill,
the liquid handling upgrade, and the RDG and CB infill
campaigns.
Exploration and development
Exploration
Rajasthan - (BLOCK RJ-ON-90/1)
The Group is reactivating its Oil & Gas exploration efforts
in the prolific Barmer Basin. The basin provides access to multiple
play types, with oil in high permeability reservoirs, tight oil and
tight gas. We have engaged global partners to reveal the full
potential of the basin and establish >1 billion boe of
prospective resources.
We have awarded an integrated contract for a drilling campaign
of 7-18 exploration and appraisal wells to build on the resource
portfolio, and well spud is expected by Q2 FY2019.
Krishna-Godavari Basin Offshore - (BLOCK KG-OSN-2009/3)
A two-well exploratory drilling campaign commenced in April 2018
to establish the potential of the block.
Open Acreage Licensing Policy (OALP)
Open Acreage Licensing Programme (OALP) provides an opportunity
to acquire acreages from all open sedimentary basins of India. The
GOI had invited bids for 55 blocks based on receipt of expression
of interest. Cairn Oil & Gas submitted bids for all the 55
blocks on offer. These blocks were assessed based on the resource
potential, chance of success and proximity to infrastructure in
prioritized sedimentary basins of India viz. Barmer, Cambay, Assam
and Krishna-Godavari offshore. The Government is expected to award
the blocks by June 2018. We intend to increase our exploration
portfolio significantly to continue building the resources
base.
Development
The Oil & Gas business has a robust portfolio of development
opportunities with the potential to deliver incremental volumes. In
order to execute these projects on time and within budget, we have
decided on a fundamental change to our project execution strategy.
We have devised an 'integrated project development' strategy, with
an in-built risk and reward mechanism to drive incremental value
from the schedule and recoveries. This new model is being delivered
in partnership with leading global oil field service companies.
Mangala infill - 45 wells
We are embarking on a significant drilling programme of an
additional 45 infill wells in the prolific Mangala field, with an
estimated ultimate recovery of 18 million barrels. The contract for
the project has been awarded, with first oil expected in Q1
FY2019.
Enhanced oil recovery (EOR) projects
The valuable learning we gained from the successful
implementation of the Mangala polymer EOR project, is being
leveraged to enhance production from the Bhagyam and Aishwariya
fields. The contracts for these EOR projects have been awarded and
preparations are on track with first oil expected in Q1 FY2019. We
are targeting incremental recovery of 40 million barrels.
MBA alkaline surfactant polymer (ASP)
Following a successful pilot test at the Mangala field, the way
is now clear to implement the world's largest alkaline surfactant
polymer (ASP) project. The work, which will enable incremental
recovery from this prolific field, entails drilling wells and
developing infrastructure facilities at the Mangala Processing
Terminal.
The drilling contract for the ASP implementation has been
awarded, and the contract for facilities will be awarded in due
course.
With full-field implementation of ASP in the MBA fields, we
estimate potential incremental recovery of around 200 million
barrels of oil, with first oil expected in Q3 FY2019.
Tight Oil & Gas projects
Tight oil: Aishwariya Barmer Hill (ABH)
The Aishwariya Barmer Hill (ABH) stage I production from seven
existing wells began during Q2 FY2018. ABH stage II consists of
drilling and fracking 39 new wells, creating new surface facilities
including well hook-ups, pipeline augmentation and installing a
de-gassing facility. The contract for tight oil wells and
facilities has been awarded, and work is ongoing on the surface
facility for ABH. We expect to start drilling in Q1 FY2019 with
first oil expected in Q3 FY2019.
Raageshwari deep gas (RDG) development
Gas development in the RDG field in Rajasthan continues to be a
strategic priority. Phase 1 of the project, to ramp up production
to 45mmscfd, was completed in December 2017. Phase 2 is being
executed through an integrated development approach to ramp up
overall Rajasthan gas production to 150mmscfd, and condensate
production of 5kboepd. We have awarded contracts, both for the
drilling of wells and the gas terminal. Drilling will begin in Q1
FY2019.
Tight oil appraisal fields
We had made 38 discoveries in the Rajasthan Block, with some
comprising complex tight oil reservoirs. In order to monetise them,
we will carry out appraisal activities through global technology
partnerships over next 12-15 months, prior to conceptualising and
developing a full-field development plan. Contract for appraisal of
4 fields targeting 190 mmboe of resources has been awarded.
Other projects
Surface facility upgrade
In order to maximise production at the Mangala Processing
Terminal (MPT), we are focusing on increasing liquid handling
capacity to handle additional volumes. We are planning a series of
measures to increase the liquid handling and water injection
capacities in a phased manner.
Outlook
The Oil & Gas business has reactivated its capital
expenditure programme with the objectives of enhancing the
exploration portfolio, executing development projects to add
incremental volumes and maintaining robust operations to generate
free cash flow post-capex.
For FY2019, we expect to achieve a significant growth in
production volume, with total volumes in the range of 220-250kboepd
through executing our growth projects, with opex of sub-$7/boe. We
estimate the net capex commitment at US$600-800 million.
Strategic priorities
Our focus and priorities will be to:
n evaluate further opportunities to expand the exploration
portfolio through OALP and other opportunities;
n execute growth projects within schedule and cost;
n further progress on execution on growth projects to deliver
275 - 320 kboepd in FY2020;
n continue to progress towards zero harm, zero waste and zero
discharge; and
n continue to operate at a low cost-base and generate free cash
flow post-capex.
ZINC INDIA
The year in summary
During FY2018, we continued our robust performance with record
production from our mines and smelters, while also maintaining our
first quartile position in the global cost curve. The journey that
started in 2013, towards a goal of 1.2 million tonnes of production
in FY2020, continues apace with a quarterly sustainable production
run-rate of 0.3 million tonnes in sight. In parallel, we are
focusing on silver and targeting a production of +26 million
ounces, in addition to the 1.2 million tonne target.
We have now successfully transitioned to fully underground
mining operations and are looking for another record year of
production in FY2019, on our way to the FY2020 goal.
SAFETY
We were deeply saddened to report two fatalities at the Rampura
Agucha underground project site and Fumer project site during the
year. Both incidents were thoroughly investigated, and the
resulting learnings were shared and implemented across the
businesses to prevent such tragedies in the future.
These incidents ran counter to an otherwise continuing
improvement in injury reduction, which has fallen by approximately
69% over the last five years. During FY2018, lost time injuries
(LTIs) fell to 0.27 (FY2017: 0.30). In particular, senior
leadership undertook a special drive to increase 'line of fire'
awareness.
Hindustan Zinc was awarded the Safety Innovation Award 2017 by
the Institution of Engineers (India) for its safety performance and
efforts to strengthen safety culture.
ENVIRONMENT
The business improved its performance in conservation and
maintained recycling performance. During the reporting year, waste
recycling rose to 95% compared to 93% in FY2017, and our water
recycling rate was 32% (FY2017: 33%).
With the success of the 20 million litres per day (MLD) Sewage
Treatment Plant (STP), Phase 2 of 25 MLD STP is under construction
and Phase-3 is in the pipeline. On completion, it will reduce our
fresh water intake at the Rajpura Dariba complex to negligible
levels.
The Company is also committed to the Science Based Target
initiative, with the goal of reducing GHG emissions by 23 % by
2030, against a 2016 baseline.
Our sustainability activities received several endorsements
during the year, including the Sustainable Plus Platinum Label
award by the Confederation of Indian Industries (CII), as well as
awards for Best Sustainability Practices, Best Carbon Foot-printing
and Best Sustainability Report from the World CSR Day. Zinc India's
sustainability performance was ranked No. 11 in the Dow Jones
Sustainability Index (Metal and Mining) globally, and No. 3
globally in the Environment category.
Production performance
Production (kt) FY2018 FY2017 % change
------------------------------------ ------ ------ --------
Total mined metal 947 907 4%
Refinery metal production 960 811* 18%
Refined zinc - integrated 791 672* 18%
Refined lead - integrated(1) 168 139 21%
Production - silver (million ounces
)(2) 17.9 14.5 23%
------------------------------------ ------ ------ --------
1. Excluding captive consumption of 6,946 tonnes in FY2018 vs. 5,285 tonnes in FY2017.
2. Excluding captive consumption of 1,171 thousand ounces in
FY2018 vs. 881 thousand ounces in FY2017.
*Including custom production of 2 kt.
Operations
In FY2018, mined metal production stood at a record 947,000
tonnes, in line with the mine plan.
Ore production was 12.6 million tonnes for FY2018, an increase
of 6% compared to FY2017. Although this was impacted by lower
production at the Rampura Agucha open cast mine (1.76mt, down by
47% against 3.30mt in FY2017), this was more than offset by a 27%
year-on-year increase from underground mines in FY2018.
Cumulative MIC production was up by 4% due to higher ore
production and treatment, partly offset by lower grades.
Performance from underground mines remained robust with Q4 FY2018
underground production setting a record and attaining best-ever ore
and MIC production. MIC production from underground mines was up by
52% in FY2018.
Integrated metal production increased by 18% to 960kt from 811kt
a year ago, due to consistent availability of MIC throughout the
year and higher smelter efficiency. Integrated saleable silver
production grew by 23% to a record 17.9 million ounces, compared to
14.5 million ounces a year ago, in line with higher production from
the Sindesar Khurd Mine.
We closed the fourth quarter of the year with the highest-ever
quarterly production of lead and silver. Integrated lead metal
production attained a record 50,000 tonnes, 11% higher y-o-y.
Integrated silver production also attained a record 5.5 million
ounces, 22% higher y-o-y. These increases were in line with the
availability of mined metal and enhanced smelter efficiencies.
In Q2 FY2018, the Group sold 220,000 tonnes of zinc and 30,000
tonnes of lead, forward at a price of US$3,084 per tonne and
US$2,418 per tonne respectively. Of this, 165,000 tonnes were for
the period January to March 2018 with the remainder for April to
June 2018.
Prices
FY2018 FY2017 % change
---------------------------------------- ------ ------ --------
Average zinc LME cash settlement prices
US$/t 3,057 2,368 29%
Average lead LME cash settlement prices
US$/t 2,379 2,005 19%
Average silver prices US$/ounce 16.9 17.8 (5)%
---------------------------------------- ------ ------ --------
Zinc and lead were the leading LME performers in FY2018 with
zinc prices up 29% and lead up 19%. The year was marked by a sharp
decline in finished goods stocks and a reduced zinc supply from
China for part of the year. The combination of scheduled mine
closures, strategic production cuts and the impact of environmental
inspections in China depleted global stocks of zinc
concentrate/mined metal. The consequent constraints on refined
production, together with global demand growth of 2.5%, depleted
stocks of refined zinc and ensured that the price rally that
started in 2016 was sustained during the year. Similarly, the
refined lead market was in deficit during the year, driven by a
shortage in mine supply.
Silver experienced a 60% uptrend in CY2017 in industrial demand
while supply remained constrained; 70% of annual silver production
is as a by-product of copper, zinc and lead extraction processes,
for which the mine supply remained subdued in 2017.
Unit costs
FY2018 FY2017 % change
----------------------------- ------ ------ --------
Unit costs (US$ per tonne)
Zinc (including royalty) 1,365 1,154 18%
Zinc (excluding royalty) 976 830 18%
----------------------------- ------ ------ --------
The unit cost of zinc production (excluding royalties) increased
to US$976 per tonne, up 18% y-o-y. The increase was due to higher
input raw material prices (primarily imported coal, diesel and
metallurgical coke), lower overall grades due to mine mix and
Indian rupee appreciation. This was partially offset by higher
production.
Including royalties, the cost of zinc production increased to
US$ 1,365 per tonne, 18% higher y-o-y.
Of the total cost of production of US$1,365 per tonne,
government levies amounted to US$423 per tonne (FY2017: US$339 per
tonne), comprising mainly of royalty payments, the Clean Energy
Cess, electricity duty and other taxes.
Financial performance
(US$ million, unless stated)
FY2018 FY2017 % change
-------------------------------------- ------ ------ --------
Revenue 3,369 2,525 33%
EBITDA 1,903 1,423 34%
EBITDA margin (%) 56% 56% -
Depreciation and amortisation 233 149 56%
Operating profit before special items 1,670 1,274 31%
Share in Group EBITDA (%) 47% 45% -
Capital expenditure 465 288 61%
Sustaining 106 50 -
Growth 359 238 51%
-------------------------------------- ------ ------ --------
Revenue for the year was US$ 3,369 million, up 33% y-o-y,
primarily due to higher metal volumes and increased commodity
prices. EBITDA in FY2018 increased to US$1,903 million, up 34%
y-o-y. The increase was primarily driven by higher volumes,
improved zinc and lead prices, but was partially offset by the
higher cost of production.
Projects
The mining projects we have announced are progressing in line
with the expectation of reaching 1.2 million tonnes per annum of
mined metal capacity in FY2020. Capital mine development was 38,501
metres during the year, an increase of 65% y-o-y.
Rampura Agucha
Rampura Agucha underground reached an ore production run-rate of
3.0mtpa towards the end of the year. The main shaft hoisting and
south ventilation shaft systems were commissioned during the year,
while off-shaft development is on track. Production from the main
shaft is expected to start as planned from Q3 FY2019.
Sindesar Khurd
Our Sindesar Khurd mine achieved its target capacity of five
million tonnes towards the end of the year and is gearing up for
higher production. The main shaft was equipped during the year and
winder installation work has begun. Production from the shaft is
expected to start as scheduled in Q3 FY2019. Civil and structure
erection for the new mill is ongoing and expected to be
commissioned in Q2 FY2019.
Towards the end of the year, orders were placed for paste fill
plants for both the Rampura Agucha and Sindesar Khurd mines.
Zawar mine
Our Zawar mine achieved record ore production of 2.2 million
tonnes during the year and production capacity has been ramped up
to 3.0mtpa. The existing mill capacity was debottlenecked to
2.7mtpa. Civil construction work for the new mill is progressing
well, with commissioning expected by Q4 FY2019.
The Ministry of Environment, Forest and Climate Change (MoEF)
has given environmental clearance for the expansion of ore
production at the Kayad mine from 1.0 to 1.2mtpa. The Kayad project
is now operating at its rated capacity of 1.2mtpa.
The Fumer project at Chanderiya is progressing as scheduled and
expected to commission in mid-FY2019.
Exploration
During the year, gross additions of 19.5 million tonnes were
made to reserves and resources (R&R), prior to depletion of
12.6 million tonnes. As at 31 March 2018, Zinc India's combined
mineral resources and ore reserves were estimated to be 411 million
tonnes, containing 35.7 million tonnes of zinc-lead metal and 1.0
billion ounces of silver. Overall mine-life continues to be more
than 25 years.
Outlook
Mined metal and refined zinc-lead production in FY2019 is
expected to be higher than in FY2018, filling the gap caused by
completion of open-cast production. Silver production will be
around 21-23 million ounces (650-700 metric tonnes).
Cost of production (CoP), before royalty for FY2019, is likely
to be in the range of US$950-975 per tonne.
The project capex for the year will be around US$400
million.
Next phase of expansion announced
Based on a long-term evaluation of assets and in consultation
with global experts, the Company is evaluating plans to increase
its mined metal capacity from 1.2mtpa to 1.5mtpa. The Board has in
principle approved Phase I of this expansion, which will increase
mined metal and smelting capacity from 1.2mtpa to 1.35mtpa, through
brownfield expansion of existing mines at an estimated capital
expenditure of around US$700 million.
Phase I includes incremental ore production capacity of 0.5mtpa
each at the Rampura Agucha, Sindesar Khurd and Rajpura Dariba
mines, bringing the total capacity to 5.0mtpa, 6.5mtpa and 2.0mtpa
respectively. The capacity of Zawar mines will be increased by
1.2mtpa to 5.7mtpa. These projects will take total ore production
capacity to 20.4mtpa and mined metal capacity from 1.2mtpa to
1.35mtpa. Phase I will be completed in three years and will be
executed concurrently with the ongoing expansion, which is now in
its final stages.
Strategic priorities
Our focus and priorities will be to:
n progressive ramp-up of underground mines to achieve target
run-rate of 1.2mtpa;
n commence work towards expansion to 1.35 mtpa;
n successfully commission fumer;
n continue our focus on adding more reserves and resources than
we deplete, through exploration;
n bring down the cost to top decile with the focus on
operational and commercial efficiencies; and
n improve silver recovery and production through Fumer plants
and tailings retreatment.
ZINC INTERNATIONAL
The year in summary
FY2018 was a strong year, in terms of stable production and good
progress made at our Gamsberg project and Pit 112 extension at
Skorpion. The performance was further supported by an improvement
in zinc and lead prices due to supply constraints, making these
major investments particularly well-timed.
The Gamsberg project represents one of the largest zinc deposits
in the world with reserves and resources of 215mt (16mt zinc) and
the potential to ramp up to 600ktpa of zinc production. Indeed,
Phase 1 of the project only exploits a quarter of the full resource
potential. The first production from Gamsberg is expected to
commence by mid-CY2018.
With full ramp-up of Gamsberg Phase 1 to 250ktpa and the
Skorpion Pit 112 expansion, Zinc International will restore volumes
to over 400,000 tonnes per annum (tpa) over the next two years.
Safety
With deep regret we reported a fatality at Skorpion Zinc during
the year, which occurred during a dewatering drilling operation.
The lessons learned, following a thorough investigation, have been
shared across the business. This incident ran counter to an
otherwise improving trend at Zinc International: lost time injuries
decreased to 16 from the previous year's 18, and the frequency rate
showed a significant decline to 1.36 (FY2017: 2.24), despite the
increased activities of the Gamsberg project.
Zinc International has further strengthened its efforts in
managing risk across its operations with emphasis on business
partner selection, on-boarding and management, robust risk
management systems and safety culture programmes aimed at achieving
our goal of 'zero harm, zero waste and zero discharge'. We achieved
a significant improvement in dust control and monitoring, as well
as a reduction in lead in blood levels - indeed, zero cases above
legal limits were reported for the year.
Environment
There were no Level 3 and Level 4 incidents reported. The water
recycling rate improved to 38% compared to 22% in FY2017. A total
of four properties (21,900 ha against a compliance target of 12,900
ha) were purchased in accordance with the Gamsberg biodiversity
offset agreement.
Production performance
FY2018 FY2017 % Change
------------------------------ ------- ------- ---------
Total production (kt) 157 156 -
Production- mined metal (kt)
BMM 72 70 3%
Refined metal Skorpion 84 85 (1)%
------------------------------ ------- ------- ---------
Operations
Production for FY2018 stood at 157,000 tonnes, in line with the
previous year. Higher production at BMM, due to higher grades and
improved recoveries from process improvements were partially offset
by the planned maintenance shutdown at Skorpion's acid plant in Q1
FY2018, and lower levels of ex-pit ore.
Skorpion's production was slightly down on FY2017, impacted by a
combination of the planned maintenance shutdown of the acid plant
in Q1 FY2018; early closure of Pit 103 for geotechnical reasons;
and blending challenges to make up the required plant feed grade
(from lower zinc grade stockpiles and high calcium ore).
At BMM, production was 3% higher than the previous year. The
increase was due to higher grades from mine plan resequencing,
improved drilling accuracy, and higher than planned recoveries from
plant flotation optimisation.
Unit costs
FY2018 FY2017 % Change
-------------------------------- ------- ------- ---------
Zinc (US$ per tonne) unit cost 1,603 1,417 13%
-------------------------------- ------- ------- ---------
The unit cost of production increased by 13% to US$1,603 per
tonne, up from US$1,417 in the previous year. This was mainly
driven by a combination of reallocation of capitalised stripping
costs of Pit 112 at Skorpion due to early ore production,
unfavourable local currency appreciation, higher usage of purchased
oxides and sulphur at Skorpion, higher maintenance costs at BMM and
lower than planned Copper credits at BMM. This was partly offset by
the improvements in energy cost and TCRC savings.
Financial performance
.(US$ million, unless stated)
FY2018 FY2017 % Change
--------------------------------------- ------- ------- ---------
Revenue 535 332 61%
EBITDA 219 138 59%
EBITDA margin 41% 42% -
Depreciation 28 28 3%
Operating profit before special items 191 111 73%
Share in group EBITDA % 5% 4%
Capital expenditure 238 57 -
Sustaining 65 12 -
Growth 173 45 -
--------------------------------------- ------- ------- ---------
During the year, revenue increased by 61% to US$535 million,
driven by higher sales volumes and improved price realisations. The
same factors lifted EBITDA to US$219 million, up 59% from US$138
million in FY2017. This was partially offset by a higher cost of
production.
Projects
At Gamsberg, we are on track for the cold commissioning of the
concentrator plant in Q1 FY2019.The ore extraction from the South
Pit is also on schedule, till March 2018completed 80% of
pre-stripping and excavated 56 million tonnes of waste. Completion
works of mechanical equipment erection, and infrastructure for
power and water pipelines for the concentrator, are in progress. We
are targeting 500kt of ore stockpile ahead of the first feed to the
concentrator plant.
The first phase of the project is expected to have a mine life
of 13 years, replacing the production lost by the closure of the
Lisheen mine and restoring volumes to over 400,000tpa at Zinc
International. First production is on track for commencement in
mid-CY2018, with 9-12 months for ramp-up to full production of
250,000tpa. Cost of production is estimated at $1000-1150 per tonne
of MIC. Indeed, Phase 1 of the project only exploits a quarter of
the full resource potential. We see Gamsberg reaching a potential
of 600ktpa through modular expansion in future through Phase 2 and
Phase 3 projects. Gamsberg Phase2 can start immediately after
completion of Phase 1 and will have some synergies with Phase 1.
The mine plans have been developed and an expanded mega pit design
has been completed to enable a faster and efficient Phase 2
execution. In terms of output, we can expect to add another 200 to
250ktpa metal in concentrate in 2-3 years.
At Skorpion, the Pit 112 extension project is progressing well,
and waste stripping has ramped up to its peak run-rate. 45% of
waste stripping was completed by the end of Q4 FY2018 and is
expected to be fully complete by Q4 FY2019, on schedule. To execute
Pit 112 and ensure no interruption in ore treatment, Skorpion Zinc
restructured the business by outsourcing mining to a Tier I mining
contractor. This also resulted in the successful secondment of some
owner-employees into the contract. Further optimisation of Pit 112
is in progress to reduce waste stripping by 8 million tonnes and
optimise the project cost. This project has increased Skorpion's
mine life by another 2.5 years and will contribute 250,000 tonnes
of metal over this period.
Exploration
During the year, we made gross additions of 1.3 million metal
tonnes to reserves and resources (R&R), prior to depletion. As
at 31 March 2018, Zinc International's combined mineral resources
and ore reserves were estimated at 304 million tonnes, containing
20.5 million tonnes of zinc-lead metal.
Outlook
In FY2019, we expect production volumes to be around 250kt. The
cost of production excluding Gamsberg is expected to be around
US$1,850-1950 per tonne, with Skorpion's CoP expected to be higher
due to reallocation of pre-stripping costs at Pit 112, lower grades
coupled with higher royalties at BMM, and input price
inflation.
Strategic priorities
Our focus and priorities will be to:
n successful commencement of Gamsberg in FY2019, with targeted
first production by mid-CY2018 and progress towards ramp up to
Phase I production of 250kt in FY2020;
n carry out a project study for Swartberg Phase 2 and Gamsberg
Phase 2 to extend the life of the Black Mountain complex; and
n complete the feasibility study for an integrated
smelter-refinery with 250ktpa metal production.
IRON ORE
The year in summary
FY2018 was a challenging year for our Goa operations, due to a
low pricing environment and the cancellation of mining leases by
the Supreme Court of India. During the year we successfully
revisited our product strategy for high-grade production from Goa
to improve realisations, but the full benefit will only accrue if
mining resumes. Significant uncertainty over the resumption of
mining at Goa under the current leases led to non-cash impairment
charge in Mar 2018. We continue to engage with Government for the
potential restart of mining operations at Goa.
At Karnataka we achieved our full permitted allocations of 2.3mt
in FY2018, and with the increase in the mining cap for the state of
Karnataka, allocation has increased from 2.3 to 4.5mt in May
2018.
Safety
With deep regret we reported two fatalities during the year at
our Goa operations. These were thoroughly investigated, and
learnings are being implemented towards our journey of zero harm.
We continue to invest time, effort and resources to make our
business and behaviours safer.
Separately, we are pleased to report a further decline in lost
time injuries to 0.13 in FY2018 (FY2017: 0.41).
Environment
We recycle all of the wastewater generated at our operations in
Goa. They are classified as 'zero discharge operations', with the
exception of the blow-down of the power plant's cooling tower,
which is treated and discharged according to the consent's
conditions. During the period, waste recycling stood at 117%
(FY2017: 90%) due to the additional recycling of waste previously
stored at the site.
Production performance
FY2018 FY2017 % Change
-------------------- ------- ------- ---------
Production (dmt)
Saleable ore 7.1 10.9 (35%)
Goa 4.9 8.8 (44%)
Karnataka 2.2 2.1 2%
Pig iron (kt) 646 708 (9%)
Sales (dmt)
Iron ore 7.6 10.2 (26)%
Goa 5.4 7.4 (26%)
Karnataka 2.2 2.7 (21%)
Pig iron (kt) 645 714 (10%)
-------------------- ------- ------- ---------
Operations
Production at Goa stood at 4.9 million tonnes and sales were 5.4
million tonnes during FY2018. However, production and sales were
impacted by a low pricing environment. During the year, we
revisited our product strategy and produced a higher quality ore
through beneficiation and blending to improve our realisations per
tonne.
However, on 7 February, the Honourable Supreme Court of India
issued a judgement directing that all mining operations in the
state of Goa were to cease with effect from 16 March 2018. Pursuant
to this order, we halted our mining activities. We have an
inventory of 0.9 million tonnes, which will be sold in Q1
FY2019.
At Karnataka, we produced and sold 2.2 million tonnes during
FY2018, in line with the allocated environmental clearance (EC)
limits. The Honourable Supreme Court has increased the cap on
production of iron ore for the state from 30 to 35 million tonnes,
and accordingly increase in our allocation for Karnataka from 2.3
to 4.5 million tonnes in May 2018.
During the year, pig iron production was 9% lower y-o-y at
646,000 tonnes. This was due to lower metallurgical coke
availability, caused by weather-related supply disruptions in
Australia in Q1 FY2018 and a local contractors' strike in Q2
FY2018.
Prices
Prices for 62% Fe grade averaged US$68.43 per tonne on a CFR
basis, which was flat compared to the previous year. The net
realisation for our grades at Goa was 33% lower y-o-y, primarily
driven by the widening of the discount.
Our Iron Ore business in Karnataka, which primarily caters to
the domestic steel industry in the state, saw a 49% increase in net
realisations where the prices are discovered through e
auctions.
Financial performance
(US$ million, unless stated)
FY2018 FY2017 % Change
--------------------------------------- ------- ------- ---------
Revenue 487 615 (21%)
EBITDA 57 194 (71%)
EBITDA margin 12% 32%
Depreciation 69 70 (2%)
Operating (loss) before special items (11) 124 -
Share in group EBITDA % 1% 6%
Capital expenditure 11 4 -
Sustaining 11 4 -
--------------------------------------- ------- ------- ---------
In FY2018, EBITDA decreased to US$57 million compared with
US$194 million in FY2017. This was mainly due to lower volume and
realisations at Goa, partly offset by higher realisations at
Karnataka.
In light of the Supreme Court of India judgement above, the
Company has taken an impairment (non-cash item) of US$534 million
net of taxes (US$758 million gross of taxes). This is mainly
related to mining reserves.
Outlook
The Company continues to explore all legal avenues to secure the
reinstatement of mining operations in Goa.
At Karnataka, the production is expected to be 4.5 mt.
Strategic priorities
Our focus and priorities will be to:
n enhance environmental clearance limits in Karnataka, and ramp
up to full capacity;
n bring about a resumption of mining operations in Goa through
continuous engagement with government and the judiciary; and
n increase our footprint in iron ore by continuing to
participate in auctions across the country, including
Jharkhand.
COPPER - INDIA / AUSTRALIA
The year in summary
The reporting year was another strong one for Copper India,
achieving an all-time-high production of copper cathodes. Indeed,
this was the third successive year of record-breaking output.
The year also marked the next phase of growth at Copper India
with the expansion of the copper smelter capacity from 400ktpa to
800ktpa. On completion, this project will rank Tuticorin as one of
the world's largest single-location copper smelting complexes.
Smelting operations at Tuticorin are halted, pending renewal of
consent to operate (CTO) and we continue to evaluate our next
course of action.
Safety
With deep regret, we recorded a fatality in the course of our
operations during the year. As a result, and following an
investigation, we instituted changes in operating procedures.
This incident ran counter to a significant underlying
improvement in our safety performance. Our lost time injuries fell
to 1 (FY2017: 4) and our frequency rate dropped to 0.08 (FY2017:
0.37).
A number of safety initiatives, following a practice of single
point accountability, have made a significant contribution to
enhancing our safety performance. By using a robotic crawler for
measuring the thickness of the storage tanks (thereby eliminating
the need for scaffolding), and by using drones to measure the
thickness of the stacks, we have achieved the lowest injury
frequency rate for five years.
Our progress was recognised when Sterlite Copper-Tuticorin
received the British Safety Council's Five Star Rating and also
secured its Sword of Honour recognition. Additionally, implementing
'bow tie' software analysis to risk-assess critical activities, and
training employees on making better risk decisions, have also
contributed to putting our safety performance on a firmer
footing.
Environment
During the period, our water recycling rate decreased from 16%
to 12% year-on-year. The overall disposal of copper slag and gypsum
for sustainable applications stood at 104%, due to the additional
use of waste stored previously on the site. Sterlite
Copper-Tuticorin received the highest CII-EHS Five Star Rating
award for excellence in EHS practices.
Production performance
FY2018 FY2017 % Change
---------------------- ------- ------- ---------
Production (Kt)
India - cathode 403 402 0%
---------------------- ------- ------- ---------
Operations
In FY2018, we achieved a record 403,000 tonnes of copper cathode
production through in-house technological upgrades and
debottlenecking, albeit with a few unplanned outages spread over
the year. This represents consistent improvement in operational
efficiencies and record production year after year. Our plant
achieved average utilisation of 95% throughout the year with
overall equipment effectiveness (OEE) of 85%.
The installation of bag houses before the scrubbers led to a
significant reduction in hazardous cake generation, which also
extends the life of the secured land fill (SLF). Further, we
continued to remain focused on improving our safety and
environmental performance, with encouraging results. During the
year, there were zero liquid discharges, and we recorded our
lowest-ever lost time injury frequency rate (LTIFR).
The 160MW power plant at Tuticorin operated at a plant load
factor (PLF) of 43% in FY2018, compared with 56% in FY2017. This
was mainly the result of a lower offtake due to weaker demand in
Southern India. The Group continues to explore viable supply
options to enter into a power purchase agreement.
Smelting operations at Tuticorin were halted as part of a
planned maintenance shutdown for approximately 15 days, with effect
from 25 March 2018. At the same time, we made an application to
renew the consent to operate (CTO) for the smelter. However, this
was rejected pending further clarifications and the shutdown was
therefore extended as we evaluate our next course of action.
Our copper mine in Australia has remained under extended care
and maintenance since 2013. However, we continue to evaluate
various options for its profitable restart, given the current
favourable government support and prices.
Prices
FY2018 FY2017 % Change
---------------------------------------------------- ------- ------- ---------
Average LME cash settlement prices (US$ per tonne) 6,451 5,152 25%
Realised TC/RCs (US cents per lb) 21.3 22.4 (5%)
---------------------------------------------------- ------- ------- ---------
In CY2018, copper LME touched a four-year high of US$7,216 amid
global growth in demand. Data from the International Copper Study
Group showed that there was deficit of 150,000 tonnes in CY2017,
driven mainly by the Chinese property market.
Wood Mackenzie also reported that the world mined production of
copper is estimated to have risen by 0.6% to 20.22 million tonnes,
while refinery production is estimated to have increased by 1.9% to
23.49 million tonnes, compared to projected demand of 23.47 million
tonnes in CY2018.
Average LME copper prices increased by 25% and treatment and
refining charges (TC/RCs) were down by 5.3%, compared with
FY2017.
TC/RC for CY2018 will be lower at 82/8.2. This would be
approximately 11% down year-on-year, mainly due to mine disruptions
resulting in a decline in concentrate availability. Global mine
supply is expected to grow slowly, but by enough to keep the market
in balance. The potential for labour disruption in 2018 was again
thrown into focus with the recent (brief) strike action at
Escondida and Southern Copper's mines, as well as violence at
Grasberg.
Unit costs
FY2018 FY2017 % Change
------------------------------------------------- ------- ------- ---------
Unit conversion costs (CoP) - (US cents per lb) 5.7 5.0 15%
------------------------------------------------- ------- ------- ---------
At the Tuticorin smelter, the cost of production increased from
US cents 5.0 per lb to US cents 5.7 per lb, mainly due to higher
coal and fuel prices, and currency appreciation, but this was
partially offset by higher by-product credit. Sulphuric acid
realisation was influenced significantly with Abu Dhabi National
Oil Company (ADNOC) increasing prices from US$84 per tonne to
US$124 per tonne year-on-year.
Financial performance
(US$ million, unless stated)
FY2018 FY2017 % change
-------------------------------------- ------ ------ --------
Revenue 3,833 3,134 22%
EBITDA 201 252 (20%)
EBITDA margin 5% 8%
Depreciation and amortisation 25 29 (14%)
Operating profit before special items 176 223 (21%)
Share in Group EBITDA % 5% 8%
Capital expenditure 84 23 -
Sustaining 34 16 -
Growth 50 7 -
-------------------------------------- ------ ------ --------
During the year, EBITDA was US$201 million, a decrease of 20% on
the previous year's US$252 million. The reduction was mainly due to
lower TCs/RCs, lower premia, higher cost of production and local
currency appreciation, but partially offset by favourable macro
factors.
Projects
In Q3 FY2018, the Board approved the expansion of the copper
smelter at Tuticorin from 400ktpa to 800ktpa. All the required
statutory approvals have been obtained and we envisage the project
being executed on an EPC basis; this includes engineering,
procurement, supply, construction, commissioning and demonstration
of complete performance guarantees.
In November 2017, we awarded the EPC contract for three packages
- the smelter, refinery and sulphuric acid plant. The site
mobilisation and civil works began in January 2018. In the case of
the oxygen plant, 60% of the major civil foundations had been
completed by March 2018, as scheduled. An EPC contract for the
phosphoric acid plant has also been awarded and mobilisation will
start shortly. Contracts for other packages such as the effluent
treatment plant and sewage treatment plant /the de-salination plant
are expected to be awarded by May 2018.
Total capex commitment at 31 March 2018 was US$424 million,
against the approved capex of US$ 717 million. The expansion
project is expected to be completed by Q3 FY2020.
Outlook
Production is expected to remain at around 100,000 tonnes per
quarter.
Strategic priorities
Our focus and priorities will be to:
n progress towards expansion to 800kt production capacity by
FY2020;
n engage with government and relevant authorities to enable the
restart of operations at Copper India;
n sustain operating efficiencies, reducing our cost profile;
and
n continuously upgrade technology to ensure high-quality
products and services that sustain market leadership and surpass
customer expectations.
COPPER ZAMBIA
The year in summary
Copper Zambia had another challenging year in terms of
production, but we are now turning the corner with a refinement of
the operating strategy. We are implementing a new
contractor-partnering model that allocates clear end-to-end
responsibility, and on a pay-for-results basis. This change in
approach is starting to yield results.
At the Konkola underground mine, we are focusing on accelerated
dewatering and development rates. Technology interventions are also
delivering results at the smelter and Tailings Leach Plant
(TLP).
We are confident that the new approach and re-engineering of
design parameters secures our 50-year vision for mining at KCM. Our
focus is being communicated under the slogan "Volume growth,
product quality, and environmental sustainability".
Safety
We deeply regret that there were two fatal accidents during the
reporting year. One contractor employee was fatally injured in an
ore tramming operation at the Nchanga underground mine, and another
contractor employee lost his life during a sloughing incident at
the open pit. Both incidents were thoroughly investigated and the
lessons learned have been shared for implementation with the rest
of the organisation.
These incidents have only sharpened our focus on the journey
towards 'zero harm' and we were pleased to see the LTIFR
decreasing, from 0.32 to 0.30 y-o-y. We continue to run active
safety interventions and initiatives, and this year we conducted
safety training for some 12,500 people, both employees and
contractors. We intend to reinforce this work with the
implementation of over 100 key-control data sheets in the coming
months. During the year, the British Safety Council audited our OHS
management system, which again showed an improvement in reporting
near-misses.
Environment
Improving our water management practices remains a top priority
for the business. During the year, we successfully reduced our
specific water consumption from 183 to 171 m3/T for the business.
Further improvement projects are under way which will not only
improve the current performance but will start to set standards for
the industry in water and air quality.
Production performance
Particulars FY2018 FY2017 % Change
---------------------- ------- ------- ---------
Production (kt)
Total mined metal 91 94 (3%)
Konkola 37 36 3%
Nchanga 13 12 6%
Tailings Leach Plant 41 46 (11%)
Finished copper 195 180 9%
Integrated 84 96 (12%)
Custom 111 84 32%
---------------------- ------- ------- ---------
Operations
Mined metal production of 91,000 tonnes was 3% lower
year-on-year, primarily impacted by a low availability of trackless
equipment in H1 and the preventive maintenance programmes at TLP in
H2.
We have put in place a contractor-partnering model, and are
mobilising resources for sustained secondary development and
production from a new production area at the Konkola underground
mine. The waste mining programme to access high-grade ore at the
open pit is progressing well, and our focused preventive
maintenance programmes at TLP are expected to start delivering
volume improvements from Q1 FY2019.
Konkola
At Konkola, production increased to 37,000 tonnes, up 3% y-o-y,
driven by improved fleet availability, development rates and
dewatering efficiency. Indeed, Konkola's highest production of the
year was achieved in March 2018, a positive sign of a start to
stabilisation. The team is clearly focused on accelerated
development and moving towards benchmark operational parameters
that will pave the way for future production ramp-up.
Nchanga
At Nchanga, production increased to 13,000 tonnes, up 6% y-o-y,
primarily due to restarting production at the underground mine in
June 2017, following its care and maintenance programme. The open
cast mines are clearly focused on waste excavation programmes for
enhanced access to high grade ore body.
Tailings Leach Plant
TLP's production stood at 41,000 tonnes, down 11% y-o-y, due
mainly to lower feed grades. Focused preventive maintenance
programmes were implemented as part of the contractor-partnering
model which will start delivering volume improvements going
forward.
Smelter and refinery
Production of finished copper (excluding TLP) increased to
154,000 tonnes in FY2018, compared to 134,000 tonnes in FY2017.
Custom volumes reached levels of 111,000 tonnes in FY2018, up 32%
y-o-y.
Others
The water level at the Kariba Dam has significantly improved due
to a healthy rainy season, resulting in an improved power situation
in Zambia. As a result, ZESCO has lifted the force majeure that had
been in place since 2015.
Unit costs (integrated production)
FY2018 FY2017 % Change
--------------------------------------------------- ------- ------- ---------
Unit costs (US cents per lb) excluding royalty 239.1 208.6 15%
Unit costs (US cents per lb) including royalty(1) 314.8 278.9 13%
--------------------------------------------------- ------- ------- ---------
(1) Including sustaining capex and interest cost
In FY2018, the unit cost of production (excluding royalties)
increased by 15% to US cents 239.1 per lb. This increase y-o-y was
a result of higher secondary development at the Konkola underground
mine, to prepare for the production ramp-up; one-off costs
associated with the Konkola pump chamber maintenance cost, to
improve dewatering efficiencies; silt removal from TLP downstream,
in preparing for water management during the monsoon season; and
increased maintenance costs to improve plant reliability and mobile
fleet availability.
However, the cost increase was partially offset by improved
cobalt credits, new power tariffs effective from January 2017, and
one-off credits related to the power provision reversal for
FY2016.
Financial performance
(US$ million, unless stated)
FY2018 FY2017 % Change
------------------------------------- ------- ------- ---------
Revenue 1,283 874 47%
EBITDA 73 6
EBITDA margin 6% 1%
Depreciation and amortisation 112 113 (1%)
Operating loss before special items (39) (107) -
Share in group EBITDA (%) 2% 0%
Capital expenditure 24 28 (15%)
Sustaining 24 28 (15%)
Growth - -
------------------------------------- ------- ------- ---------
Revenue in FY2018 was higher at US$1,283 million, compared with
US$874 million in the previous year. This was mainly due to
improved metal prices and increased custom sales volumes. EBITDA
for the year stood at US$73 million compared with US$6 million in
FY2017. This includes a one-off credit related to the power
provision reversal of US$28 million.
Outlook
Full-year production for FY2019 is expected to reach 115-125kt
of integrated production and 110-120kt of custom production. An
integrated C1 cost for FY2019 is expected at US cents 220-240 per
pound.
Konkola underground mine
The Konkola underground mine remains a key priority. The
operational philosophy, re-designed to include
contractor-partnering, is central to the ramp-up plan. A
feasibility study to develop a deeper flat level is under way as
part of the "dry mine" project.
Nchanga operations
At Nchanga, the focus continues to be plant reliability at the
TLP, and on driving productivity in the open cast mines.
Smelter and refinery
We are targeting higher feed rates above 80 tonnes per hour
(tph), refinery ramp-up and greater cost efficiencies by installing
oil-fired boilers for electrolyte heating, which has now been
commissioned.
Exploration
During the year, reserves and resources (R&R) depleted by
12.5 million tonnes due to production and by 9.5 million tonnes due
to updation of the Konkola resource model. As at 31 March 2018,
KCM's combined mineral resources and ore reserves were estimated to
be 691.2 million tonnes, containing 15.2 million tonnes of copper.
Overall mine-life continues to be more than 50 years.
Our strategic priorities
Our focus and priorities will be to:
n deliver volume growth through successful implementation of
vendor partnering model;
n increase production of underground mine at Konkola with an
additional, deeper horizontal development;
n improve equipment availability and reliability;
n ensure a reliable Tailings Leach facility with the potential
to increase recoveries;
n reduce the cost base through the contractor
business-partnering model and value-focused initiatives; and
n strengthen the team expertise with strong mining, maintenance
and health & safety specialists.
ALUMINIUM
The year in summary:
FY2018 was a milestone year for our Aluminium business, as we
achieved record aluminium production of 1.7 million tonnes, with
ramp-up at BALCO complete and ramp-up at Jharsuguda nearly
complete, despite a pot outage at Jharsuguda I at the beginning of
the year. We now have a strong base to target production of two
million tonnes in FY2019; indeed, our annualised exit run-rate in
March 2018 was already broadly equivalent to that figure.
There were headwinds in terms of the cost of production (CoP),
primarily due to input commodity inflation and temporary coal
shortages in the domestic market. Input commodity prices continue
to be volatile. Therefore, as a strategy, we have looked at ways to
optimise our controllable costs, while also increasing the price
realisation in order to improve profitability in a sustainable way
going forward.
We continue to explore the feasibility of expanding our alumina
refinery capacity. Our vision is to expand from 2 to 4 million and
then up to 6 million tonnes per annum, subject to bauxite
availability and regulatory approvals.
Safety
The business faced safety challenges during the year and, with
deep regret, we recorded a fatality due to a vehicle accident.
After a thorough investigation, the lessons learned were shared for
implementation across all our businesses. Lost time injuries rose
to 22 (FY2017: 15), and the frequency rate increased to 0.39
compared to 0.32 in the previous year. We do not regard the year's
safety performance as acceptable and are targeting measurable
improvements as the result of enhanced safety programmes that we
have put in place.
These include equipping site safety leaders with tools for more
robust risk analysis, such as 'bow tie' software and experience
based quantification (EBQ), to help them identify the need for
critical controls. We have also delivered specialist skill and
competency training in areas such as crane and forklift operation,
rigging and rescue.
On a positive note, the Lanjigarh refinery achieved zero-LTIs
for the second consecutive year, and we seek replicate its success
across the business.
Environment
We recycled 11% of the water we used in FY2018. In Lanjigarh, as
part of waste management, a total of 2226.306mt of vanadium sludge,
and 100% of fly ash and lime grit, has been recycled. Red Mud
utilisation for FY2018 stood at 246.3kt.
In August 2017, a partial collapse of a section of the ash dyke
wall at Jharsuguda resulted in the State Pollution Control Board
(SPCB) directing temporary closure of five power units in
Jharsuguda (3x135MW, 2x600MW). Orders to restart three of the power
plants was issued on 20 September 2017, followed by an order to
restart the remaining two units on 13 November 2017.
Production performance
FY2018 FY2017 % change
-------------------------------------------- ------- ------- ---------
Production (kt)
Alumina - Lanjigarh 1,209 1,208
Total aluminium production 1,675 1,213 38%
Jharsuguda I 440 525 (16)%
Jharsuguda II(1) 666 261 -
BALCO I 259 256 1%
BALCO II(2) 310 171 81%
Jharsuguda 1800MW - 511 -
(surplus power sales in million units)(3)
-------------------------------------------- ------- ------- ---------
(1) Including trial run production of 61.8kt in FY2018 vs. 95kt
in FY2017
(2) Including trial run production of 16.1kt in FY2018 vs. 47kt
in FY2017
(3) Jharsuguda 1,800MW and BALCO 270MW have been moved from the
Power to the Aluminium segment since 1 April 2016.
Alumina refinery: Lanjigarh
At Lanjigarh, production was flat y-o-y at 1,209,000 tonnes. We
had expected to achieve a higher production, but lower bauxite
availability from our mines at Chhattisgarh, as well as temporary
issues with rail logistics, meant constraints on bauxite supply
from other sources. We continue to evaluate the possible Lanjigarh
refinery expansion, subject to bauxite availability.
Aluminium smelters
We ended the year with record production of 1.7 million tonnes
(including trial run) and exited it with a run-rate of around two
million tonnes per annum. Production excluding the trial run
totalled 1.6 million tonnes.
Jharsuguda I smelter
Production from this smelter was 16% lower y-o-y; this followed
a pot outage incident in April 2017 that affected 228 pots of the
Jharsuguda-I smelter. However, these pots were fully restored by Q3
FY2018.
Jharsuguda II smelter
Jharsuguda II smelter continued its ramp-up during the year.
Line 1 was completed during Q3 FY2018. Line 2 was completed in Q4
FY2017, which delivered steady operations throughout the year. At
Line 3, 220 pots were powered on as of 31 March 2018, and the full
ramp-up was delayed due to infrastructure development works
undertaken by the railway authorities for capacity enhancement. It
is expected to be fully ramped up by H1 FY2019. We continue to
evaluate Line 4.
BALCO I & II smelters
The BALCO I smelter continued to show consistent production,
delivering 259,000 tonnes during the year; this comfortably
exceeded its rated capacity of 245,000 tonnes.
The ramp-up of BALCO II smelter was completed in Q1 FY2018 and
the plant continues to operate consistently with production of
310,000 tonnes - an increase of 81% y-o-y.
Coal linkages
We continue to focus on ensuring the long-term security of our
coal supply, and at competitive prices. We added 4mtpa of coal
linkages during FY2018, ending the period with a total coal linkage
of 10mtpa.
During the year we experienced temporary disruptions in the
domestic coal supply from Coal India. The disruption, both in terms
of quality and quantity, resulted in an increase in the cost of
captive power.
Prices
FY2018 FY2017 % Change
---------------------------------------------------- ------- ------- ---------
Average LME cash settlement prices (US$ per tonne) 2,046 1,688 21%
---------------------------------------------------- ------- ------- ---------
Average LME prices for aluminium in FY2018 stood at US$2,046 per
tonne, an increase of 21% y-o-y. It also reached a six-year high of
$2,266 per tonne before moderating back towards the end of the
year. Prices were driven by the anti-pollution supply reforms in
China, increases in raw material prices and trade tariff
announcements by the US.
Unit costs
(US$ per tonne)
FY2018 FY2017 % Change
------------------------------------- ------- ------- ---------
Alumina cost (ex-Lanjigarh) 326 282 16%
Aluminium hot metal production cost 1,887 1,463 29%
Jharsuguda CoP 1,867 1,440 30%
BALCO CoP 1,923 1,506 28%
------------------------------------- ------- ------- ---------
During FY2018, the cost of alumina production was 16% up y-o-y
at US$ 326 per tonne, mainly due to input commodity inflation
(principally caustic soda), and currency appreciation.
In FY2018, the total bauxite requirement of about 3.8 million
tonnes was met from three sources: captive mines (29%), domestic
sources (41%) and imports (30%). In the previous year, the bauxite
mix was captive mines (31%), domestic sources (23%) and imports
(46%).
The CoP of hot metal at Jharsuguda was US$1,867 per tonne, up
from US$1,440 in FY2017. The increase was primarily due to input
commodity inflation (imported alumina and carbon), higher power
cost and currency appreciation. The power cost was higher due to
disruptions in domestic coal supply from Coal India resulting in
procurement of coal and power from alternative sources at higher
prices. We also incurred one-off costs related to pot outages in
April 2017, and temporary power imports as a result of the ash dyke
incident.
The cost of production at BALCO increased to US$1,923 per tonne
from US$1,506 in FY2017, up 28% y-o-y. This was primarily due to
input commodity inflation (imported alumina and carbon), higher
power cost due to coal shortages and rupee appreciation.
Financial performance
(US$ million, unless stated)
FY2018 FY2017 % Change
--------------------------------------- ------- ------- ---------
Revenue 3,588 2,040 76%
EBITDA 452 344 31%
EBITDA margin 13% 17%
Depreciation and amortisation 257 141 82%
Operating profit before special items 195 203 (4%)
Share in group EBITDA (%) 11% 11%
Capital expenditure 218 291 (25%)
Sustaining 105 28 -
Growth 113 263 (57%)
--------------------------------------- ------- ------- ---------
EBITDA was higher at US$452 million (FY2017: US$344 million),
driven mainly by volume ramp-up and increased LME prices. This was
partially offset by the increase in the cost of production.
Outlook
Volume and cost
In FY2019, aided by the full ramp-up of the third line of
Jharsuguda II, we anticipate aluminium volume of two million
tonnes.
As input commodity prices continue to be volatile, we have
looked at ways to optimise our controllable costs, while also
increasing the price realisation in order to improve profitability
in a sustainable way.
Alumina and Bauxite
During FY2019, we expect production of around 1.5-1.6 million
tonnes per annum. We are working towards a step change in local
bauxite sourcing to feed the alumina refinery. We have entered into
a long term contract with Odisha Mining Corporation (OMC) for
supply of bauxite.
Power
In FY2019, we aim to improve the realisations from the 10mtpa of
coal linkages already in place, and increase linkages further. We
are also hopeful that the disruption in coal supply experienced in
FY2018 will not continue into the next reporting year.
We are also working towards reduction in GCV losses as well as
improvement in plant operating parameters which should deliver
higher PLFs and reduction in non-coal costs.
Marketing
We are targeting an increase in value-added production in FY2019
to 1.0 million tonnes. We will also be focusing on increasing the
domestic and OEM sales further.
Cost of production
We expect a reduction in COP by c.US$120-170/t in FY2019 by
optimising controllable costs and through elimination of one-offs.
This will imply a COP of US$1,725-1,775/t, assuming costs of
imported alumina, coal e-auctions and carbon at average FY2018
levels. We are targeting a medium-term COP target of US$1,500/t
with continued focus on sourcing of low cost bauxite, alternate
sourcing of alumina, improve plant operating parameters, increase
in linkage coal mix and strategic partnership with carbon
suppliers.
Strategic priorities
Our focus and priorities will be to:
n achieve steady state production of 2mt in FY2019;
n reduce controllable costs in the aluminium business;
n firm up bauxite sourcing and the supply chain, diversify
imported alumina sourcing;
n improve coal linkage realisation (10mtpa) and further increase
coal linkage;
n improve power plant operating parameters and reduction in
non-coal cost; and
n improve realisations through gaining a higher domestic market
share, and by increasing our value-added product (VAP).
POWER
The year in summary:
FY2018 was an important year for the Talwandi Saboo Power plant
(TSPL), where we achieved a consistent availability of over 85%
from Q2 onwards. The entire operational and maintenance activities
were transferred to a single contractor in order to enhance
operational efficiencies.
However, the plant load factors for the Jharsuguda and Balco IPP
were impacted, primarily by domestic coal shortages.
Safety
We recorded one lost time injury during the year (FY2017: 1).
The frequency rate of 0.20 compared to 0.25 previously.
Separately, in April 2017 TSPL experienced a fire incident in
the conveyor belt of the coal handling plant (CHP). This was due to
the spontaneous ignition of coal dust, impacting our operations in
Q1 FY2018. Full operation was restored, and is now protected by
comprehensive fire detection, protection and suppression systems,
complete with dust extraction and dust suppression
capabilities.
Environment
One of the main environmental challenges for power plants is the
management and recycling of fly ash. We recorded an improvement in
our overall waste recycling rate, from 55% in FY2017 to 67% in this
reporting year.
Water reuse and recycling rates remained broadly consistent at
10% in FY2018, compared to 11% in the previous year.
Production performance
FY2018 FY2017 % Change
------------------------ ------- ------- ---------
Total power sales (MU) 11,041 12,916 (15%)
Jharsuguda 600 MW* 6 1,172 3,328 (65%)
BALCO 600 MW 1,536 2,609 (41%)
MALCO 4 190 (98%)
HZL wind power 414 448 (8%)
TSPL 7,915 6,339 25%
TSPL - availability 74% 79%
------------------------ ------- ------- ---------
Operations
TSPL achieved significantly higher power sales in FY2018, due to
full operation of the 1980MW power plants. However, this was
partially offset by the fire incident mentioned above, which
resulted in 65 days of shutdown in Q1 FY2018. The power purchase
agreement with the Punjab state compensates us based on the
availability of the plant. Average availability for the full year
was 74%, in line with previous guidance.
The Jharsuguda 600MW power plant operated at a lower plant load
factor (PLF) of 25% in FY2018 (FY2017: 68%), due to disruptions in
coal supply in the domestic market.
The 600MW BALCO IPP operated at a PLF of 44% in FY2018 (FY2017:
58%), due to the temporary coal shortages and weak external power
demand.
The MALCO plant has been placed under care and maintenance,
effective from 26 May 2017, due to low demand in Southern
India.
Unit sales and costs
FY2018 FY2017 % Change
------------------------------------------ ------- ------- ---------
Sales realisation (US cent/kWh)(1) 4.5 4.2 6%
Cost of production (US cent/kWh)(1) 3.6 3.1 16%
TSPL sales realisation (US cent/kWh)(2) 5.4 4.9 10%
TSPL cost of production (US cent/kWh)(2) 3.9 3.4 16%
------------------------------------------ ------- ------- ---------
(1) Power generation excluding TSPL
(2) TSPL sales realisation and cost of production is considered
above based on availability declared during the respective
period
Average power sales prices, excluding TSPL, remained flat in
FY2018 due to continued weaker prices in the open access
market.
During the year, the average generation cost was higher at US
cents 3.6 per kWh (FY2017: 3.1 per kWh) due to temporary
disruptions in the coal supply.
TSPL's average sales price was higher at US cents 5.4 per kWh
compared with US cents 4.9 per kWh in FY2017, and power generation
cost was higher at US cents 3.9 per kWh compared with US cents 3.4
per kWh in the previous year, driven mainly by increased coal
prices.
Financial performance
(US$ million, unless stated)
FY2018 FY2017 % change
--------------------------------------- ------- ------- ---------
Revenue 877 836 5%
EBITDA 259 245 6%
EBITDA margin 25%* 29% -
Depreciation and amortisation 75 88 (15%)
Operating profit before special items 184 157 17%
Share in group EBITDA% 6% 8% -
Capital expenditure 2 60 (96%)
Sustaining 2 - -
Project - 60
--------------------------------------- ------- ------- ---------
* Excluding one-offs
EBITDA for the year was 6% higher y-o-y at US$259 million. This
includes a one-off revenue recognition of US$35 million and $22
million at BALCO and at Jharsuguda IPP respectively.
Outlook
During FY2019, we will remain focused on increasing the plant
availability of TSPL (80%) and achieving higher plant load factors
at the Balco and Jharsuguda IPP.
Strategic priorities
Our focus and priorities will be to:
n resolve pending legal issues and recover aged power
debtors;
n tie up for the balance capacity under open access for
BALCO;
n achieve high plant load factors for the Jharsuguda and Balco
IPP; and
n improve power plant operating parameters to deliver higher
PLFs/availability and reduce the non-coal cost.
PORT BUSINESS
Vizag General Cargo Berth (VGCB)
During FY2018, VGCB operations showed an increase of 31% in
discharge and 22% in dispatch compared to FY2017. This was mainly
driven by an increase in zonal imports volume in the second half of
FY2018. This was partially offset by restrictions in handling
road-bound cargo, imposed by a High Court order in April 2017.
However, these restrictions were removed in September 2017.
PRINCIPLE RISKS AND UNCERTAINTIES
As a global natural resources company, our businesses are
exposed to a variety of risks. It is therefore essential to have in
place the necessary systems and a robust governance framework to
manage risk, while balancing the risk-reward equation expected by
stakeholders.
Our risk management framework is designed to be simple and
consistent and provide clarity on managing and reporting risks to
the Board. Together, our management systems, organisational
structures, processes, standards and Code of Conduct and Ethics
form the system of internal control that governs how the Group
conducts its business and manages the associated risks. The Board
has ultimate responsibility for the management of risks and for
ensuring the effectiveness of internal control systems. The Board's
review includes the Audit Committee's report on the risk matrix,
significant risks and the mitigating actions we put in place. Any
weaknesses identified by the review are addressed by enhanced
procedures to strengthen the relevant controls, and these are
reviewed at regular intervals.
The Audit Committee is in turn assisted by the Group-level Risk
Management Committee in evaluating the design and effectiveness of
the risk mitigation programme and control systems. The Group Risk
Management Committee (GRMC) meets every quarter and comprises the
Group Chief Executive Officer, Group Chief Financial Officer,
Director of Finance and Director-Management Assurance. The Group
Head-Health, Safety, Environment & Sustainability is invited to
attend these meetings. GRMC discusses key events impacting the risk
profile, principle risks and uncertainties, emerging risks and
progress against planned actions.
Since it is critical to the delivery of the Group's strategic
objectives, risk management is embedded in business-critical
activities, functions and processes. The risk management framework
helps the Company by aligning operating controls with the
objectives of the Group. It is designed to manage rather than
eliminate the risk of failure to achieve business objectives and
provides reasonable and not absolute assurance against material
misstatement or loss. Materiality and risk tolerance are key
considerations in our decision-making. The responsibility for
identifying and managing risk lies with every manager and business
leader.
In addition to this structure, other key risk governance and
oversight committees include:
n Vedanta Sustainability Committee which looks at sustainability
related risks. The Sustainability Committee is chaired by a
Non-Executive Director and the Group Chief Executive Officer is a
member;
n Finance Standing Committee, with oversight of treasury-related
risks. This is a committee of the Board and is attended by the
Group CFO, business CFOs, Group Treasury Head and the Treasury
Heads at the respective businesses; and
n The Group Capex Sub-Committee which evaluates the risks
associated with any capital investment decisions and institutes a
risk management framework in expansion projects.
Vedanta's risk management and internal control system is aligned
to the recommendations in the FRC's revised guidance 'Risk
management, internal control and related financial and business
reporting' (the Risk Guidance). The Group has a consistently
applied methodology for identifying risks at the individual
business level for existing operations and for ongoing
projects.
The Group's risk appetite is set by the Board. It has been
defined taking into consideration the Group's risk tolerance level
and is clearly linked to its strategic priorities. The risk
appetite forms the basis of the Board's assessment and
prioritization of each risk based on its likely impact on the
business operations. A risk scale aligned to the Board's overall
risk appetite and consisting of qualitative and quantitative
factors has been defined to facilitate a consistent assessment of
the risk exposure across the Group.
At a business level, formal discussions on risk management occur
at review meetings at least once a quarter. The respective
businesses review their major risks, and changes in their nature
and extent since the last assessment and discuss the control
measures which are in place and further action plans. The control
measures stated in the risk matrix are also periodically reviewed
by the business management teams to verify their continued
effectiveness. These meetings are chaired by the respective
business CEOs and attended by CXOs, senior management and
appropriate functional heads. Risk officers have been formally
nominated at each of the operating businesses as well as at Group
level, whose role is to create awareness of risks at senior
management level and to develop and nurture a risk management
culture. Risk mitigation plans form an integral part of the
performance management process. Structured discussions on risk
management also happen at business level with regard to their
respective risk matrix and mitigation plans. The leadership team in
the businesses is accountable for governance of the risk management
framework and they provide regular updates to the GRMC.
Each of the businesses has developed its own risk matrix and
risk register, which is reviewed by their respective management
committee/executive committee, chaired by their CEOs. In addition,
each business has developed its own risk register depending on the
size of its operations and number of SBUs/ locations. Risks across
these risk registers are aggregated and evaluated and the Group's
principle risks are identified based on the frequency, and
potential magnitude and impact of the risks identified.
This element is an important component of the overall internal
control process, from which the Board obtains assurance. The scope
of work, authority and resources of Management Assurance Services
(MAS) are regularly reviewed by the Audit Committee. The
responsibilities of MAS include recommending improvements in the
control environment and reviewing compliance with our philosophy,
policies and procedures. The planning of internal audits is
approached from a risk perspective. In preparing the internal audit
plan, reference is made to the risk matrix, and inputs are sought
from senior management, business teams and members of the Audit
Committee. In addition, we make reference to past audit experience,
financial analysis and the current economic and business
environment.
Each of the principle subsidiaries has procedures in place to
ensure that sufficient internal controls are maintained. These
procedures include a monthly meeting of the relevant management
committee and quarterly meeting of the audit committee of that
subsidiary. Any adverse findings are reported to the Audit
Committee. The Chairman of the Audit Committee may request MAS
and/or the external auditor to look at certain areas identified by
risk management and the internal control framework. The findings by
MAS are presented monthly to the Executive Committee and to the
Audit Committee periodically. Due to the limitations inherent in
any system of internal control, this system is designed to meet the
Group's particular needs, and the risks to which it is exposed,
rather than to eliminate risk altogether. Therefore, it can only
provide reasonable and not absolute assurance against material
misstatement or loss.
Principle Risks and Uncertainties
Vedanta's principle risks and uncertainties as set out below may
impact the following areas of the Group's business:
Area Impact
Business model (BM) Ability to conduct our operations across
the value chain in order to generate revenue
and make profit from operations.
--------------------------------------------------------
Future performance Ability to deliver on our financial plans
(FP) in short/medium term.
--------------------------------------------------------
Solvency (S) Ability to meet all our financial obligations.
--------------------------------------------------------
Liquidity (L) Ability to meet our short-term obligations/liabilities
as they fall due.
--------------------------------------------------------
Health, safety, Ability to send our employees and contractors
environment and home safe and healthy every day and work
communities (HSEC) with our communities and partners to achieve
the Group's sustainable development goals.
--------------------------------------------------------
Reputation (R) Ability to maintain investor confidence and
our social licence to operate.
--------------------------------------------------------
The order in which these risks appear in the section below does
not necessarily reflect the likelihood of their occurrence or the
relative magnitude of their impact on our business. The risk
direction of each risk has been reviewed based on events, economic
conditions, changes in business environment and regulatory changes
during the year. While Vedanta's risk management framework is
designed to help the organisation meet its objectives, there can be
no guarantee that the Group's risk management activities will
mitigate or prevent these or other risks from occurring.
The Board, with the assistance of management, carries out
periodic and robust assessments of the principle risks and
uncertainties of the Group and tests the financial plans for each
of risks and uncertainties mentioned below.
Financial risks
---------------------------------------------------------- --------------------------------------------------------
Access to capital
---------------------------------------------------------- --------------------------------------------------------
Impact Mitigation
---------------------------------------------------------- ----------------------------------------------------------
Impact criteria: FP, S, L, R Risk direction:
---------------------------------------------------------- ----------------------------------------------------------
The Group may not be able to meet n A focused team continues to work on refinancing
its payment obligations when due initiatives,
or may be unable to borrow funds reducing cost of borrowing, extending maturity profile
in the market at an acceptable price and deleveraging
to fund actual or proposed commitments. the balance sheet.
A sustained adverse economic downturn n Track record of good relations with banks, and of
and/or suspension of its operation raising
in any business, affecting revenue borrowings in last few years.
and free cash flow generation, may n Regular discussions with rating agencies. Ratings have
cause stress on the Company's financing been
and covenant compliance and its ability upgraded.
to raise financing at competitive n With an improved credit profile and a stronger balance
terms. sheet,
Risk has been reduced compared to Vedanta continues to enjoy good access to capital and
last year, due to good liquidity loan markets
and an improved credit profile. and proactively refinances its near-term debt. No
concerns envisaged
for upcoming maturities.
n Group treasury policies such as borrowing, investment,
commodity
hedging, banking, forex, etc. have been prepared after
elaborate
benchmarking and risk analysis. Business teams ensure
continued
compliance with the Group's treasury policies that govern
our
financial risk management practices.
---------------------------------------------------------- ----------------------------------------------------------
Fluctuation in commodity prices (including oil) and currency exchange rates
----------------------------------------------------------------------------------------------------------------------
Impact criteria: BM, FP, S, L Risk direction:
---------------------------------------------------------- ----------------------------------------------------------
Prices and demand for the Group's n The Group has a well-diversified portfolio which acts
products may remain volatile/uncertain as a
and could be influenced by global hedge against fluctuations in commodities and delivers
economic conditions. Volatility in cash
commodity prices and demand may adversely flows through the cycle.
affect our earnings, cash flow and n Pursue low-cost production, allowing profitable supply
reserves. throughout
Our assets, earnings and cash flows the commodity price cycle.
are influenced by a variety of currencies n Vedanta considers exposure to commodity price
due to the diversity of the countries fluctuations
in which we operate. Fluctuations to be an integral part of the Group's business and its
in exchange rates of those currencies usual
may have an impact on our financials. 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. Strategic
hedge,
if any, is taken after appropriate deliberations & due
approval
from ExCo.
n Our Forex policy prohibits forex speculation.
n Robust controls in forex management to hedge currency
risk
liabilities on a back-to-back basis.
n Finance Committee reviews all forex and
commodity-related
risks and suggests necessary courses of action as needed
by
business divisions.
n 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.
n Notes to the financial statements in the Annual Report
give
details of the accounting policy followed in calculating
the
impact of currency translation.
---------------------------------------------------------- ----------------------------------------------------------
Major project delivery
---------------------------------------------------------- --------------------------------------------------------
Impact criteria: FP, L Risk direction:
---------------------------------------------------------- ----------------------------------------------------------
Shortfall in achievement of expansion n Enlisting internationally renowned engineering and
projects stated objectives leading technology
to challenges in achieving stated partners on all projects.
business milestones - existing & n Strong focus on safety aspects in the project.
new growth projects. n Geo-technical audits are being carried out by
independent
agencies.
n Reputable contractors are engaged to ensure completion
of
the project on indicated time lines.
n Strong separate empowered organisation working towards
ensuring
a smooth transition from open pit to underground mining.
n Mines being developed using best in class technology
and equipment
and ensuring the highest level of productivity and
safety.
n Stage gate process to review risks and remedy at
multiple
stages on the way.
n Robust quality control procedures have also been
implemented
to check safety and quality of services / design / actual
physical
work. (Details of projects are appearing in AR).
---------------------------------------------------------- ----------------------------------------------------------
Sustainability risks
---------------------------------------------------------- --------------------------------------------------------
Health, safety and environment (HSE)
---------------------------------------------------------- --------------------------------------------------------
Impact criteria: BM, FP, HSEC, R Risk direction:
---------------------------------------------------------- ----------------------------------------------------------
The resources sector is subject to n HSE is a high priority area for Vedanta. Compliance
extensive health, safety and environmental with international
laws, regulations and standards. and local regulations and standards, protecting our
Evolving requirements and stakeholder people,
expectations could result in increased communities and the environment from harm and our
cost or litigation, or threaten the operations
viability of operations in extreme from business interruptions are key focus areas.
cases. n Vedanta has a Board-level Sustainability Committee,
Emissions and climate change: our chaired
global presence exposes us to a number by a non-executive director and attended the Group CEO,
of jurisdictions in which regulations which
or laws have been, or are being, meets periodically to discuss HSE performance.
considered to limit or reduce emissions. n Policies and standards are in place to mitigate and
The likely effect of these changes minimise
could be to increase the cost for any HSE-related occurrences. Safety standards issued /
fossil fuels, impose levies for emissions continue
in excess of certain permitted levels, to be issued to reduce risk level in high risk areas.
and increase administrative costs Structured
for monitoring and reporting. Increasing monitoring and a review mechanism and system of positive
regulation of greenhouse gas (GHG) compliance
emissions, including the progressive reporting are in place.
introduction of carbon emissions n The Company has implemented a set of standards to align
trading mechanisms and tighter emission its
reduction targets, is likely to raise sustainability framework with international practice. A
costs and reduce demand growth. structured
sustainability assurance programme continues to operate
in the
business divisions covering environment, health, safety,
community
relations and human rights aspects, and is designed to
embed
our commitment at operational level.
n HSE experts have been inducted from reputed Indian and
global
organisations to bring in best-in-class practices.
n All businesses have appropriate policies in place for
occupational
health-related matters, supported by structured
processes, controls
and technology.
n Strong focus on safety during project
planning/execution,
and contract workmen safety.
n Building safety targets into performance management to
incentivise
safe behaviour and effective risk management.
n Leadership coaching rolled out across businesses to
make better
risk decisions. Wave 2 of leadership in action has been
launched
to identify critical risks and put in place critical
controls
and processes to measure, monitor and report
effectiveness.
n Leadership remains focused on a zero-harm culture
across the
organisation and consistent application of 'Life-Saving'
performance
standards.
n Carbon forum with business representation monitors
developments
and sets out defensive policies, strategy and actions.
n Defining targets and implementing action plans to
reduce the
carbon intensity of our operations. This includes
reducing emission
intensity, increasing renewable mix and green cover at
locations.
n Engaging with government on carbon policies and
innovation
technologies.
n Institutionalise systems to manage carbon risks and
opportunities
across the business over the life cycle of its products.
n Engage with stakeholders in creating awareness and
developing
climate change solutions.
---------------------------------------------------------- ----------------------------------------------------------
Managing relationship with stakeholders
---------------------------------------------------------- --------------------------------------------------------
Impact criteria: BM, FP, HSEC, R Risk direction:
---------------------------------------------------------- ----------------------------------------------------------
The continued success of our existing n CSR approach to community programmes is governed by the
operations and future projects are following
in part dependent on broad support key considerations: the needs of the local people and the
and a healthy relationship with our development
respective local communities. Failure plan in line with the new Companies Act in India; CSR
to identify and manage local concerns guidelines;
and expectations can have a negative UN Millennium Development Goals (UNMDG); CSR National
impact on relations and therefore Voluntary
affect the organisation's reputation Guidelines of the Ministry of Corporate Affairs,
and social licence to operate and Government
grow. of India; and the UN's sustainable development goals.
n CSR Committees at business-level decide focus areas of
CSR,
budget and their respective programmes.
n Sustainable development programmes are driven by
stakeholder
engagement and consultation along with baseline studies
and
need-based assessments.
n Periodic meetings with existing and potential SRI
Investors,
lenders and analysts, as well as hosting a Sustainable
Development
Day in London, helps in two-way engagement and
understanding
the material issues for stakeholders.
n Every business has a dedicated CSR team. Key focus
areas for
CSR are health, nutrition, sanitation, education,
sustainable
livelihoods and female empowerment. We have a dedicated
team
of over 180 corporate social responsibility personnel.
n Help communities to identify their priorities through
participatory
need assessment programmes and work closely with them to
design
programmes that seek to make progress towards
improvements in
the quality of life of local communities.
n Our business leadership teams have periodic engagements
with
the local communities to build relations based on trust
and
mutual bene t. Our businesses seek to identify and
minimise
any potentially negative operational impacts and risks
through
responsible behaviour - acting transparently and
ethically,
promoting dialogue and complying with commitments to
stakeholders.
n Integration of sustainability objectives into long-term
plans.
---------------------------------------------------------- ----------------------------------------------------------
Tailings dam stability
---------------------------------------------------------- --------------------------------------------------------
Impact criteria: BM, FP, HSEC, R Risk direction:
---------------------------------------------------------- ----------------------------------------------------------
A release of waste material leading n The Risk Management Committee included tailings dams on
to loss of life, injuries, environmental the
damage, reputational damage, financial Group Risk Register with a requirement for annual
costs and production impacts. A tailings internal review
dam failure is considered to be a and three-yearly external review.
catastrophic risk - i.e. a very high n Operation of tailings dams is executed by suitably
severity but very low frequency event experienced
that must be given the highest priority. personnel within the businesses.
The appreciation of risk has improved n Full review of tailings dams and water storage
further in the group. facilities
being carried out in the Group. Follow-up reviews will be
conducted
based on the results until the control is verified.
n Management standard developed with business
involvement.
n Third-party expert assessment of the dams to identify
tailings
dams' related risks by reputed international firm.
Improvement
opportunities/remedial works in line with best practice
are
progressing.
n Individuals responsible for dam management have
received training
from a reputed agency.
n System of monitoring of tailings dams instituted.
---------------------------------------------------------- ----------------------------------------------------------
Operational risks
---------------------------------------------------------- --------------------------------------------------------
Challenges to operationalise investments in Aluminium and Power business
----------------------------------------------------------------------------------------------------------------------
Impact criteria: BM, FP, S, L, R Risk direction:
---------------------------------------------------------- ----------------------------------------------------------
Some of our projects have been completed n Global technical experts have been inducted to
(pending commissioning) and may be strengthen
subject to a number of challenges operational excellence.
during operationalisation phase. n Operationalisation of Jharsuguda facilities progressing
These may also include challenges satisfactorily.
around sourcing raw materials and n Building of new intermediate facilities/infrastructure
infrastructure-related aspects. progressing
Risk reduced compared to last year, well.
due to ramp-up at Jharsuguda progressing n Continuous focus on plant operating efficiency
satisfactorily. improvement
programme to achieve design parameters, manpower
rationalisation,
logistics infrastructure and cost reduction initiatives.
n Continue to pursue developing sources of bauxite.
n Continuous augmentation of power security and
infrastructure.
n Coal security is being strengthened by pursuing
additional
coal linkages.
n Key raw material linkages for alumina/aluminium
business:
infrastructure-related challenges are being addressed.
n Strong management team continues to work towards
sustainable
low-cost of production, operational excellence and
securing
key raw material linkages.
n Talwandi Saboo (TSPL) power plant matters are being
addressed
in a structured manner by a competent team.
---------------------------------------------------------- ----------------------------------------------------------
Operational turnaround at KCM
---------------------------------------------------------- --------------------------------------------------------
Impact criteria: BM, FP, S, L, R Risk direction:
---------------------------------------------------------- ----------------------------------------------------------
Lower production and higher cost n Management team reviewing operations and engaging with
at KCM may impact our profitability. all
stakeholders in light of operating challenges.
n Focus at Konkola is to improve efficiency, equipment
availability,
dewatering and enhance volumes. Committed to improving
KCM operating
performance.
n Several cost-saving initiatives and restructuring
reviews
under way at KCM to preserve cash.
n Process improvement actions put in place through
focused operating
teams to improve production performance.
n Working on the engineering design for accelerated
dewatering
and development to increase production from the Konkola
Mine
n Elevated temperature leach project to improve
recoveries at
the Tailings Leach Plant, has been commissioned and is
currently
under stabilisation. Planning and engineering for phase
II of
the elevated temperature leach under way.
n KCM has entered into strategic partnerships with expert
mining
contractors for accelerating development of ore
production.
n Concentrate sourcing tie-ups with high grade mines
being pursued.
n VAT refunds are being pursued.
---------------------------------------------------------- ----------------------------------------------------------
Discovery risk
-------------------------------------------------------- --------------------------------------------------------
Impact criteria: Risk direction:
BM, FP
-------------------------------------------------------- ----------------------------------------------------------
Increased production rates from our n Dedicated exploration cell with continuous focus on
growth-oriented operations place enhancing
demand on exploration and prospecting exploration capabilities.
initiatives to replace reserves and n Appropriate organisation and adequate financial
resources at a pace faster than depletion. allocation
A failure in our ability to discover in place for exploration.
new reserves, enhance existing reserves n Strategic priority is to add to our reserves and
or develop new operations in sufficient resources
quantities to maintain or grow the by extending resources at a faster rate than we deplete
current level of our reserves could them,
negatively affect our prospects. through continuous focus on drilling and exploration
There are numerous uncertainties programme.
inherent in estimating ore and oil n Continue to work towards long-term supply contracts
and gas reserves, and geological, with mines
technical and economic assumptions to secure sufficient supply where required.
that are valid at the time of estimation. n Exploration-related systems being strengthened, and new
These may change significantly when technologies
new information becomes available. being utilised wherever appropriate.
n International technical experts and agencies are
working closely
with our exploration team to build on this target.
---------------------------------------------------------- ----------------------------------------------------------
Breaches in IT/cybersecurity
---------------------------------------------------------- --------------------------------------------------------
Impact criteria: Risk direction:
FP, R
-------------------------------------------------------- ----------------------------------------------------------
Like many global organisations, our n Group-level standards and policies to ensure uniformity
reliance on computers and network in
technology is increasing. These systems security stance and assessments.
could be subject to security breaches n Chief Information Security Officer (CISO) at
resulting in theft, disclosure or Group-level focuses
corruption of key/strategic information. on formulating necessary frameworks, policies and
Security breaches could also result procedures,
in misappropriation of funds or disruptions and for leading any agreed Group-wide initiatives to
to our business operations. A cyber mitigate
security breach could have an impact risks.
on business operations. n Various initiatives taken up to strengthen IT/cyber
security
controls in last few years.
n Cyber security risk being addressed through increased
standards,
ongoing monitoring of threats and awareness initiatives
throughout
the organisation.
n IT system is in place to monitor logical access
controls.
n Continue to carry out periodic IT security reviews by
experts
and improve IT security standards.
---------------------------------------------------------- ----------------------------------------------------------
Loss of assets or profit due to natural
calamities
---------------------------------------------------------- --------------------------------------------------------
Impact criteria: Risk direction:
FP, R
-------------------------------------------------------- ----------------------------------------------------------
Our operations may be subject to n Vedanta has taken appropriate Group insurance cover to
a number of circumstances not wholly mitigate
within the Group's control. These this risk.
include damage to or breakdown of n An external agency reviews the risk portfolio and
equipment or infrastructure, unexpected adequacy
geological variations or technical of this cover and assists us in our insurance portfolio.
issues, extreme weather conditions n Our underwriters are reputed institutions and have
and natural disasters - any of which capacity
could adversely affect production to underwrite our risk.
and/or costs. n Established mechanism of periodic insurance review in
place
at all entities. However, any occurrence not fully
covered by
insurance could have an adverse effect on the Group's
business.
n Continue to focus on capability building within the
Group.
---------------------------------------------------------- ----------------------------------------------------------
Extension of production sharing contract of Cairn beyond 2020 at less favourable terms
----------------------------------------------------------------------------------------------------------------------
Impact criteria: Risk direction:
BM, FP, L, S
-------------------------------------------------------- ----------------------------------------------------------
Cairn India has 70% participating n Ongoing dialogue with the Government and relevant
interest in Rajasthan Block. The stakeholders.
production sharing contract (PSC) n Cairn Steering Committee is regularly reviewing the
of Rajasthan Block runs till 2020. updates/progress,
Extension of production sharing contract including plans to meet the timelines, and is
of Cairn beyond 2020 at less favourable continuously engaging
terms may have implications. with the stakeholders concerned.
Government of India notified PSC n Carrying value factors additional 10% profit petroleum
extension policy which applies to share,
Rajasthan Barmer block. hence mitigating financial / balance sheet risk.
---------------------------------------------------------- ----------------------------------------------------------
Compliance risks
-------------------------------------------------------- --------------------------------------------------------
Regulatory and legal
risk
-------------------------------------------------------- --------------------------------------------------------
Impact criteria: Risk direction:
BM, FP, R
-------------------------------------------------------- ----------------------------------------------------------
We have operations in many countries n The Group and its business divisions monitor regulatory
around the globe. These may be impacted developments
because of legal and regulatory changes on an ongoing basis.
in the countries in which we operate n Business-level teams identify and meet regulatory
resulting in higher operating costs, obligations
and restrictions such as the imposition and respond to emerging requirements.
or increase in royalties or taxation n Focus has been to communicate our responsible mining
rates, export duty, impacts on mining credentials
rights/bans, and change in legislation. through representations to government and industry
associations.
n Continue to demonstrate the Group's commitment to
sustainability
by proactive environmental, safety and CSR practices.
Ongoing
engagement with local community/media/NGOs.
n SOX compliant subsidiaries.
n Common compliance monitoring system being implemented
in Group
companies. Legal requirements and a responsible person
for compliance
have been mapped in the system.
n Legal counsel continues to work on strengthening the
framework
in the Group and resolution of matters.
n Group wide online portal is being rolled out for
compliance
reporting. Appropriate escalation and review mechanisms
are
in place.
n Competent in-house legal organisation is in place at
all the
businesses and the legal teams have been strengthened
with induction
of senior legal professionals across all Group companies.
n Standard operating procedures (SOPs) have been
implemented
across our businesses for compliance monitoring.
n Contract management framework has been strengthened
with the
issue of boiler plate clauses across the Group which will
form
part of all contracts. All key contract types
standardised.
n Framework for monitoring performance against
anti-bribery
and corruption guidelines is also in place.
---------------------------------------------------------- ----------------------------------------------------------
Tax related matters
-------------------------------------------------------- --------------------------------------------------------
Impact criteria: Risk direction:
S, L, R
-------------------------------------------------------- ----------------------------------------------------------
Our businesses are in a tax regime n Tax Council reviews all key tax litigations and
and changes in any tax structure provides advice
or any tax-related litigation may to the Group.
impact our profitability. n Robust organisation in place at business- and
Group-level
to handle tax-related matters.
n Engage, consult and take opinion from reputable tax
consulting
firms.
n Reliance is placed on appropriate legal opinion and
precedence.
n Continue to take appropriate legal opinions and actions
on
tax matters to mitigate the impact of any actions on the
Group
and its subsidiaries.
---------------------------------------------------------- ----------------------------------------------------------
Financial Statements
for the Year Ended 31 March 2018
CONSOLIDATED INCOME STATEMENT
(US$ million except as stated)
Year ended 31 March 2018 Year ended 31 March 2017
-------------------------------- ----- ------------------------------------- --------------------------------------
Before
Special Special Before Special
Note items items Total Special items items Total
-------------------------------- ----- ------------ --------- ------------ --------------- -------- -----------
Revenue 5 15,358.7 - 15,358.7 11,520.1 - 11,520.1
Cost of sales 6 (11,973.6) 33.1 (11,940.5) (8,789.2) - (8,789.2)
-------------------------------- ----- ------------ --------- ------------ --------------- -------- -----------
Gross profit 3,385.1 33.1 3,418.2 2,730.9 - 2,730.9
Other operating income 89.2 - 89.2 73.4 - 73.4
Distribution costs (276.5) - (276.5) (274.9) - (274.9)
Administrative expenses (417.3) - (417.3) (368.8) - (368.8)
Impairment (charge)/reversal,
loss on PP&E 6 - 649.9 649.9 - (17.3) (17.3)
-------------------------------- ----- ------------ --------- ------------ --------------- -------- -----------
Operating profit/ (loss) 2,780.5 683.0 3,463.5 2,160.6 (17.3) 2,143.3
Investment revenue 7 465.1 - 465.1 642.6 - 642.6
Finance costs 8 (1,342.6) (108.2) (1,450.8) (1,340.6) (41.6) (1,382.2)
Other gains and (losses) [net] 9 (1.0) 5.3 4.3 (23.8) - (23.8)
-------------------------------- ----- ------------ --------- ------------ --------------- -------- -----------
Profit/ (loss) before taxation
(a) 1,902.0 580.1 2,482.1 1,438.8 (58.9) 1,379.9
Net tax expense (b) 10 (674.7) (338.5) (1,013.2) (495.4) (4.9) (500.3)
-------------------------------- ----- ------------ --------- ------------ --------------- -------- -----------
Profit/ (loss) for the year
from
continuing operations (a+b) 1,227.3 241.6 1,468.9 943.4 (63.8) 879.6
-------------------------------- ----- ------------ --------- ------------ --------------- -------- -----------
Attributable to:
Equity holders of the parent 162.6 73.0 235.6 34.8 (57.5) (22.7)
Non-controlling interests 1,064.7 168.6 1,233.3 908.6 (6.3) 902.3
-------------------------------- ----- ------------ --------- ------------ --------------- -------- -----------
Profit/ (loss) for the year
from continuing operations 1,227.3 241.6 1,468.9 943.4 (63.8) 879.6
-------------------------------- ----- ------------ --------- ------------ --------------- -------- -----------
Earnings/(loss) per share (US
cents)
Basic earnings/(loss) per
ordinary
share 11 58.5 26.3 84.8 12.6 (20.8) (8.2)
Diluted earnings/(loss) per
ordinary
share 11 56.9 25.9 82.8 12.3 (20.8) (8.2)
-------------------------------- ----- ------------ --------- ------------ --------------- -------- -----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(US$ million)
Year ended Year ended
31 March 31 March
2018 2017
-------------------------------------------------- ------------ -----------
Profit for the year from continuing operations 1,468.9 879.6
-------------------------------------------------- ------------ -----------
Items that will not be reclassified subsequently
to income statement:
Remeasurement of net defined benefit plans 1.1 (0.8)
Tax effects on net defined benefit plans 0.5 0.6
-------------------------------------------------- ------------ -----------
Total (a) 1.6 (0.2)
Items that may be reclassified subsequently
to income statement:
Exchange differences arising on translation
of foreign operations 56.9 216.3
Gain in fair value of available-for-sale
financial assets 13.9 4.1
Cumulative (losses)/ gains of cash flow
hedges (62.4) 9.5
Tax effects arising on cash flow hedges 24.4 (5.7)
Losses/ (Gains) on cash flow hedges recycled
to income statement 54.8 (12.2)
Tax effects arising on cash flow hedges
recycled to income statement (19.0) 4.2
-------------------------------------------------- ------------ -----------
Total (b) 68.6 216.2
-------------------------------------------------- ------------ -----------
Other comprehensive income for the year
(a+b) 70.2 216.0
-------------------------------------------------- ------------ -----------
Total comprehensive income for the year 1,539.1 1,095.6
-------------------------------------------------- ------------ -----------
Attributable to:
Equity holders of the parent 267.1 64.5
Non-controlling interests 1,272.0 1,031.1
-------------------------------------------------- ------------ -----------
Total comprehensive income for the year 1,539.1 1,095.6
-------------------------------------------------- ------------ -----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(US$ million)
As at As at
31 March 31 March
Note 2018 2017
--------------------------------------- ----- ------------ ------------
Assets
Non-current assets
Goodwill 12.2 16.6
Intangible assets 123.1 95.6
Property, plant and equipment 17,727.3 16,750.8
Leasehold land 57.0 55.3
Financial asset investments 24.5 10.7
Non-current tax assets 521.1 434.6
Other non-current assets 659.2 544.4
Financial instruments (derivatives) - 0.6
Deferred tax assets 916.7 1,111.0
--------------------------------------- ----- ------------ ------------
20,041.1 19,019.6
--------------------------------------- ----- ------------ ------------
Current assets
Inventories 2,037.7 1,670.1
Trade and other receivables 1,526.9 1,084.8
Financial instruments (derivatives) 24.0 1.6
Current tax assets 2.2 2.1
Liquid investments 13 4,807.8 8,043.0
Cash and cash equivalents 14 798.7 1,682.2
--------------------------------------- ----- ------------ ------------
9,197.3 12,483.8
--------------------------------------- ----- ------------ ------------
Total assets 29,238.4 31,503.4
--------------------------------------- ----- ------------ ------------
Liabilities
Current liabilities
Short term borrowings 15 (5,460.3) (7,658.5)
Trade and other payables (6,077.5) (6,223.4)
Financial instruments (derivatives) (22.1) (126.9)
Retirement benefits (18.0) (7.5)
Provisions (22.1) (17.5)
Current tax liabilities (53.9) (37.8)
--------------------------------------- ----- ------------ ------------
(11,653.9) (14,071.6)
--------------------------------------- ----- ------------ ------------
Net current liabilities (2,456.6) (1,587.8)
--------------------------------------- ----- ------------ ------------
Non-current liabilities
Medium and long-term borrowings 15 (9,733.5) (10,570.2)
Trade and other payables (142.8) (68.5)
Financial instruments (derivatives) (18.1) (8.6)
Deferred tax liabilities (743.0) (371.1)
Retirement benefits (62.4) (59.6)
Provisions (351.8) (327.3)
Non equity non-controlling interests (11.9) (11.9)
--------------------------------------- ----- ------------ ------------
(11,063.5) (11,417.2)
--------------------------------------- ----- ------------ ------------
Total liabilities (22,717.4) (25,488.8)
--------------------------------------- ----- ------------ ------------
Net assets 6,521.0 6,014.6
--------------------------------------- ----- ------------ ------------
Equity
Share capital 30.4 30.1
Share premium 201.5 201.5
Treasury shares (558.3) (557.9)
Share-based payment reserve 13.3 28.2
Hedging reserve (92.5) (90.9)
Other reserves 154.3 140.5
Retained earnings (87.5) (160.0)
--------------------------------------- ----- ------------ ------------
Equity attributable to equity holders
of the parent (338.8) (408.5)
Non-controlling interests 6,859.8 6,423.1
--------------------------------------- ----- ------------ ------------
Total equity 6,521.0 6,014.6
--------------------------------------- ----- ------------ ------------
Financial Statements of Vedanta Resources plc with registration
number 4740415 were approved by the Board of Directors on 22 May
2018 and signed on their behalf by
Navin Agarwal
Executive Vice Chairman
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2018
(US$ million)
Year ended Year ended
31 March 31 March
Note 2018 2017
Operating activities
Profit before taxation 2,482.1 1,379.9
Adjustments for:
Depreciation and amortisation 1,270.7 1,030.5
Investment revenues (465.1) (642.6)
Finance costs 1,450.8 1,382.2
Other gains and (losses)[net] (4.3) 23.8
(Profit) /loss on disposal of PP&E (0.5) 5.2
Write-off of unsuccessful exploration
costs - 6.5
Share-based payment charge 19.5 13.4
Impairment charge/ reversal (net),
loss on PP&E (649.9) 17.3
Other non-cash items 10.0 3.5
---------------------------------------------- ----- ----------- ------------
Operating cash flows before movements
in working capital 4,113.3 3,219.7
Increase in inventories (354.5) (266.7)
(Increase)/ decrease in receivables (606.5) 18.8
Increase in payables 261.7 522.3
---------------------------------------------- ----- ----------- ------------
Cash generated from operations 3,414.0 3,494.1
Dividend received 4.0 0.1
Interest income received 223.5 298.0
Interest paid (1,415.6) (1,417.5)
Income taxes paid (567.2) (778.7)
Dividends paid (164.4) (138.4)
---------------------------------------------- ----- ----------- ------------
Net cash inflow from operating activities 1,494.3 1,457.6
---------------------------------------------- ----- ----------- ------------
Cash flows from investing activities
Purchases of property, plant and equipment
and intangibles (1,104.3) (873.9)
Proceeds on disposal of property,
plant and equipment 10.4 25.2
Proceeds from redemption of liquid
investments 16 16,863.0 15,284.8
Purchases of liquid investments 16 (13,421.5) (14,363.3)
Acquisition through business combination (134.4) -
Net cash from investing activities 2,213.2 72.8
---------------------------------------------- ----- ----------- ------------
Cash flows from financing activities
Issue of ordinary shares 0.3 0.0
Purchase of shares under DSBP scheme (2.4) (2.0)
Dividends paid to non-controlling
interests of subsidiaries (1,414.4) (1,393.3)
Acquisition of additional interests
in subsidiary/ share purchase by subsidiary (31.4) (21.4)
Exercise of stock options in subsidiary 5.2 2.9
(Repayment of)/ Proceeds from working
capital loan (net) 16 (612.2) 1,709.1
Proceeds from other short-term borrowings 16 1,115.4 3,193.8
Repayment of other short-term borrowings 16 (4,362.4) (4,324.0)
Buyback of non-convertible bond 16 (1,128.5) (858.5)
Proceeds from medium and long-term
borrowings 16 3,640.2 2,146.4
Repayment of medium and long-term
borrowings 16 (1,816.9) (205.9)
Buyback of convertible bond 16 - (590.3)
---------------------------------------------- ----- ----------- ------------
Net cash used in financing activities (4,607.1) (343.2)
---------------------------------------------- ----- ----------- ------------
Net (decrease)/ increase in cash and
cash equivalents (899.6) 1,187.2
Effect of foreign exchange rate changes 16.1 66.7
Cash and cash equivalents at beginning
of the year 1,682.2 428.3
---------------------------------------------- ----- ----------- ------------
Cash and cash equivalents at end of 14 &
the year 16 798.7 1,682.2
---------------------------------------------- ----- ----------- ------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(US$ million)
Attributable to equity holders of the Company
--------------------------------------------------------------------------------------
Share-based
Share Share Treasury payment Hedging Other Retained Non-controlling Total
capital premium Shares reserves reserve reserves earnings Total Interests equity
------------------------- -------- -------- --------- ------------ -------- --------- --------- --------- ---------------- ---------
At 1 April 2017 30.1 201.5 (557.9) 28.2 (90.9) 140.5 (160.0) (408.5) 6,423.1 6,014.6
Profit/(loss) for the
year - - - - - - 235.6 235.6 1,233.3 1,468.9
Other comprehensive
income/(loss) for the
year - - - - (1.6) 33.1 - 31.5 38.7 70.2
------------------------- -------- -------- --------- ------------ -------- --------- --------- --------- ---------------- ---------
Total comprehensive
income/(loss) for the
year - - - - (1.6) 33.1 235.6 267.1 1,272.0 1,539.1
Acquisition of shares
under DSBP scheme - - (0.9) - - - (1.5) (2.4) - (2.4)
Transfers(1) - - - - - (19.3) 19.3 - - -
Dividends paid/ payable
(note 12) - - - - - - (164.4) (164.4) (828.3) (992.7)
Exercise of stock
options 0.3 - 0.5 (27.0) - - 26.5 0.3 - 0.3
Recognition of
share-based
payment - - - 12.1 - - - 12.1 - 12.1
Non-controlling interest
on business combination - - - - - - - - 11.5 11.5
Recognition of put
option
liability/derecognition
of non controlling
interest - - - - - - (20.7) (20.7) (22.0) (42.7)
Other changes in
non-controlling
interests* - - - - - - (22.3) (22.3) 3.5 (18.8)
At 31 March 2018 30.4 201.5 (558.3) 13.3 (92.5) 154.3 (87.5) (338.8) 6,859.8 6,521.0
------------------------- -------- -------- --------- ------------ -------- --------- --------- --------- ---------------- ---------
* Includes purchase of shares by Vedanta Limited through ESOP
trust for its stock options and share based payment charge by
subsidiaries.
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 earnings Total Interests equity
----------------- -------- -------- --------- ------------ ------------ -------- --------- --------- --------- ---------------- -----------
At 1 April 2016 30.1 201.5 (557.2) 29.9 6.0 (87.7) (1.4) (334.0) (712.8) 7,565.2 6,852.4
Profit for the
year - - - - - - - (22.7) (22.7) 902.3 879.6
Other
comprehensive
income
for the year - - - - - (3.2) 90.4 - 87.2 128.8 216.0
----------------- -------- -------- --------- ------------ ------------ -------- --------- --------- --------- ---------------- -----------
Total
comprehensive
income/(loss)
for the year - - - - - (3.2) 90.4 (22.7) 64.5 1,031.1 1,095.6
Acquisition of
shares
under DSBP
scheme - - (0.8) - - - - (1.2) (2.0) - (2.0)
Convertible bond
transfer - - - - (6.0) - - 6.0 - - -
Transfers(1) - - - - - - 51.5 (51.5) - - -
Dividends paid/
payable
(note 12) - - - - - - - (137.5) (137.5) (1,340.1) (1,477.6)
Exercise of
stock options 0.0 - 0.1 (15.1) - - - 15.0 - - 0.0
Recognition of
share-based
payment - - - 13.4 - - - - 13.4 - 13.4
Change in
non-controlling
interest-
merger - - - - - - - 368.4 368.4 (817.1) (448.7)
Other changes in
non-controlling
interests* - - - - - - - (2.5) (2.5) (16.0) (18.5)
At 31 March 2017 30.1 201.5 (557.9) 28.2 - (90.9) 140.5 (160.0) (408.5) 6,423.1 6,014.6
----------------- -------- -------- --------- ------------ ------------ -------- --------- --------- --------- ---------------- -----------
* Includes purchase of shares by Vedanta Limited through ESOP
trust for its stock options and additional stake purchased during
the year in erstwhile Cairn India Limited and share based payment
charge by subsidiaries.
OTHER RESERVES COMPRISE
(US$ million)
Currency Investment Other reserves(3)
translation Merger revaluation
reserve reserve(2) reserve Total
------------------------------------------ ------------- ------------ ------------- ------------------ --------
At 1 April 2016 (2,255.2) 4.4 4.1 2,245.3 (1.4)
Exchange differences on translation of
foreign operations 87.9 - - - 87.9
Gain in fair value of available-for-sale
financial assets - - 2.5 - 2.5
Remeasurements - - - - 0.0
Transfer from/ (to) retained earnings(1) - - - 51.5 51.5
At 1 April 2017 (2,167.3) 4.4 6.6 2,296.8 140.5
------------------------------------------ ------------- ------------ ------------- ------------------ --------
Exchange differences on translation of
foreign operations 25.5 - - - 25.5
Gain in fair value of available-for-sale
financial assets - - 6.9 - 6.9
Remeasurements - - - 0.7 0.7
Transfer from/ (to) retained earnings(1) - - - (19.3) (19.3)
------------------------------------------ ------------- ------------ ------------- ------------------ --------
At 31 March 2018 (2,141.8) 4.4 13.5 2,278.2 154.3
------------------------------------------ ------------- ------------ ------------- ------------------ --------
(1) Transfer to other reserve during the Year ended 31 March
2018 includes US$3.5 million of legal reserve and withdrawal of US$
22.8 million from debenture redemption reserve (31 March 2017
:US$51.5 million of debenture redemption 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$4.4 million arose, being the difference
between the carrying value of the investment in Twin Star in
Volcan's accounts and the nominal value of the shares issued to
Volcan.
(3) Other reserves includes legal reserves of US$ 3.8 million
(31 March 2017: US$ 0.3 million), debenture redemption reserve of
US$ 156.2 million (31 March 2017 US$ 178.9 million) and balance
mainly includes general reserve. Debenture redemption reserve is
required to be created under the Indian Companies Act from annual
profits until such debentures are redeemed. Legal reserve is
required to be created by Fujairah Gold by appropriation of 10 % of
profits each year until the balance reaches 50% of the paid up
share capital. This reserve is not available for distribution
except in circumstances stipulated by the Articles of
Incorporation. Under the erstwhile Indian Companies Act, 1956,
general reserve was created in relation to Group's Indian
subsidiaries through an annual transfer of net income to general
reserve 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 total distributable
reserves for that year. The said requirement was dispensed with
w.e.f. 1 April 2013 and there are no restrictions of use of these
reserves.
NOTES TO PRELIMINARY ANNOUNCEMENT
General information and accounting policies
This preliminary results announcement is for the year ended 31
March 2018. 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. The amendments applicable
with effect from 01 April 2017 did not have any significant impact
on the amounts reported in the financial statements. The Company
expects to publish full financial statements that comply with IFRSs
in July, 2018.
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 24.
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 the
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, together with undrawn fund based
committed facilities of US$ 0.6billion, and cash and liquid
investments of US$ 5.6 billion as at 31 March 2018, are expected to
be sufficient to meet the liquidity requirement of the Group in the
near future.
During FY2018, Moody's upgraded the group's corporate family
ratings from B1/Stable to Ba3/Stable on account of improved
operating performance and significant reduction in gross debt which
led to improved financial metrics. S&P has maintained their
rating at B+/Stable. The Group strives to maintain a healthy
liquidity and retains flexibility in the financing structure.
During the year ,Proactive refinancing of US$2.4 billion through a
bond issuance and bank loans improved average maturity at Vedanta
Resources plc to about four years at March 2018 (from approx. three
years).
The Board is satisfied that the Group's forecasts and
projections, taking into account reasonably possible changes in
trading performance on cash flows and forecast covenant compliance,
the transferability of cash within the Group, the flexibility the
Group has over the timings of its capital expenditure and other
uncertainties, show that the Group will be able to operate within
the level of its current facilities for the foreseeable future. For
these reasons the Group continues to adopt the going concern basis
in preparing its financial statements.
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.
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 2018 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 13
August 2018. 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 2017 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.
Significant accounting estimates and judgments
The preparation of financial statements 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 these consolidated
financial statements and the reported amounts of revenues and
expenses for the years presented. These judgments and estimates are
based on management's best knowledge of the relevant facts and
circumstances, having regard to previous experience, but actual
results may differ materially from the amounts included in the
financial statements.
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.
The information about significant areas of estimation
uncertainty and critical judgements in applying accounting policies
that have the most significant effect on the amounts recognized in
the financial statements are as given below:
Significant Estimates:
(i) Oil & Gas reserves
Oil & 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 annually. 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 oil and gas prices could
impact the depreciation rates, carrying value of assets and
environmental and restoration provisions.
(ii) Carrying value of exploration and evaluation oil and gas
assets
The recoverability of a project is assessed under IFRS 6.
Exploration assets are assessed by comparing the carrying value to
higher of fair value less cost of disposal or value in use, if
impairment indicator exists. Change to the valuation of exploration
assets is an area of judgement. Further details on the Group's
accounting policies on this are set out in accounting policy above.
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/reversal impact 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 where indicators of
impairment or impairment reversal of previous recorded impairment
are identified in accordance with IAS 36.
The impairment assessments are based on a range of estimates and
assumptions, including:
Estimates/assumption Basis
--------------------- -----------------------------------------------------
Future production proved and probable reserves, resource estimates
and, in certain cases, expansion projects
--------------------- -----------------------------------------------------
Commodity prices management's best estimate benchmarked with external
sources of information, to ensure they are within
the range of available analyst forecast
--------------------- -----------------------------------------------------
Discount to management's best estimate based on historical
price prevailing discount
--------------------- -----------------------------------------------------
Extension of assumed that PSC for Rajasthan block would be
PSC extended till 2030 on the expected commercial
terms as per the announced government policy
--------------------- -----------------------------------------------------
Discount rates cost of capital risk-adjusted for the risk specific
to the asset/ CGU
--------------------- -----------------------------------------------------
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/reversal impact and the assumptions
and sensitivities 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.
In the current year the Group has reassessed the parameters for
mine development depletion including cost to complete at HZL, which
has resulted in additional depletion charge of $57.3 million for
the current year.
Management performs impairment tests when there is an indication
of impairment or impairment reversal. The impairment assessments
are based on a range of estimates and assumptions, including:
Estimates/assumptions Basis
---------------------- -----------------------------------------------------
Future production proved and probable reserves, resource estimates
(with an appropriate conversion factor) considering
the expected permitted mining volumes and, in
certain cases, expansion projects
---------------------- -----------------------------------------------------
Commodity prices management's best estimate benchmarked with external
sources of information, to ensure they are within
the range of available analyst forecast
---------------------- -----------------------------------------------------
Exchange rates management best estimate benchmarked with external
sources of information
---------------------- -----------------------------------------------------
Discount rates cost of capital risk-adjusted for the risk specific
to the asset/ CGU
---------------------- -----------------------------------------------------
Details of impairment charge are disclosed in note 6.
(v) Assessment of impairment at Lanjigarh Refinery
During financial year 2015-16, the Group has received the
necessary approvals for expansion of the Lanjigarh refinery to 4
million tonnes per annum (MTPA). Accordingly, second stream
operations were commenced in Alumina refinery from April 2016 and
the refinery was debottlenecked to nameplate capacity of 2 MTPA in
this year. We continue to explore the feasibility of expanding our
alumina refinery capacity, from 2 to 4 million and then up to 6
million tonnes per annum, subject to bauxite availability and
regulatory approvals.
The State of Odisha has abundant bauxite resources and given the
initiatives by the Government of Odisha, management is confident
that bauxite will be made available in the short to medium term.
The group has entered into agreements with various suppliers
internationally and domestically to ensure the availability of
bauxite to run its refinery.
Recoverability value assessment during the previous year ended
31 March 2017 including sensitivity analysis on the key assumptions
indicated recoverable value exceeds the carrying value. No negative
developments have occurred since the previous year and accordingly,
it is not expected that the carrying amount would exceed the
recoverable amount and hence the recoverable value for the year
ended 31 March 2018 was not re-determined.
As at 31 March 2018, the carrying amount of property plant and
equipment related to alumina refinery operations at Lanjigarh and
related mining assets is US$1,043.5 million (31 March 2017 :
US$1,099.4 million).
(vi) Assessment of Impairment of Goa iron ore mines:
Pursuant to an order passed by the Hon'ble Supreme Court of
India on 07 February 2018, the second renewal of the mining leases
granted by the State of Goa in 2014-15 to all miners including
Vedanta were cancelled. Consequentially all mining operations
stopped with effect from 16 March 2018 until fresh mining leases
(not fresh renewals or other renewals) and fresh environmental
clearances are granted in accordance with the provisions of The
Mines and Minerals (Development and Regulation) (MMDR) Act.
Significant uncertainty exists over the resumption of mining at Goa
under the current leases. The Group has assessed the recoverable
value of all its assets and liabilities associated with existing
mining leases which led to a non-cash impairment charge in March
2018. Details of this impairment charge and method of estimating
recoverable value is disclosed in note 6.
(vii) Assessment of Impairment at Konkola Copper Mines (KCM)
The KCM operations in Zambia have experienced, lower equipment
availability, throughput constraints, and other operational
challenges including production ramp up. Due to these factors, the
Group has reviewed the carrying value of its property, plant and
equipment at KCM as at balance sheet date, estimated the
recoverable amounts of the 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 Group has also carried out a sensitivity analysis on key
variables like movement in copper prices, discount rate and
production. Based on the sensitivity analysis, the recoverable
amount is still expected to exceed the carrying value.
The carrying value of assets as at 31 March 2018 is US$1,575.8
million (31 March 2017: US$1,663.6 million).
(viii) 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 or oil fields. The costs are estimated on
an annual basis on the basis of mine 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. The provision for
decommissioning oil and gas assets is based on the current estimate
of the costs for removing and decommissioning producing facilities,
the forecast timing and currency of settlement of decommissioning
liabilities and the appropriate discount rate.
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.
(ix) 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.
(x) 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.
(xi) Recoverability of deferred tax and other income tax
assets
The Group has carry forward tax losses, unabsorbed depreciation
and MAT credit that are available for offset against future taxable
profit. Deferred tax assets are recognised only to the extent that
it is probable that taxable profit will be available against which
the unused tax losses or tax credits can be utilized. This involves
an assessment of when those assets are likely to reverse, and a
judgement as to whether or not there will be sufficient taxable
profits available to offset the assets. This requires assumptions
regarding future profitability, which is inherently uncertain. To
the extent assumptions regarding future profitability change, there
can be an increase or decrease in the amounts recognised in respect
of deferred tax assets and consequential impact in the income
statement.
Additionally, the Group has tax receivables on account of refund
arising on account of past amalgamation and relating to various tax
disputes. The recoverability of these receivables involve
application of judgement as to the ultimate outcome of the tax
assessment and litigations. This pertains to the application of the
legislation, which in certain cases is based upon management's
interpretation of country specific tax law, in particular India,
and the likelihood of settlement. Management uses in-house and
external legal professionals to make informed decision.
(xii) Copper operations India
The annual consent to operate (CTO) under the Air and Water Acts
for copper smelter in India was rejected by the State Pollution
Control Board on 09 April 2018 for want of further clarifications
and consequently, the operations have presently been suspended. The
company has filed an appeal in the Tribunal. Even though there can
be no assurance regarding the final outcome of the process, as per
the company's assessment, it is in compliance with the applicable
regulations and expects the renewal of CTO in next few months.
The carrying value of assets as at 31 March 2018 is US$256.3
million.
Judgements:
(i) Assessment of IFRIC 4- Determining whether an arrangement
contains a lease
The Group has ascertained that the Power Purchase Agreement
(PPA) entered into between one of the Subsidiary and a State Grid
qualifies to be an operating lease under IAS 17 "Leases".
Accordingly, the consideration receivable under the PPA relating to
recovery of capacity charges towards capital cost have been
recognised as operating lease rentals and in respect of variable
cost that includes fuel costs, operations and maintenance etc. is
considered as revenue from sale of products/services.
Significant judgement is required in segregating the capacity
charges due from State Grid, between fixed and contingent payments.
The Group has determined that since the capacity charges under the
PPA are based on the number of units of electricity made available
by its Subsidiary which would be subject to variation on account of
various factors like availability of coal and water for the plant,
there are no fixed minimum payments under the PPA, which requires
it to be accounted for on a straight line basis.
(ii) Contingencies
In the normal course of business, contingent liabilities may
arise from litigation, taxation and other claims against the Group.
A tax provision is recognised when the group has a present
obligation as a result of a past event, it is probable that the
group will be required to settle that obligation.
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.
When considering the classification of a legal or tax cases as
probable, possible or remote there is judgement involved. This
pertains to the application of the legislation, which in certain
cases is based upon management's interpretation of country specific
applicable law, in particular India, and the likelihood of
settlement. Management uses in-house and external legal
professionals to make informed decision.
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.
(iii) Revenue recognition and receivable recovery in relation to
the power division
In certain cases, the Group's power customers are disputing
various contractual provisions of Power Purchase Agreements (PPA).
Significant judgement is required in both assessing the tariff to
be charged under the PPA in accordance with IAS 18 and to assess
the recoverability of withheld revenue currently accounted for as
receivables.
In assessing this critical judgment management considered
favorable external legal opinions the Group has obtained in
relation to the claims and favorable court judgements in the
related matter. In addition the fact that the contracts are with
government owned companies implies the credit risk is low.
(iv) Special items
Special items are those items that management considers, by
virtue of their size or incidence (including but not limited
Impairment charges and acquisition and restructuring related
costs), should be disclosed separately to ensure that the financial
information allows an understanding of the underlying performance
of the business in the year, so as to facilitate comparison with
prior periods. Also tax charges related to Special items and
certain one-time tax effects are considered Special. Such items are
material by nature or amount to the year's result and require
separate disclosure in accordance with IFRS.
The determination as to which items should be disclosed
separately requires a degree of judgement. The details of special
items is set out in note 6.
4. Segment information
The Group is diversified natural resources group engaged in
exploring, extracting and processing minerals and oil and gas. We
produce Zinc, Lead, Silver, Copper, Aluminium, Iron ore, Oil and
gas, commercial power and glass substrate and have presence across
India, Zambia, South Africa, Namibia, UAE, Ireland, Australia,
Liberia, Japan, South Korea and Taiwan. The Group is also in the
business of port operations and manufacturing of glass
substrate.
The Group's reportable segments defined in accordance with IFRS
8 are as follows:
n Zinc- India
n Zinc-International
n Oil & Gas
n Iron Ore
n Copper-India/Australia
n Copper-Zambia
n Aluminium
n Power
'Others' segment mainly comprises of port/berth and glass
substrate business and those segments which do not meet the
quantitative threshold for separate reporting.
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 years ended 31 March 2018 and 31 March
2017. Items after operating profit are not allocated by
segment.
(a) Reportable segments
Year ended 31 March 2018
(US$ million)
Oil and Iron Copper-India*/ Total
Zinc-India Zinc-International gas Ore Australia Copper-Zambia Aluminium Power Others Elimination operations
----------------- ----------- ------------------- --------- --------- --------------- ------------- ---------- -------- ------- ------------ ------------
REVENUE
Sales to
external
customers 3,368.7 534.7 1,479.6 483.4 3,832.3 1,181.3 3,583.7 853.6 41.4 - 15,358.7
Inter-segment
sales(1) - - - 4.1 0.4 101.7 3.9 23.4 1.9 (135.4) -
----------------- ----------- ------------------- --------- --------- --------------- ------------- ---------- -------- ------- ------------ ------------
Segment revenue 3,368.7 534.7 1,479.6 487.5 3,832.7 1,283.0 3,587.6 877.0 43.3 (135.4) 15,358.7
----------------- ----------- ------------------- --------- --------- --------------- ------------- ---------- -------- ------- ------------ ------------
Segment Result
EBITDA(2) 1,902.8 219.5 849.1 57.3 200.6 73.2 452.4 258.9 37.4 - 4,051.2
Depreciation and
amortisation(3) (232.9) (28.3) (461.3) (68.6) (24.9) (111.8) (256.9) (75.1) (10.9) - (1,270.7)
Operating profit
/ (loss)
before special
items 1,669.9 191.2 387.8 (11.3) 175.7 (38.6) 195.5 183.8 26.5 - 2,780.5
Investment
revenue 465.1
Finance costs (1,342.6)
Other gains and
(losses)
[net] (1.0)
Special items 580.1
------------
PROFIT BEFORE
TAXATION 2,482.1
------------
Segments assets 2,575.2 862.0 3,706.0 613.2 1,447.0 2,017.2 7,440.4 2,950.3 424.0 - 22,035.3
Financial asset
investments 24.5
Deferred tax
assets 916.7
Liquid
investments 4,807.8
Cash and cash
equivalents 798.7
Tax assets 523.3
Others 132.1
------------
TOTAL ASSETS 29,238.4
------------
Segment
liabilities (637.6) (170.3) (851.3) (249.8) (1,367.8) (757.6) (2,061.0) (268.2) (30.5) - (6,394.1)
Short-term
borrowings (5,460.3)
Current tax
liabilities (53.9)
Medium and
long-term
borrowings (9,733.5)
Deferred tax
liabilities (743.0)
Others (332.6)
TOTAL
LIABILITIES (22,717.4)
----------------- ----------- ------------------- --------- --------- --------------- ------------- ---------- -------- ------- ------------ ------------
Other segment
information
Additions to
property,
plant and
equipment
including
intangible
assets** 473.0 254.7 162.6 21.6 84.1 27.4 221.0 11.1 281.4 1,536.9
Impairment
reversal/
(losses)(4) - - 1,447.4 (758.5) - - - - - - 688.9
----------------- ----------- ------------------- --------- --------- --------------- ------------- ---------- -------- ------- ------------ ------------
* The annual consent to operate (CTO) under the Air and Water
Acts for copper smelters in India was rejected by the State
Pollution Control Board on 09 April 2018 for want of further
clarification and consequently the operations have presently been
suspended. The matter is presently pending in Tribunal.
** Including acquisition through business combination
Year ended 31 March 2017
(US$ million)
Oil
and Iron Copper-India/ Total
Zinc-India Zinc-International gas Ore Australia Copper-Zambia Aluminium Power Others Elimination operations
----------------- ----------- ------------------- --------- --------- -------------- ------------- ---------- -------- ------- ------------ -----------
REVENUE
Sales to
external
customers 2,521.9 332.4 1,222.7 609.3 3,131.4 830.1 2,037.1 822.6 12.6 - 11,520.1
Inter-segment
sales(1) 3.1 - - 6.1 2.3 44.2 2.9 13.3 1.0 (72.9) -
----------------- ----------- ------------------- --------- --------- -------------- ------------- ---------- -------- ------- ------------ -----------
Segment revenue 2,525.0 332.4 1,222.7 615.4 3,133.7 874.3 2,040.0 835.9 13.6 (72.9) 11,520.1
----------------- ----------- ------------------- --------- --------- -------------- ------------- ---------- -------- ------- ------------ -----------
Segment Result
EBITDA(2) 1,423.2 138.3 597.2 194.2 252.2 5.9 344.2 244.8 (8.9) - 3,191.1
Depreciation and
amortisation(3) (149.2) (27.5) (411.0) (69.9) (28.9) (113.3) (141.0) (88.2) (1.5) - (1,030.5)
Operating profit
/ (loss)
before special
items 1,274.0 110.8 186.2 124.3 223.3 (107.4) 203.2 156.6 (10.4) - 2,160.6
Investment
revenue 642.6
Finance costs (1,340.6)
Other gains and
(losses)
[net] (23.8)
Special items - - - - - - - - - - (58.9)
-----------
PROFIT BEFORE
TAXATION 1,379.9
-----------
Segments assets 2,422.7 553.2 2,548.9 1,409.0 1,183.5 2,006.8 7,103.5 2,837.5 85.6 - 20,150.7
Financial asset
investments 10.7
Deferred tax
assets 1,111.0
Liquid
investments 8,043.0
Cash and cash
equivalents 1,682.2
Tax assets 436.7
Others 69.1
-----------
TOTAL ASSETS 31,503.4
-----------
Segment
liabilities (615.7) (173.7) (716.7) (228.2) (1,708.1) (570.0) (1,561.5) (266.0) (25.9) - (5,865.8)
Short-term
borrowings (7,658.5)
Current tax
liabilities (37.8)
Medium and
long-term
borrowings (10,570.2)
Deferred tax
liabilities (371.1)
Others (985.4)
TOTAL
LIABILITIES (25,488.8)
----------------- ----------- ------------------- --------- --------- -------------- ------------- ---------- -------- ------- ------------ -----------
Other segment
information
Additions to
property,
plant and
equipment
including
intangible
assets 325.1 74.6 151.9 11.5 24.9 28.3 280.6 82.0 0.5 - 979.4
Impairment
reversal/
(losses)(4) - - 12.6 - - - (29.9) - - (17.3)
----------------- ----------- ------------------- --------- --------- -------------- ------------- ---------- -------- ------- ------------ -----------
(1) Transfer prices for inter segment sales are on an arm's
length basis in a manner similar to transactions with third
parties. However, inter segment sales at BALCO amounting to US$20.6
million for the year ended 31 March 2018 (31 March 2017 US$6.2
million), is at cost.
(2) EBITDA is a non-IFRS measure and represents earnings before
special items, depreciation, amortisation, other gains and losses,
interest and tax.
(3) Depreciation and amortisation is also provided to the chief
operating decision maker on a regular basis.
(4) Included under special items (note 6).
Segment information (continued)
(b) Geographical segmental analysis
The Group's operations are located in India, Zambia, Namibia,
South Africa, UAE, Liberia, Ireland, Australia, Japan, South Korea
and Taiwan. The following table provides an analysis of the Group's
sales by region in which the customer is located, irrespective of
the origin of the goods.
(US$ million)
Year ended Year ended
31 March 31 March
2018 Percentage 2017 Percentage
---------- ----------- ----------- ----------- -----------
India 8,262.1 54% 6,712.1 58%
China 2,184.7 14% 1,501.9 13%
UAE 620.5 4% 716.5 6%
Malaysia 827.8 5% 431.2 4%
Others 3,463.6 23% 2,158.4 19%
Total 15,358.7 100% 11,520.1 100%
---------- ----------- ----------- ----------- -----------
The following is an analysis of the carrying amount of
non-current 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 assets(1)
-------------- -------------------------------------------
As at As at
31 March 2018 31 March 2017
India 16,045.1 15,496.6
Zambia 1,623.6 1,639.0
Namibia 170.7 112.7
South Africa 570.1 322.3
Taiwan 188.4 -
Others 130.5 27.5
-------------- --------------------- --------------------
Total 18,728.4 17,598.1
-------------- --------------------- --------------------
(1) Non-current assets do not include deferred tax assets,
derivative assets, financial asset investments and other
non-current financial assets.
Information about major customer
No customer contributed 10% or more to the Group's revenue
during the year ended 31 March 2018 and 31 March 2017.
5. Total Revenue
(US$ million)
Year ended Year ended
31 March 31 March
2018 2017
------------------------------------------ ----------- -----------
Sale of products (including excise duty) 15,426.7 11,998.7
Less: Excise duty (163.9) (588.2)
Sale of products (net of excise duty) 15,262.8 11,410.5
Sale of services 31.2 71.4
Export incentives 64.7 38.2
------------------------------------------ ----------- -----------
Total Revenue 15,358.7 11,520.1
------------------------------------------ ----------- -----------
6. Special items
(US$ million)
Year ended 31 March 2018 Year ended 31 March 2017
------------------------------------------- -------------------------------------------
Tax effect Tax effect
of of
Special Special items Special Special items
Special items items after tax Special items items after tax
-------------------------- -------------- ----------- -------------- ----------- --------------
Reversal of provision of
DMF(1) 45.8 (15.9) 29.9 - - -
Gratuity- change in
limits(2) (12.7) 2.9 (9.8) - - -
Gross profit special
items 33.1 (13.0) 20.1 - - -
Impairment reversal of
oil
and gas assets(3) 1,447.4 (569.9) 877.5 12.6 (4.9) 7.7
Impairment of iron ore
assets(4) (758.5) 224.6 (533.9) - - -
Impairment of assets
under
construction-
Aluminium(5) - - - (29.9) - (29.9)
Total impairment charge 688.9 (345.3) 343.6 (17.3) (4.9) (22.2)
Loss on unusable assets
under construction-
Aluminium(5) (39.0) 13.6 (25.4) - - -
Operating special items 683.0 (344.7) 338.3 (17.3) (4.9) (22.2)
Financing special
items(6) (108.2) 6.2 (102.0) (41.6) - (41.6)
Bargain gain net of
acquisition
cost(7) 5.3 - 5.3 - - -
-------------------------- -------------- ----------- -------------- -------------- ----------- --------------
Special items 580.1 (338.5) 241.6 (58.9) (4.9) (63.8)
-------------------------- -------------- ----------- -------------- -------------- ----------- --------------
1. During the year ended 31 March 2018, the Group has recognised
the reversal of provisions of US$ 45.8 million relating to
contribution to the District Mineral Foundation. Effective 12
January 2015, the Mines and Minerals Development and Regulation
Act, 1957 prescribed the establishment of the District Mineral
Foundation (DMF) in any district affected by mining related
operations. The provisions required contribution of an amount
equivalent to a percentage of royalty not exceeding one-third
thereof, as may be prescribed by the Central Government of India.
The rates were prescribed on 17 September 2015 for minerals other
than coal, lignite and sand and on 20 October 2015 for coal,
lignite and sand as amended on 31 August 2016. The Supreme Court
order dated 13 October 2017 has determined the prospective
applicability of the contributions from the date of the
notification fixing such rate of contribution and hence DMF would
be effective;
a) for minerals other than coal, lignite and sand from the date
when the rates were prescribed by the Central Government; and;
b) for coal, lignite and sand, DMF would be effective from the
date when the rates were prescribed by the Central Government of
India or from the date on which the DMF was established by the
State Government by a notification, whichever is later.
Pursuant to the aforesaid order, the Group has recognised a
reversal of DMF provision for the period for which DMF is no longer
leviable.
2. The Indian subsidiaries of the Company participate in a
defined benefit plan (the "Gratuity Plan") covering certain
categories of employees. In a few of these companies, the maximum
liability was capped at the statutory prescribed limit of INR 1
million (US$ 0.2 million). Consequent to the increase in the
statutory limit to INR 2 million (US$ 0.3 million), the increase in
provision representing past service cost has been recognized as
special items.
3. During the year ended 31 March 2018, the Group has recognized
net impairment reversal of US$ 1,447.4 million on its assets in the
oil and gas segment comprising of:
a) reversal of previously recorded impairment charge of US$
1,464.5 million relating to Rajasthan oil and gas block ("CGU")
mainly following the progress on key growth projects expected to
result in the enhanced recovery of resources in a commercially
viable manner leading to a higher forecast of oil production and
adoption of integrated development strategy for various projects
leading to savings in cost. Of this reversal, US$ 499.9 million
reversal has been recorded against oil and gas properties and US$
964.6 million reversal has been recorded against exploratory and
evaluation assets. The recoverable amount of the CGU, US$ 2,514.0
million (March 2017: US$ 2,007.0 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
reflects 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 and 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 use assumption for oil
price of US$ 62 per barrel for FY2019 (March 2017: US$ 58 per
barrel) and scales upto the long-term nominal price of US$ 65 per
barrel over the next 3 years thereafter (March 2017: US$ 70 per
barrel) derived from a consensus of various analyst
recommendations. Thereafter, these have been escalated at a rate of
2.5% per annum (March 2017: 2.5% per annum). The cash flows are
discounted using the post-tax nominal discount rate of 10.1% (March
2017: 10.2%) derived from the post-tax weighted average cost of
capital after factoring in the risks ascribed to PSC extension
including successful implementation of key growth projects. Based
on the sensitivities carried out by the Group, change in crude
price assumptions by US$ 1/bbl and changes to discount rate by 0.5%
would lead to a change in recoverable value by US$ 64 million and
US$ 53 million respectively.
b) Impairment charge of US$ 17.1 million representing the
carrying value of assets relating to exploratory wells in Block
PR-OSN-2004/1 which has been relinquished during the year.
During the year ended 31 March 2017, the Group has recognized
net impairment reversal of US$12.6 million relating to Rajasthan
block net of the charge in relation to change in the
decommissioning liability due to change in discount rate in the
previous year. Of this net reversal US$ 63.0 million charge has
been recorded against oil and gas properties and US$ 75.6 million
reversal has been recorded against exploratory and evaluation
assets.
4. During the year ended 31 March 2018, the Group has recognized
an impairment charge of US$ 758.5 million as against the net
carrying value of US$ 865.0 million on its iron ore assets in Goa
in the iron ore segment. Pursuant to an order passed by the Hon'ble
Supreme Court of India on 07 February 2018, the second renewal of
the mining leases granted by the State of Goa in 2014-15 to all
miners including Vedanta were cancelled. Consequentially all mining
operations stopped with effect from 16 March 2018 until fresh
mining leases (not fresh renewals or other renewals) and fresh
environmental clearances are granted in accordance with the
provisions of The Mines and Minerals (Development and Regulation)
(MMDR) Act.
Significant uncertainty exists over the resumption of mining at
Goa under the current leases. The Group has assessed the
recoverable value of all its assets and liabilities associated with
existing mining leases which led to a non-cash impairment charge in
March 2018. The recoverable value of the mining reserve (grouped
under 'mining property and leases') has been assessed as Nil, as
there is no reasonable certainty towards re-award of these mining
leases. Similarly, upon consideration of past precedence, the
provision for restoration and rehabilitation with respect to these
mines has been assessed as Nil, as the Group believes that the same
would be carried out by the future successful bidder at the time of
mine closure. The net recoverable value of other assets and
liabilities has been assessed at US$ 114.0 million based on the
fair value less cost of sales methodology using a level 3 valuation
technique. The fair value was determined based on the estimated
selling price of the individual assets using depreciated
replacement cost method.
5. During the year ended 31 March 2018, the Group has recognised
a loss of US$ 39.0 million relating to certain items of capital
work-in-progress at the aluminium operations, which are no longer
expected to be used.
During the year ended 31 March 2017, the Group has recognised US
$ 29.9 million impairment charge relating to certain old items of
capital work-in-progress at the Alumina refinery operations.
6. a) During the year ended 31 March 2018, the Group has
recognised US $ 90.6 million loss as financing costs arising on the
bond buybacks completed during the year. Similarly, during the year
ended 31 March 2017, the Group has reclassified US $ 41.6 million
as special item under finance cost arising on the bond buybacks
completed during the year then ended.
b) Charge pursuant to unfavourable arbitration order- US$ 17.6
million (Vedanta Limited: Contractor claim)
7. On 28 December 2017, the Group through its wholly owned
subsidiary, acquired 51.6% equity stake in AvanStrate Inc. (ASI)
for a cash consideration of JPY 1 million ($ 0.01 million) and
acquired debts for JPY 17,058 million ($ 150.8 million) and
incurred acquisition expenses of US$ 7.0 million. Additionally, a
loan of JPY 814.8 million ($7.2 million) was extended to ASI. The
transaction has been accounted for on a provisional basis in the
financial statements under IFRS 3 and the resultant bargain
purchase gain, net of US$ 7.0 million of acquisition expenses, has
been recorded in the income statement.
7. Investment revenue
(US$ million)
Year ended Year ended
31 March 31 March
2018 2017
------------------------------------------- ----------- -----------
Fair value gain on financial assets
held for trading 258.1 483.5
Interest Income:
Interest - financial assets held for
trading 108.5 87.3
Interest - bank deposits 21.0 26.5
Interest - loans and receivables 71.6 48.3
Dividend Income:
Dividend - available for sale investments - 0.1
Dividend - financial assets held for 4.0 -
trading
Foreign exchange gain/(loss) (net) 1.9 (3.1)
465.1 642.6
------------------------------------------- ----------- -----------
8. Finance costs
(US$ million)
Year ended Year ended
31 March 31 March
2018 2017
---------------------------------------------- ----------- -----------
Interest on bonds and other borrowings 1,203.8 1,210.0
Coupon interest on convertible bonds - 15.5
Accretive Interest on convertible bonds - 3.1
Other borrowing and finance costs (including
bank charges) 172.0 186.3
Total interest cost 1,375.8 1,414.9
Unwinding of discount on provisions 13.0 13.0
Net interest on defined benefit arrangements 7.9 12.4
Special items (note 6) 108.2 41.6
Capitalisation of finance costs/borrowing
costs (54.1) (99.7)
1,450.8 1,382.2
---------------------------------------------- ----------- -----------
All borrowing costs are capitalised using rates based on
specific borrowings with the interest rate of 8.1% per annum.
9. Other gains and (losses) (net)
(US$ million)
Year ended Year ended
31 March 31 March
2018 2017
----------------------------------------------- ----------- -----------
Gross foreign exchange (losses) (11.0) (16.4)
Qualifying exchange losses capitalised - 1.9
----------- -----------
Net foreign exchange (losses) (11.0) (14.5)
Change in fair value of financial liabilities
measured at fair value (1.1) (0.4)
Net (loss)/ gain arising on qualifying
hedges and non-qualifying hedges 11.1 (8.9)
Bargain gain net of acquisition cost (note 5.3 -
6)
----------------------------------------------- ----------- -----------
4.3 (23.8)
----------------------------------------------- ----------- -----------
10. Tax
(US$ million)
Year ended Year ended
31 March 31 March
2018 2017
--------------------------------------- ----------- -----------
Current tax:
Current Tax on profit for the year 515.6 589.5
Charge/(credit) in respect of current
tax for earlier years 6.1 (1.5)
Total current tax 521.7 588.0
---------------------------------------- ----------- -----------
Deferred tax:
--------------------------------------- ----------- -----------
Origination and reversal of temporary
differences 140.0 (83.0)
Charge in respect of deferred tax for
earlier years 13.0 (9.6)
Charge in respect of Special items
(note 6) 338.5 4.9
Total deferred tax 491.5 (87.7)
---------------------------------------- ----------- -----------
Net tax expense 1013.2 500.3
---------------------------------------- ----------- -----------
Effective tax rate 40.8% 36.2%
---------------------------------------- ----------- -----------
Tax expense
(US$ million)
Year ended Year ended
31 March 31 March
2018 2017
------------------------------------ ----------- -----------
Tax effect of special items (note
6) 338.5 4.9
Tax expense - others 674.7 495.4
------------------------------------- ----------- -----------
Net tax expense 1,013.2 500.3
------------------------------------- ----------- -----------
A reconciliation of income tax expense applicable to accounting
profit/ (loss) before tax at the Indian statutory income tax rate
to income tax expense/ (credit) at the Group's effective income tax
rate for the year ended 31 March 2018 is as follows. Given majority
of the Group's operations are located in India, the reconciliation
has been carried out from Indian statutory income tax rate.
(US$ million)
Year ended Year ended
31 March 31 March
2018 2017
------------------------------------------------- ----------- -----------
Accounting profit before tax 2,482.1 1,379.9
------------------------------------------------- ----------- -----------
Indian statutory income tax rate 34.608% 34.608%
Tax at local statutory income tax rate 859.0 477.6
Disallowable expenses 21.0 58.0
Non-taxable income (37.4) (96.5)
Tax holidays and similar exemptions (157.5) (204.8)
Effect of tax rates differences of subsidiaries
operating in other jurisdictions 72.9 76.1
Dividend distribution tax 62.7 244.5
Unrecognized tax assets (net) 165.2 149.2
Changes in deferred tax balances due to 11.5 -
change in income tax rate from 34.608%
to 34.944%
Capital Gains subject to lower tax rate (11.8) (68.0)
Investment allowances - (74.7)
Charge/(credit) in respect of previous
years 19.1 (11.1)
Others 8.5 (50.0)
------------------------------------------------- ----------- -----------
Total 1,013.2 500.3
------------------------------------------------- ----------- -----------
Certain businesses of the Group within India are eligible for
specified tax incentives which are included in the table above as
tax holidays and similar 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 for 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).
In the current year, Haridwar and Pantnagar units are eligible for
deduction at 30% of taxable profits.
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 8.4 Giga Watts
(GW) of thermal based power generation facilities and wind power
capacity of 274 Mega Watts (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 (where such benefits
have been drawn), Talwandi Sabo Power Limited, Vedanta Limited and
Bharat Aluminium Company Limited (where no benefit has been
drawn).
The Group operates a zinc refinery in Export Processing Zone,
Namibia which has been granted tax exempt status by the Namibian
government.
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$157.5 million for the year ended 31 March 2018 (31 March 2017:
US$204.8 million).
11. Earnings/ (loss) per share
Basic earnings/ loss per share amounts are calculated by
dividing net profit/ loss for the year attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the year.
Weighted average number of treasury shares, 24,373,820 (2017 :
24,347,664) outstanding during the year are excluded from the total
outstanding shares for the calculation of EPS.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
parent (after adjusting for the impact of share options issued by
the subsidiary) by the weighted average number of ordinary shares
outstanding during the year (adjusted for the effects of dilutive
options). The following reflects the income and share data used in
the basic and diluted earnings per share computations:
(US$ million)
Year ended Year ended
31 March 31 March
2018 2017
------------------------------------------ ----------- -----------
Net profit/(loss) attributable to equity
holders of the parent 235.6 (22.7)
------------------------------------------ ----------- -----------
Earnings/ (Loss) per share based on profit/ (loss) for the
year
(US$ million except as stated)
Year ended Year ended
31 March 31 March
2018 2017
-------------------------------------------- ----------- -----------
Profit/(Loss) for the year attributable
to equity holders of the parent 235.6 (22.7)
Weighted average number of shares of the
Company in issue (million) 277.7 277.3
-------------------------------------------- ----------- -----------
Earnings/(Loss) per share on profit/(loss)
for the year (US cents per share) 84.8 (8.2)
-------------------------------------------- ----------- -----------
Computation of adjusted weighted average number of shares
Year ended Year ended
31 March 31 March
2018 2017
--------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for basic earnings per share (million) 277.7 277.3
Effect of dilution :
Potential ordinary shares relating to share
option awards 4.7 5.0
Adjusted weighted average number of shares
of the Company in issue (million) 282.4 282.3
--------------------------------------------- ----------- -----------
Computation of adjusted profit/(loss) attributable to equity
holders of the parent
Year ended Year ended
31 March 31 March
2018 2017
-------------------------------------------------- ----------- -----------
Profit/(Loss) for the year attributable
to equity holders of the parent 235.6 (22.7)
Effect of dilution :
Reduction in attributable profit on account (1.8)
of stock options of subsidiary -
Adjusted profit/(Loss) for the year attributable
to equity holders of the parent (US$ million) 233.8 (22.7)
-------------------------------------------------- ----------- -----------
Diluted earnings/ (loss) per share on profit/ (loss) for the
year
(US$ million except as stated)
Year ended Year ended
31 March 31 March
2018 2017
-------------------------------------------------- ----------- -----------
Adjusted profit/(loss) for the year attributable
to equity holders of the parent 233.8 (22.7)
Adjusted weighted average number of shares
of the Company in issue (million) 282.4 277.3
-------------------------------------------------- ----------- -----------
Diluted earnings/(loss) per share on profit/
(loss) for the year (US cents per share) 82.8 (8.2)
-------------------------------------------------- ----------- -----------
The outstanding awards of 4.7 million as at 31 March 2018 under
the LTIP are reflected in the diluted earnings per share through an
increased number of weighted average shares.
For the year ended 31 March 2017, the effect of 5.0 million
potential ordinary shares, which relate to share option awards
under the LTIP scheme, on the attributable loss for the year was
anti-dilutive and thus these shares were not considered in
determining diluted loss per share.
The loss for the previous year would have decreased if holders
of the convertible bonds in Vedanta had exercised their right to
convert their bond holdings into Vedanta equity as this conversion
would have lowered interest payable on the convertible bond. The
adjustment in respect of the convertible bonds had an anti-dilutive
impact on the number of shares and earnings/ loss and thus diluted
EPS is not disclosed.
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
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 2018 2017
----------------------------------------------- ----- ----------- -----------
Profit/(Loss) for the year attributable
to equity holders of the parent 235.6 (22.7)
Special items 6 (580.1) 58.9
Other gains/(losses) [net] 9 1.0 23.8
Tax and non-controlling interest effect
of special items (including taxes classified
as special items) and other gains/ (losses)
[net] 505.3 (15.4)
----------------------------------------------- ----- ----------- -----------
Underlying attributable profit/ (loss)
for the year 161.8 44.6
----------------------------------------------- ----- ----------- -----------
Reduction in attributable profit on account (1.8) -
of stock options of subsidiary
----------------------------------------------- ----- ----------- -----------
Adjusted underlying profit for the year 160.0 44.6
----------------------------------------------- ----- ----------- -----------
Basic earnings per share on Underlying profit for the year
(Non-GAAP)
(US$ million except as stated)
Year ended Year ended
31 March 31 March
2018 2017
-------------------------------------------------- ----------- -----------
Underlying profit for the year 161.8 44.6
Weighted average number of shares of the Company
in issue (million) 277.7 277.3
-------------------------------------------------- ----------- -----------
Earnings/ (Loss) per share on Underlying profit
for the year (US cents per share) 58.3 16.1
-------------------------------------------------- ----------- -----------
Diluted earnings per share on Underlying profit for the year
(Non-GAAP)
(US$ million except as stated)
Year ended Year ended
31 March 31 March
2018 2017
-------------------------------------------------- ----------- -----------
Adjusted underlying profit for the year 160.0 44.6
Adjusted weighted average number of shares
of the Company in issue (million) 282.4 282.3
-------------------------------------------------- ----------- -----------
Diluted earnings/ (Loss) per share on Underlying
profit for the year (US cents per share) 56.7 15.8
-------------------------------------------------- ----------- -----------
The outstanding awards of 4.7 million under the LTIP (31 March
2017 : 5.0 million) are reflected in the diluted underlying
earnings per share through an increased number of weighted average
shares.
The profit for the previous year would have increased if holders
of the convertible bonds in Vedanta had exercised their right to
convert their bond holdings into Vedanta equity. The impact on
profit for the previous year of this conversion would have lowered
interest payable on the convertible bond. The adjustment in respect
of the convertible bonds had an anti-dilutive impact on the number
of shares and earnings/ loss and thus diluted EPS is not
disclosed.
12. Dividends
(US$ million)
Year ended Year ended
31 March 31 March
2018 2017
----------------------------------------------- ----------- -----------
Amounts recognised as distributions to equity
holders:
Equity dividends on ordinary shares:
Final dividend for 2016-17: 35.0 US cents per
share
(2015-16: 30.0 US cents per share) 96.9 82.4
Interim dividend paid during the year: 24.0
US cents per share
(2016-17: 20.0 US cents per share) 67.5 55.1
----------------------------------------------- ----------- -----------
Proposed for approval at AGM
Equity dividends on ordinary shares:
Final dividend for 2017-18: 41.0 US cents per
share
(2016-17: 35.0 US cents per share) 114.6 96.9
----------------------------------------------- ----------- -----------
13. Liquid investments
(US$ million)
As at As at
31 March 31 March 2017
2018
------------------- ---------- ---------------
Bank deposits(1) 482.5 882.6
Other investments 4,325.3 7,160.4
------------------- ---------- ---------------
4,807.8 8,043.0
------------------- ---------- ---------------
(1) Includes US$48.7 million of restricted bank deposits for
closure costs/ for securing banking facilities. The amount in the
prior year relates to US$59.0 million of bank deposits for securing
banking facilities. It also includes US$ 8.9 million of restricted
bank deposits maintained as debt service reserve account (31 March
2017: US$ 7.9 million).
Bank deposits are made for periods of between three months and
one year depending on the cash requirements of the companies within
the Group and earn interest at the respective fixed deposit
rates.
Other investments include mutual fund investments and investment
in bonds which are held for trading and recorded at fair value with
changes in fair value reported through the income statement. These
investments do not qualify for recognition as cash and cash
equivalents due to their maturity period and risk of change in
value of the investments.
14. Cash and cash equivalents
(US$ million)
As at As at
31 March 31 March 2017
2018
------------------------------------------ ---------- ---------------
Cash and cash equivalents consist of the
following
Cash at bank and in hand 604.8 1,323.7
Short-term deposits 158.3 185.3
Restricted cash and cash equivalents(1) 35.6 173.2
Total 798.7 1,682.2
------------------------------------------ ---------- ---------------
(1) Restricted cash and cash equivalents includes US$35.6
million (31 March 2017: US$156.0 million) kept in a specified bank
account to be utilized solely for the purposes of payment of
dividends to non-controlling shareholders, which is being carried
as a current liability. Of the same, US$21.8 million (31 March
2017: US$99.0 million) has been utilized to pay dividends to the
non-controlling shareholder subsequent to the Balance Sheet date.
Restricted cash and cash equivalents as at 31 March 2017 further
includes US$17.2 million kept in short term deposits under lien,
which can be utilized by the Group for the repayment of bills of
exchange facilities against which these have been pledged as
security.
Short-term deposits are made for periods of between one day and
three months, depending on the immediate cash requirements of the
Group, and earn interest at the respective short-term deposit
rates.
15. Borrowings
(US$ million)
As at As at
31 March 31 March
2018 2017
----------------------------------------------- ---------- ----------
Short-term borrowings consist of:
Banks and financial institutions 3,606.7 5,587.9
Current portion of medium and long-term
borrowings 1,853.6 2,070.6
Short-term borrowings (A) 5,460.3 7,658.5
Medium and long-term borrowings consist
of:
Banks and financial institutions 5,892.0 6,595.5
Bonds 3,360.1 3,457.6
Non-convertible debentures 1,779.2 2,109.1
Preference shares 462.8 464.2
Other 93.0 14.4
Medium and Long-term borrowings 11,587.1 12,640.8
Less: Current portion of medium and long-term
borrowings (1,853.6) (2,070.6)
Medium and Long-term borrowings, net of
current portion (B) 9,733.5 10,570.2
Total (A+B) 15,193.8 18,228.7
----------------------------------------------- ---------- ----------
16. Movement in net debt(1)
(US$ million)
Debt due
within
one year Debt due after one year
-----------
Total cash
Cash and and Debt Debt
cash Liquid liquid carrying carrying Debt-related Total Net
equivalents investments investments value value derivatives(2) Debt
------------- ------------- ------------- ------------- -----------
At 1 April
2016 428.3 8,508.2 8,936.5 (4,313.8) (11,949.5) (2.0) (7,328.8)
Cash flow 1,187.2 (921.5) 265.7 74.1 (1,144.6) - (804.8)
Other
non-cash
changes (3) - 321.0 321.0 (3,266.6) 2,643.4 2.0 (300.2)
Foreign
exchange
currency
translation
differences 66.7 135.3 202.0 (152.2) (119.5) - (69.7)
------------- ------------- ------------- ------------- ------------- ------------- --------------- -----------
At 1 April
2017 1,682.2 8,043.0 9,725.2 (7,658.5) (10,570.2) - (8,503.5)
------------- ------------- ------------- ------------- ------------- ------------- --------------- -----------
Cash flow (923.2) (3,441.5) (4,364.7) 3,859.2 (694.8) - (1,200.3)
Net debt on
acquisition
through
business
combination 23.6 - 23.6 - (98.7) - (75.1)
Other
non-cash
changes(3) - 208.8 208.8 (1,668.6) 1627.5 - 167.7
Foreign
exchange
currency
translation
differences 16.1 (2.5) 13.6 7.6 2.7 - 23.9
------------- ------------- ------------- ------------- ------------- ------------- --------------- -----------
At 31 March
2018 798.7 4,807.8 5,606.5 (5,460.3) (9,733.5) - (9,587.3)
------------- ------------- ------------- ------------- ------------- ------------- --------------- -----------
(1) Net debt is a Non IFRS measure and represents total debt
after fair value adjustments under IAS 32 and 39 as reduced by cash
and cash equivalents and liquid investments.
(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 interest accretion on
convertible bonds, amortisation of borrowing costs, foreign
exchange difference on net debt and preference shares issued on
merger and reclassification between debt due within one year and
debt due after one year. It also includes US$208.8 million (31
March 2017: US$321.0 million) of fair value movement in investments
and accrued interest on investments.
Other information:
Alternative performance measures
Introduction
Vedanta Group is committed to providing timely and clear
information on financial and operational performance to investors,
lenders and other external parties, in the form of annual reports,
disclosures, RNS feeds and other communications. We regard high
standards of disclosure as critical to business success.
Alternative Performance Measure (APM) is an evaluation metric of
financial performance, financial position or cash flows that is not
defined or specified under International Financial Reporting
Standards (IFRS).
The APMs used by the group fall under two categories:
n Financial APMs: These financial metrics are usually derived
from financial statements, prepared in accordance with IFRS.
Certain financials metrics cannot be directly derived from the
financial statements as they contain additional information such as
profit estimates or projections, impact of macro-economic factors
and changes in regulatory environment on financial performance.
n Non-Financial APMs: These metrics incorporate non - financial
information that management believes is useful in assessing the
performance of the group.
APMs are not uniformly defined by all the companies, including
those in the Group's industry. APM's should be considered in
addition to, and not a substitute for or as superior to, measures
of financial performance, financial position or cash flows reported
in accordance with IFRS.
Purpose
The Group uses APMs to improve comparability of information
between reporting periods and business units, either by adjusting
for uncontrollable or one-off factors which impacts upon IFRS
measures or, by aggregating measures, to aid the user of the Annual
Report in understanding the activity taking place across the
Group's portfolio.
APMs are used to provide valuable insight to analysts and
investors along with Generally Accepted Accounting Practices
(GAAP). We believe these measures assist in providing a holistic
view of the company's performance.
Alternative performance measures (APMs) are denoted by where
applicable.
Closest equivalent Adjustments to reconcile to
APM terminology* IFRS measure primary statements
---------------- -------------------------- ----------------------------------------
EBITDA Operating profit/(loss) Operating Profit/(Loss) before
before special items special items Add: Depreciation
& Amortisation
---------------- -------------------------- ----------------------------------------
EBITDA margin No direct equivalent Not applicable
(%)
---------------- -------------------------- ----------------------------------------
Adjusted revenue Revenue Revenue
Less: revenue of custom smelting
operations at our Copper & Zinc
business
---------------- -------------------------- ----------------------------------------
Adjusted EBITDA Operating profit/(loss) EBITDA
before special items Less:
EBITDA of custom smelting operations
at our Copper & Zinc business
---------------- -------------------------- ----------------------------------------
Adjusted EBITDA No direct equivalent Not applicable
margin
---------------- -------------------------- ----------------------------------------
Underlying Attributable Profit/(loss) Attributable profit/(loss) before
profit/(loss) before special items special items
Less: NCI share in other gains/(losses)
(net of tax)
---------------- -------------------------- ----------------------------------------
Underlying Basic earnings per Underlying attributable profit/(loss)
earnings per share before special divided by weighted avg. no.
share items of shares of the company in
issue
---------------- -------------------------- ----------------------------------------
Project Capex Expenditure on Property, Gross Addition to PPE
Plant and Equipment Less: Gross disposals to PPE
(PPE) Add: Accumulated Depreciation
on disposals
Less: Decommissioning liability
Less: Sustaining Capex
---------------- -------------------------- ----------------------------------------
Free cash flow Net cash flow from Net Cash flow from operating
operating activities activities Less: purchases of
property, plant and equipment
and intangibles less proceeds
on disposal of property, plant
and equipment
Add: Dividend paid and dividend
distribution tax paid
Add/less: Other non-cash adjustments
---------------- -------------------------- ----------------------------------------
Net debt Borrowings and debt No Adjustments
related derivatives
Less: cash and cash
equivalents and liquid
investment
---------------- -------------------------- ----------------------------------------
ROCE No direct Equivalent Not Applicable
---------------- -------------------------- ----------------------------------------
* Glossary and definition section includes further description as relevant.
ROCE for FY2018 is calculated based on the working summarised
below. The same method is used to calculate the ROCE for all
previous years (stated at other places in the report).
Year ended
31 March
Particulars 2018
--------------------------------------- -----------
Operating Profit Before Special Items 2,781
Less: Cash Tax Outflow (498)
Return on Capital Employed (a) 2,283
Opening Capital Employed (b) 14,518
Closing Capital Employed (c) 16,108
Average Capital Employed (d)= (a+b)/2 15,313
ROCE (a)/(d) 14.9%
---------------------------------------- -----------
GLOSSARY AND DEFINITIONS
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 at 3.00 pm, UK time, on 13 August 2018
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
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 Sustainability, each with its own terms of
reference
Businesses
The Aluminium Business, the Copper Business, the Zinc, lead,
silver, Iron ore, Power and Oil & Gas Business together
Cairn India
Erstwhile Cairn India Limited and its subsidiaries
Capital Employed
Net assets before Net (Debt)/Cash
Capex
Capital expenditure
CEO
Chief executive officer
CFO
Chief Financial Officer
CII
Confederation of Indian Industries
CO2
Carbon dioxide
CMT
Copper Mines of Tasmania Pty Limited, a company incorporated in
Australia
Company or Vedanta
Vedanta Resources plc
Company financial statements
The audited financial statements for the Company for the year
ended 31 March 2018 as defined in the Independent Auditors' Report
on the individual Company Financial Statements to the members of
Vedanta Resources plc
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
Copper India
Copper Division of Vedanta Limited comprising of a copper
smelter, two refineries and two copper rod plants in India.
Cents/lb
US cents per pound
CRRI
Central Road Research Institute
CRISIL
CRISIL Limited (A S&P Subsidiary) is a rating agency
incorporated in India
CSR
Corporate social responsibility
CTC
Cost to company, the basic remuneration of executives, which
represents an aggregate figure encompassing basic pay, pension
contributions and allowances
CY
Calendar year
DDT
Dividend distribution tax
Deferred Shares
Deferred shares of GBP1.00 each in the Company
DFS
Detailed feasibility study
DGMS
Director General of Mine Safety in the Government of India
Directors
The Directors of the Company
DMF
District Mineral Fund
DMT
Dry metric tonne
Dollar or $
United States Dollars, the currency of the United States of
America
EAC
Expert advisory committee
EBITDA
EBITDA is a non-IFRS measure and represents earnings before
special items, depreciation, amortisation, other gains and losses,
interest and tax.
EBITDA Margin
EBITDA as a percentage of turnover
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 Chief Executive Officer
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 2018 as defined in the
Independent Auditor's Report to the members of Vedanta Resources
plc
FY
Financial year i.e. April to March.
GAAP, including UK 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
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
HIIP
Hydrocarbons initially-in place
HSE
Health, safety and environment
HZL
Hindustan Zinc Limited, a company incorporated in India
IAS
International Accounting Standards
IFRIC
IFRS Interpretations Committee
IFRS
International Financial Reporting Standards
INR
Indian Rupees
Interest cover
EBITDA divided by gross finance costs (including capitalised
interest) excluding accretive interest on convertible bonds,
unwinding of discount on provisions, interest on defined benefit
arrangements less investment revenue
IPP
Independent power plant
Iron Ore Sesa
Iron ore Division of Vedanta Limited, comprising of a Iron ore
mines in Goa and Karnataka 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
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
KPI s
Key performance indicators
KTPA
Thousand tonnes per annum
Kwh
Kilo-watt hour
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
MBA
Mangala, Bhagyam, Aishwarya oil fields in Rajasthan
MIC
Metal in concentrate
MOEF
The Ministry of Environment, Forests and Climate change 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, liquid investments and debt related
derivative
NGO
Non-governmental organisation
Non-executive Directors
The Non-Executive Directors of the Company
Oil & Gas business
Oil & Gas division of Vedanta Limited, is involved in the
business of exploration, development and production of Oil &
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
OPEC
Organisation of the Petroleum Exporting Countries
PBT
Profit before tax
PPE
Property plant and 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.
PSP
The Vedanta Resources Performance Share Plan
Recycled water
Water released during mining or processing and then used in
operational activities
Relationship Agreement
The agreement between the Company, Volcan Investments Limited
and members of the Agarwal family which had originally been entered
into at the time of the Company's listing in 2003 and was
subsequently amended in 2011 and 2014 to regulate 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
Operating profit before special items net of tax outflow, as a
ratio of average capital employed
RO
Reverse osmosis
Senior Management Group
For the purpose of the remuneration report, the key operational
and functional heads within the Group
SEWT
Sterlite Employee Welfare Trust, a long-term investment plan for
Sterlite senior management
SHGs
Self help groups
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 (refer Note
2(A) (III) special items of accounting policies)
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
TGT
Tail gas treatment
TLP
Tail Leaching Plant
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
Twin Star
Twin Star Holdings Limited, a company incorporated in
Mauritius
Twin Star Holdings Group
Twin Star and its subsidiaries and associated undertaking
US cents
United States cents
UK CORPORATE GOVERNANCE CODE OR THE CODE
The UK Corporate Governance Code 2014 issued by the Financial
Reporting Council
Vedanta Limited (formerly known as Sesa Sterlite Limited/ Sesa
Goa Limited)
Vedanta Limited, a company incorporated in India engaged in the
business of Oil & Gas exploration and production, copper
smelting, Iron Ore mining, Alumina & Aluminium production and
Energy generation.
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
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
[1] Operations at Tuticorin Smelter halted due to pending
renewal of its consent to operate
[2] Reduction expectations are calculated on GHG/tonne of
product to ensure that non-production related factors such as
change in prices do not influence the GHG numbers and as a result
they are a reflection of actual efficiency gains in the system
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR PGUUWAUPRPWP
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May 23, 2018 02:01 ET (06:01 GMT)
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