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Transcript of VEDANTA RESOURCES PLC - should not be relied upon as a recommendation or forecast by Vedanta...

  • VEDANTA RESOURCES PLC Interim Results Presentation for the half year ended 30 September 2013

    15 NOVEMBER 2013

  • Cautionary Statement and Disclaimer

    The views expressed here may contain information derived from publicly available sources that have not been

    independently verified.

    No representation or warranty is made as to the accuracy, completeness, reasonableness or reliability of this

    information. Any forward looking information in this presentation including, without limitation, any tables, charts

    and/or graphs, has been prepared on the basis of a number of assumptions which may prove to be incorrect. This

    presentation should not be relied upon as a recommendation or forecast by Vedanta Resources plc ("Vedanta").

    Past performance of Vedanta cannot be relied upon as a guide to future performance.

    This presentation 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,' 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 environmental, climatic, natural,

    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.

    This presentation is not intended, and does not, constitute or form part of any offer, invitation or the solicitation of

    an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities in Vedanta or any

    of its subsidiary undertakings or any other invitation or inducement to engage in investment activities, nor shall

    this presentation (or any part of it) nor the fact of its distribution form the basis of, or be relied on in connection

    with, any contract or investment decision.

    2FY2014 INTERIM RESULTS PRESENTATION - 15 NOVEMBER 2013

  • Chairman’s

    Remarks

    Anil Agarwal

    Executive Chairman

  • Overview

    Navin Agarwal

    Deputy Executive

    Chairman

  • H1 FY2014 Highlights

    Corporate

    � Sesa Sterlite merger completed

    Financial

    � EBITDA of $2.2bn, EBITDA margin 45%1

    � Underlying Attributable Profit of $80mn2, Underlying EPS of $0.292

    � Free Cash Flow of $1.0bn3 (47% of EBITDA), Free Cash Flow after Growth Capex of $417mn

    � Net Debt reduced by c.$1.6bn over the last 18 months

    � Interim Dividend of 22 US cents per share, up 5%

    Operations

    � Record oil & gas production

    � Increased production of refined zinc, lead and silver at Zinc India

    � Continued strong performance at Aluminium

    � Managing cost performance despite industry-wide inflationary trends

    5FY2014 INTERIM RESULTS PRESENTATION - 15 NOVEMBER 2013

    Note: 1. Excludes custom smelting at Copper and Zinc-India operations

    2. Based on profit for the half year after excluding special items and other gains and losses, and their resultant tax and minority interest effects

    3. Free Cash Flow before Growth Capex

  • Sesa Sterlite Merger Completed

    � Simplified structure, cross-

    holdings eliminated

    � On track to achieve announced

    financial synergies

    � Evaluating further operational

    synergies

    � Better aligns cash flows and debt

    � Interest cost at Vedanta plc

    reduced from c.$500mn to

    c.$200mn p.a.

    6FY2014 INTERIM RESULTS PRESENTATION - 15 NOVEMBER 2013

    Konkola

    Copper

    Mines

    Vedanta Resources

    Sesa Sterlite

    58.3%79.4%

    HZL

    Zinc

    International

    Zinc-Lead- Silver

    India

    Liberia

    Iron OreOil & Gas

    Tuticorin

    CMT

    Copper

    BALCO

    Vedanta

    Aluminium

    Aluminium

    Jharsuguda

    BALCO

    MALCO

    Talwandi Sabo

    Power

    Listed on LSE

    Listed on NSE, BSE and NYSE

    Cairn India

  • Tier-1 Asset Portfolio

    FY2014 INTERIM RESULTS PRESENTATION - 15 NOVEMBER 2013

    Positioning R&R Life1

    H1 FY2014 Production Capacity2

    Oil & Gas India’s largest private-sector crude oil

    producer

    15 213kboepd 225+

    3

    kboepd

    Zinc India Largest integrated zinc producer

    25+ 459kt 1.2mtpa

    Zinc Intl. One of the largest undeveloped zinc

    deposits

    20+ 196kt 400ktpa

    Silver One of the largest silver producers

    25+ 6.0moz 16mozpa

    Iron Ore 4

    Largest private sector exporter in India,

    Large deposit in Liberia

    20+ - 5

    16.8mtpa

    Copper Zambia World class resource potential

    25+ 65kt 6

    400ktpa

    Aluminium Strategically located large-scale assets

    with integrated power

    395kt 2.3mtpa

    Notes

    1. Based on FY2013 production and R&R as at 31 March 2013; Iron ore is based on existing

    capacity; Zinc International includes Gamsberg deposit in R&R

    2. Includes announced expansions; Iron ore shown at existing EC capacity of 14.5mt in Goa and

    2.3mt provisional capacity in Karnataka

    3. Expected capacity for currently producing assets, subject to approvals

    4. Numbers excluding Liberia

    5. Iron Ore operations affected by mining restrictions in Karnataka and Goa

    6. Integrated Production

    Large, long-life, low-cost, scalable assets

    7

    Competitive Position on Cost Curve Quartiles

    I II III IV

    Zinc Intl.

    Oil & Gas

    Zinc India

    C o s t

    o f

    P r o d u

    c ti

    o n

    Cumulative Production

    Iron Ore

    Aluminium

    Copper Zambia

    Size of circle denotes EBITDA

    contribution

  • Positive Free Cash Flow post Growth Capex

    0

    500

    1,000

    1,500

    2,000

    2,500

    FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

    Zinc-Lead Silver Copper Aluminium

    Power Iron Ore Oil & Gas

    Production Growth (in Copper Equivalent kt)1

    Well-Invested Assets

    8FY2014 INTERIM RESULTS PRESENTATION - 15 NOVEMBER 2013

    Notes: 1. All metal and power capacities rebased to copper equivalent production (defined as production x commodity price / copper price) using commodity prices for H1 FY2014. Copper custom

    smelting capacities rebased at TC/RC for H1 FY2014.

    2. Free cash flow after sustaining capex and before growth capex

    0.0

    1.0

    2.0

    3.0

    4.0

    5.0

    FY09 FY10 FY11 FY12 FY13 H1 FY14

    Free Cash Flow² - H1 Free Cash Flow² - H2

    Growth Capex - H1 Growth Capex - H2

    Strong Free Cash Flows ($bn)

    Generating Significant Free Cash Flows

  • Consistent Margins driven by Diversification (EBITDA by Segment in $mn)

    Consistent and High Margins through the Cycle

    9FY2014 INTERIM RESULTS PRESENTATION - 15 NOVEMBER 2013

    Notes: 1. Excludes custom smelting at Copper and Zinc-India operations

    Industry-leading Margins

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    0

    500

    1,000

    1,500

    2,000

    2,500

    3,000

    3,500

    4,000

    4,500

    5,000

    FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 H1

    FY14

    Zinc Iron ore Copper

    Aluminium Power Oil & Gas

    EBITDA Margin %¹

    0%

    5%

    10%

    15%

    20%

    25%

    30%

    35%

    40%

    45%

    50%

    VED¹ Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7

    Cost Efficient Tier-1 Assets driving High Margins (EBITDA margin)

    Source: Bloomberg

    Peers are Anglo American, BHP Billiton, Freeport-McMoRan, Glencore Xstrata (Mining

    business), Rio Tinto, Teck and Vale.

  • Opportunities and Challenges

    10FY2014 INTERIM RESULTS PRESENTATION - 15 NOVEMBER 2013

    Group Structure � Sesa Sterlite Merger: Completed

    � Buyout of GoI’s stake in HZL and BALCO: Shareholder approval renewed

    Zinc � Mining Expansion: 1.2mtpa by FY2017

    Oil & Gas

    � 225+ kboepd by FY2014

    � GoI issued policy on Integrated Block Development

    � Re-commenced exploration in Rajasthan

    Iron Ore

    � Karnataka: Await final clearance

    � Goa: Supreme Court’s interim order permits sales of inventory

    � Liberia: Phased approach, 1st phase of 2mtpa under review

    Aluminium and

    Power

    � Power: Increase utilization of Jharsuguda 2,400MW; start-up Talwandi Sabo 1,980MW

    � Bauxite: Pursuing multiple options f