Vedanta Resources — FY2018 Earnings Presentation
46 slides from Vedanta Resources's earnings presentation, May 23, 2018
Slide 1: Channelling growth opportunities
Channelling Vedanta Resources Plc growth opportunities VEDANTA RESOURCES PLC-OIL&GAS|ZINC&SILVER|ALUMINIUM|POWER|IRONORE|COPPER I N V E S T O R P R E S E N T A T IO N May, 2018
Slide 2: Cautionary Statement and Disclaimer
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 forwa
Slide 3: Contents
Contents Section Presenter Page Overview Anil Agarwal, Executive Chairman 4 FY2018 Review Kuldip Kaura, CEO 6 Financial Update Arun Kumar, CFO 12 Growth Projects Kuldip Kaura, CEO 18 Appendix 29 VEDANTA RESOURCES PLC – FY2018 INVESTOR PRESENTATION 3
Slide 4: Overview
Overview Anil Agarwal Executive Chairman VEDANTA RESOURCES PLC OIL&GAS|ZINC&SILVER|ALUMINIUM| POWER|IRONORE|COPPER
Slide 5: Key Messages: Delivering Growth and Shareholder Returns
Key Messages: Delivering Growth and Shareholder Returns Operational excellence and asset optimisation Uniquely positioned to harness India’s resources potential and demand growth Delivering growth through brownfield projects Clear priorities for capital allocation and shareholder returns VEDANTA RES
Slide 6: FY2018 Review
FY2018 Review Kuldip Kaura Chief Executive Officer VEDANTA RESOURCES PLC OIL&GAS|ZINC&SILVER|ALUMINIUM| POWER|IRONORE|COPPER
Slide 7: Safety and Sustainability
Safety and Sustainability Safety LTIFR – (per million man-hours worked) • 9 fatalities in FY2018 0.83 • Workshops to validate & manage safety-related critical risks • 921,550 hours in safety training 0.55 0.54 0.46 0.50 • British Safety Council “Sword of Honour” for Sterlite Copper & 0.39 “5-Star Ra
Slide 8: Key Messages - FY 2018
Key Messages - FY 2018 Solid Operational Operational Excellence Strong Financials Delivering on Growth Performance • Record annual • EBITDA of $4,051mn • Zinc India on track • Vendor partnership production of (35% margin1) for ramp up to programme refined zinc-lead 1.2mt and silver at Zinc • FCF of
Slide 9: Business highlights
Business highlights Zinc India Zinc International O&G Aluminium FY18 Avg: 186 kboepd Aluminium: 1.7mt Refined Zn-Pb: 960kt BMM: 72kt Production FY18 Exit: 200 kboepd FY18 Exit: c.2.0mt Silver: 17.9 moz Skorpion: 84kt (Gross) Alumina: 1.2mt Costs CoP ex. royalty: $976/t CoP: $1,603/t RJ blended: $6.6
Slide 10: Business highlights (cont’d)
Business highlights (cont’d) Power Iron Ore & Steel Copper India Copper Zambia Power sales: 11,041MU Goa: 4.9mt Integrated: 84 kt Production Cathodes: 403 kt TSPL availability: 74% Karnataka: 2.2mt Custom: 111 kt TSPL margin: c. Re 1/unit CoP IOG: $27.6/t Costs CoP: 5.7c/lb CoP (ex royalty): 239c/lb
Slide 11: Delivering on our Strategic Priorities
Delivering on our Strategic Priorities Optimise Capital Augment our Operational Allocation & Maintain Reserves & Excellence Strong Balance Sheet Delivering on Resources base • Volume growth and Preserve our License • Improving cash flows Growth • Well developed asset optimisation to Operate Opportun
Slide 12: Financial Update
Financial Update Arun Kumar Chief Financial Officer VEDANTA RESOURCES PLC OIL&GAS|ZINC&SILVER|ALUMINIUM| POWER|IRONORE|COPPER
Slide 13: Financial snapshot
Financial snapshot EBITDA FCF post capex ND/EBITDA Gross Debt $ 4,051 mn $ 925 mn 2.4x $ 15,194 mn Up 27% y-o-y Strong FCF Improved over years Lower 17% y-o-y EBITDA Margin1 Attributable PAT2 ROCE3 Dividend 35% $ 163 mn 14.9% 65 USc/share Industry leading margin FY 2017 – $ 35 mn Up 210 bp Strong sh
Slide 14: EBITDA Bridge (FY2018 vs. FY2017)
EBITDA Bridge (FY2018 vs. FY2017) (In $ mn) Zinc & Lead 562 Zinc India 231 Aluminum 570 Aluminum 188 Brent 136 ZI 27 Copper 103 TSPL 11 Metal Premiums 26 Cairn (13) Iron ore (69) Iron-ore (42) Brent Discount (8) Power (47) KCM (54) Others (4) 1,320 646 297 28 4,051 99 16 3,782 3,191 Market & Regulat
Slide 15: Net Debt for FY2018
Net Debt for FY2018 (In $ mn) 1,887 9,587 8,503 2,629 590 1,163 122 7,110 49 Net Debt CF from WC Movements Capex Translation Net Debt WC Movement Dividends paid¹ Reported 1st Apr 17 Operations & Others 31st Mar 18 swaped with and ASI Net Debt borrowings Acquisition 31st Mar 18 Note 1: Special divide
Slide 16: Proactive Refinancing and Improving maturity profile
Proactive Refinancing and Improving maturity profile Maturity Profile of Term Debt ($11.3bn) (as of 31st Mar 2018) Debt at VED plc Term Debt at Subsidiaries 2.6 2.1 2.0 0.9 1.6 1.6 0.7 0.2 1.4 1.2 1.0 1.4 1.8 1.4 1.7 0.4 0.4 0.2 FY19 FY20 FY21 FY22 FY23 FY24 and later Debt numbers at face value; As
Slide 17: Capex at Attractive Returns
Capex at Attractive Returns Growth Capex Profile and Free Cash Flow pre capex - $bn Oil & Gas Zinc Al & Power Copper Optionality Capex Free Cash Flow (pre-capex) ROCE 3.4% 12.8% 14.9% 2.3 2.2 1.5 1.7 0.10 0.2 0.1 0.8 0.5 0.6 0.7 0.05 0.1 0.01 0.2 0.3 0.5 0.7 0.2 0.3 0.2 0.1 0.1 FY16 FY17 FY18 FY19e
Slide 18: Growth Projects
Growth Projects Kuldip Kaura Chief Executive Officer VEDANTA RESOURCES PLC OIL&GAS|ZINC&SILVER|ALUMINIUM| POWER|IRONORE|COPPER
Slide 19: India’s Growth Drives Resources Demand
India’s Growth Drives Resources Demand 6.0 trillion 3,979 40% Improving regulatory (2030) (2030) (2030) environment: Transparent 2.8 trillion (2018) 2,083 (2018) 34% (2018) auctioning and private GDP (real) Per capita income (real) Urbanisation ownership India’s demand potential 7.5kg 0.9 kg 1.5 b 1
Slide 20: High-return growth projects with further optionality
High-return growth projects with further optionality Current Near-term growth Medium-term growth Current update Zinc-lead production: • Phase – I with target of 1.35mt Zinc-lead production: c.1mt Zinc-lead production: 1.5mt Zinc India 1.2mt pa towards a ramp-up to 1.5mt Silver: 558t (17.9 moz) Silve
Slide 21: $2.3 billion Capex for Incremental 200 kboepd Peak Production
$2.3 billion Capex for Incremental 200 kboepd Peak Production Million barrels of oil equivalent 2P Reserves: 2009 465 74 539 Production: 2009-18 478 126 604 Reserves & Resources: 2018 97 35 176 375 580 1,263 Commercialised 683 RJ PSC 2020 (Base) Ravva, CB, etc. PSC Extension Growth Projects Yet to b
Slide 22: Growth Projects: Doubling the number of wells in Rajasthan
Growth Projects: Doubling the number of wells in Rajasthan • Doubling the production through gross capex investment of $2.3 bn over 2-3 years to monetize 375 mmboe • Increasing wells in Rajasthan from 500+ to 900+ • 9 development drilling rigs - 4 rigs at site, 3 rigs to be added in May and 2 rigs i
Slide 23: Exploration: Creating Sustainable Stakeholder Value
Exploration: Creating Sustainable Stakeholder Value Gross Capex of over $ 100m for exploration & appraisal in FY19 Onshore Exploration • Rajasthan Exploration (300-600 mmboe of resources) 7-18 E&A wells drilling to commence in Aug 2018 • Rajasthan Tight Oil Appraisal (190 mmboe of resources) App
Slide 24: Aluminium: Ramp-up on track, Focus on Costs
Aluminium: Ramp-up on track, Focus on Costs Cost Focus Cost of production ($/t) Alumina 1,887 1,725-1,775* • Ramp-up alumina production (FY19: 1.5-1.6mt) 1,463 409 1,500 • Step change in local bauxite sourcing 301 • Diversify imported alumina sourcing 697 580 Coal • Improve linkage realization and i
Slide 25: Copper Zambia: Turnaround underway
Copper Zambia: Turnaround underway Value based contracting • Transition to a long term contractor-partnering model; fully in place by Q2 FY2019 • Focus on improving equipment availability ‒ OEMs for supervision and provision of new trackless fleets ‒ Planned maintenance through skilled O&M Companies
Slide 26: Zinc India: Vision of 1.5mtpa MIC capacity
Zinc India: Vision of 1.5mtpa MIC capacity Roadmap to Phase-I of 1.35mtpa Zinc – Lead – Silver FY18 FY20 FY21 Rampura Agucha UG 2.1 4.5 5.0 1.5 mt 1,500 t (48 moz) Sindesar Khurd 4.6 6.0 6.5 Zawar 2.2 4.5 5.7 Rajpura Dariba 0.9 1.5 2.0 1.2 mt + 800 t (26 moz) Kayad 1.2 1.2 1.2 Total ore capacity mtp
Slide 27: Zinc International: Gamsberg Expansion
Zinc International: Gamsberg Expansion Production (kt) • Reserve and Resource of 215mt (16mt Zinc) 450-500 ‒ Potential to ramp up to 600ktpa • Phase 1 : On track for first production in middle 2018 250 ‒ Ramp up to 250kt by FY2020 • Potential Phase 2 : Mine design for open pit completed ‒ Addition o
Slide 28: Key Investment Highlights
Key Investment Highlights 1 2 Large & diversified asset base with an Ideally positioned to capitalise on attractive commodity mix India’s growth potential 3 4 Operational Excellence and Well-invested assets Technology Driving Efficiency and driving cash flow growth Sustainability 5 6 Strong Financia
Slide 29: Appendix
Appendix VEDANTA RESOURCES PLC OIL&GAS|ZINC&SILVER|ALUMINIUM| POWER|IRONORE|COPPER
Slide 30: FY 2019 Guidance
FY 2019 Guidance Segment FY19 Production FY19 CoP Zinc India Zinc-Lead Integrated > FY18 production ; Silver: 650 - 700 tonnes (21 – 23 moz) $950-975/t excluding royalty Skorpion and BMM: 150kt ZI COP (excl Gamsberg) : $1,850 - 1,950 Zinc International Gamsberg: 100kt Gamsberg: $1,000 - $1,150/t Oil
Slide 31: Income Statement
Income Statement Depreciation & Amortization $mn or as stated FY18 FY17 • Higher primarily on account of higher capitalisation at Aluminium and power business, higher charge at Oil & EBITDA 4,051 3,191 Gas due to change in depreciation method based on Depreciation & amortisation (1,271) (1,031) prov
Slide 32: Special Items - FY 2018
Special Items - FY 2018 1. Net impairment reversal of $689 mn ($344 mn net of taxes) in FY 2018 Oil & Gas business: • Reversal of previously recorded impairment charge of $1,464 mn ($888 mn net of taxes) partly offset by $17 mn ($11 mn net of taxes) relating to exploratory well (palar) written off i
Slide 33: Project Capex
Project Capex Capex5 Spent up to Mar Unspent as at Capex in Progress Status ($mn) 2017 6 Spent in FY2018 31 Mar’18 7 Cairn India – Mangala Infill, Liquid handling, 1,863 56 127 1,680 Bhagyam & Aishwariya EOR, Tight Oil & Gas etc Aluminium Sector BALCO – Korba-II 325ktpa Smelter and Smelter: fully op
Slide 34: Segment-wise Summary
Segment-wise Summary Oil & Gas FY18 FY17 Zinc-India FY18 FY17 Average Daily Gross Operated Mined Metal (kt) 947 907 Production (boepd) 185,587 189,926 Refined Zinc – Integrated (kt) 791 6724 Rajasthan 157,983 161,571 Refined Lead – Integrated (kt)1 168 139 Ravva 17,195 18,602 Saleable Silver – Integ
Slide 35: Segment-wise Summary (cont’d)
Segment-wise Summary (cont’d) Copper-Zambia FY18 FY17 Aluminium FY18 FY17 Mined Metal (kt) 91 94 Aluminium Production (kt) 1,675 1,213 Finished Metal – Total (kt) 195 180 Jharsuguda I - 500kt 440 525 Integrated (kt) 84 96 Jharsuguda II - 1,250kt1 666 261 Custom Smelting (kt) 111 84 Korba-I 245kt 259
Slide 36: Segment-wise Summary (cont’d)
Segment-wise Summary (cont’d) Power FY2018 FY2017 Iron Ore and Pig Iron FY2018 FY2017 Power Sales (million units) 11,041 12,916 Sales (mt) 7.6 10.2 Jharsuguda 600MW 1,172 3,328 Goa 5.4 7.4 BALCO 600MW 1,536 2,609 Karnataka 2.2 2.7 MALCO 100MW3 4 190 Production (mt) 7.1 10.9 Talwandi Sabo 1980MW 7,91
Slide 37: Segment-wise Summary (cont’d)
Segment-wise Summary (cont’d) Power Generation Capacity – c. 9GW IPP: 3.6GW CPP:5.1GW • 600MW Jharsuguda • 1,215MW Jharsuguda (of 2400MW plant) • 3*600MW Jharsuguda • 1,980MW TSPL (of 2400MW plant) • 2*300MW BALCO • 540MW BALCO 41% (of 1200MW plant) • 270MW BALCO • 274MW HZL Wind Power • 2*300MW BAL
Slide 38: Segment-wise Summary (cont’d)
Segment-wise Summary (cont’d) Aluminium Profitability, $/t Q3 FY18 2,102 94 53 2,249 (782) (750) (413) (80) $224/t (126) (237) (139) Q4 FY18 109 56 2,323 (856) 2,158 (703) (410) (57) (274) 297 (244) (221) LME Ingot Value Total Alumina Power Other Hot Conversion EBITDA Dep Int PBT Premium Addition Re
Slide 39: Entity Wise Cash and Debt
Entity Wise Cash and Debt Net Debt Summary ($ mn) 31 Mar 2018 31 Mar 2017 Company Debt Cash & LI Net Debt Debt Cash & LI Net Debt Vedanta Plc1 5,877 122 5,755 6,173 17 6,156 KCM 376 1 375 554 1 553 Vedanta Limited Standalone 6,259 1,096 5,163 7,177 356 6,821 Cairn India Holdings Limited2 426 791 (36
Slide 40: Entity-wise Financials
Entity-wise Financials FY2018 VED Ltd VED Plc VED Ltd ($mn or as stated) KCM Plc Cos Elim stand- CIHL1 HZL ZI BALCO TS Others2 Consol Consol alone Group Revenue 15,359 1,283 - (102) 14,178 7,030 691 3,394 535 1,359 647 521 EBITDA 4,051 73 31 0 3,947 1,061 393 1,927 220 173 183 (10) Depreciation and
Slide 41: Debt Breakdown & Funding Sources
Debt Breakdown & Funding Sources Diversified Funding Sources for Term Debt of $11.3 bn Debt Breakdown (as of 31st Mar 2018) (as of 31st Mar 2018) Debt breakdown as of 31 March 2018 (in $bn) Bonds - USD Term debt 11.3 Bonds - INR 31% 30% Term Loans - INR Working capital 0.7 Term Loans-USD/Foreign Sho
Slide 42: Credit Metrics
Credit Metrics Covenant FY2017 FY2018 (Up to Mar 2018) Net Debt/EBITDA 2.7x 2.4x <3.25x EBITDA/Net Interest Expense1 3.9x 4.0x >3.25x Net Assets/Debt 1.42x 1.53x >1.20x • Several of our facilities initially had the covenants of Net Debt/EBITDA of <2.75x and EBITDA/Net Interest of >4.0x, as disclosed
Slide 43: Currency and Commodity Sensitivities
Currency and Commodity Sensitivities Foreign Currency - Impact of a 10% depreciation in FX Rate FY18 FY18 Currency Average FX rate EBITDA ($mn) INR/USD 64.44 246 Commodity prices – Impact of a 10% increase in Commodity Prices FY18 FY18 Commodity Average price EBITDA ($mn) Oil ($/bbl) 57 91 Zinc ($/t
Slide 44: Sales Summary
Sales Summary Sales volume FY18 FY17 Sales volume FY18 FY17 Zinc-India Sales Copper-India Sales Refined Zinc (kt) 793 696 Copper Cathodes (kt) 200 192 Refined Lead (kt) 169 138 Copper Rods (kt) 203 207 Zinc Concentrate (MIC) - 27 Sulphuric Acid (kt) 505 499 Lead Concentrate (MIC) - - Phosphoric Acid
Slide 45: Group Structure
Group Structure Vedanta Resources Plc Divisions of Vedanta Limited 79.4% 50.1% Sesa Iron Ore Sterlite Copper (Tuticorin) Konkola Power (600 MW Jharsuguda) Copper Vedanta Ltd Mines (KCM) Aluminium (Odisha aluminium and power assets) Cairn Oil & Gas* Subsidiaries of Vedanta Ltd 64.9% 51% 100
Slide 46: Results Conference Call Details
Results Conference Call Details Results conference call is scheduled at 9:00 AM (UK Time) on Wednesday, 23 May 2018. The dial-in numbers for the call are given below: Event Telephone Number Toll free: 0 808 101 1573 UK – 9:00 AM (UK Time) Other: +44 20 3478 5524 Toll free: 1800 120 1221 India – 1:30