Vedanta Resources plc

Vedanta Resources — H1 FY2018 Earnings Presentation

57 slides from Vedanta Resources's earnings presentation, Nov 10, 2017

  1. Slide 1: FY2018 Interim Results and Capital Markets Day

    Vedanta Resources Plc FY2018 Interim Results and Capital Markets Day Delivering Growth and Shareholder Returns 10 November 2017 VEDANTA RESOURCES PLC – ZINC–LEAD–SILVER | OIL & GAS | ALUMINIUM | COPPER | IRON ORE | POWER VEDANTA RESOURCES PLC – FY2018 INTERIM RESULTS AND CAPITAL MARKETS DAY

  2. 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

  3. Slide 3: Contents & Agenda

    Contents & Agenda Time (GMT) Section Presenter Page 0900hrs Overview Anil Agarwal – Executive Chairman 4 Strategy Update Kuldip Kaura – CEO 9 Exploration Scott Caithness – Head of Exploration 21 Financial Update Ashwin Bajaj – Head of Investor Relations 24 Kuldip Kaura – CEO H1 Business Review 31 St

  4. Slide 4: Overview

    Vedanta Resources Plc FY2018 Interim Results and Capital Markets Day Overview Anil Agarwal - Executive Chairman 10 November 2017 VEDANTA RESOURCES PLC – ZINC–LEAD–SILVER | OIL & GAS | ALUMINIUM | COPPER | IRON ORE | POWER VEDANTA RESOURCES PLC – FY2018 INTERIM RESULTS AND CAPITAL MARKETS DAY

  5. Slide 5: Key Messages: Delivering Growth and Shareholder Returns

    Key Messages: Delivering Growth and Shareholder Returns Consistent and successful strategy Clear priorities for capital allocation and shareholder returns Uniquely positioned to harness India’s resources potential and demand growth Delivering profitable capacity growth in attractive commodities VEDA

  6. Slide 6: India's Secular Growth Drives Resources Demand

    India’s Secular Growth Drives Resources Demand Aluminium consumption 2017 2030 (kg/capita) 24.4 8.4 GDP 2.6 6.0 130% 1.6 (real terms) trillion trillion India Global China Zinc consumption Per capita (kg/capita) 5.0 income $1,959 $3,979 103% (real terms) 1.9 0.5 India Global China Population 1.3bn 1.

  7. Slide 7: Strong Track Record of Shareholder Returns

    Strong Track Record of Shareholder Returns Since IPO in 2003 16% CAGR 242% Production Cu eq. Growth1 Total Shareholder Returns2 $27bn 14 years Cumulative Free Cash Flow Annual Dividends Pre-Growth Capex Generated 1. All commodity and power capacities rebased to copper equivalent capacity (defined as

  8. Slide 8: Vedanta Group – Our Values

    Vedanta Group – Our 7 Values Shareholder INNOVATION returns VEDANTA RESOURCES PLC – FY2018 INTERIM RESULTS AND CAPITAL MARKETS DAY 8

  9. Slide 9: Strategy Update

    Vedanta Resources Plc FY2018 Interim Results and Capital Markets Day Strategy Update Kuldip Kaura - Chief Executive Officer 10 November 2017 VEDANTA RESOURCES PLC – ZINC–LEAD–SILVER | OIL & GAS | ALUMINIUM | COPPER | IRON ORE | POWER VEDANTA RESOURCES PLC – FY2018 INTERIM RESULTS AND CAPITAL MARKETS

  10. Slide 10: Safety first: Focussed on Building a Zero Harm Culture

    Safety first: Focussed on Building a Zero Harm Culture LTIFR - Lost Time Injury Frequency Rate  Regrettably, 4 fatalities during H1 FY18; detailed (Number of lost time injuries per million man-hours worked)1 investigations completed and interventions are in progress under direction of Executive Com

  11. Slide 11: H1 FY2018 Results Highlights

    H1 FY2018 Results Highlights Operations: Record volumes with ramp-up on track EBITDA mix (H1 FY2018)  High zinc-lead & record silver volume in Q2 at Zinc India 7% Zinc 4%  Gamsberg on track for mid CY18 production Oil & Gas  Aluminium smelters continue ramp up; current run-rate 9% of 1.6mtpa Alum

  12. Slide 12: Vedanta Investment Case

    Vedanta Investment Case 1 2 Large, low cost and Attractive commodity mix diversified asset base 6 3 Ideally positioned to Shareholder Proven track record capitalise on India’s growth returns potential 5 4 Well-invested assets driving Strong financial profile industry leading growth VEDANTA RESOURCES

  13. Slide 13: Diversified Portfolio in Commodities with Strong Demand Growth

    Diversified Portfolio in Commodities with Strong Demand Growth Global demand CAGR 2017-30E Aluminium 2.8% O&G India 2.2% 89% of Vedanta Group’s H1 FY2018 EBITDA Lead 2.2% Zinc 2.0% Nickel 1.6% Group EBITDA Mix (H1 FY18) Copper 1.5% 7% Zinc 4% Met Coal 0.9% Oil & Gas 9% Thermal 0.6% Coal Aluminium 56

  14. Slide 14: Industry Leading Growth and Track Record of Delivery

    Industry Leading Growth and Track Record of Delivery Total Production (copper equivalent mt)1 2017E – 2019E (copper equivalent mt) production CAGR2 1.8 9% 7.8% 1.6 1.4 6% 1.2 3% 1.0 0% 0.8 (1.0)% 0.6 (3)% (2.5)% (2.7)% 0.4 (6)% (5.1)% 0.2 (6.0)% 0.0 (9)% (8.7)% FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY1

  15. Slide 15: Capital Allocation Framework: Focus on Shareholder Returns

    Capital Allocation Framework: Focus on Shareholder Returns World class assets and operational excellence to deliver strong and sustainable cash flows Production growth and asset optimization Strong Maintain Grow Shareholder Returns Strong Balance Sheet Existing Businesses VEDANTA RESOURCES PLC – FY2

  16. Slide 16: Strategic Framework

    Strategic Framework Near Term Priority Medium Term Priority (FY18-20) (FY20+) Deliver Selectively pursue growth Ramp up to Design Capacity superior options shareholders  Well-invested assets ramping  High quality portfolio with up by FY2020 to deliver attractive brownfield growth returns with indu

  17. Slide 17: Strategic Framework: Ramp-up to Design Capacity

    Strategic Framework: Ramp-up to Design Capacity Remaining Total expanded Near-term expansions capex, $mn1 capacity Zinc  Expansion to 1.2mt mined Zn-Pb metal 1.2mt Zn-Pb 603 India  Silver to 24mn oz 24mn oz Ag Zinc  Gamsberg project (250kt) and Skorpion pit 270 400kt International extension  Var

  18. Slide 18: Strategic Framework: Selectively Pursue Growth Options

    Strategic Framework: Selectively Pursue Growth Options Future growth options Zinc  Expansion to Zn-Pb to 1.5mtpa India  Silver production of 32mn oz.+ Zinc  Gamsberg Phase 2 & 3 (350kt incremental) Intl.  Swartberg (75kt)  300-500 kboepd Oil & Gas  Accompanied by continued exploration Aluminiu

  19. Slide 19: Operational Excellence and Technology Driving Efficiency and Safety

    Operational Excellence and Technology Driving Efficiency and Safety Operational excellence First quartile Process and Value Sustainability cost position innovation creation Technology and digitalisation Digitisation and automation Worlds Largest Collision Awareness System at SK mine continuously hea

  20. Slide 20: Sustainable Development: Key Achievements

    Sustainable Development: Key Achievements 16MW solar projects set up on waste land in Udaipur Biodiversity Management Plan at Gamsberg, S. Africa Target of 115MW in the short term Focus to minimise environmental footprint Drinking water initiative at Barmer, Cairn Ranking by the Dow Jones Sustainabi

  21. Slide 21: Exploration

    Vedanta Resources Plc FY2018 Interim Results and Capital Markets Day Exploration Scott Caithness - Head of Exploration 10 November 2017 VEDANTA RESOURCES PLC – ZINC–LEAD–SILVER | OIL & GAS | ALUMINIUM | COPPER | IRON ORE | POWER VEDANTA RESOURCES PLC – FY2018 INTERIM RESULTS AND CAPITAL MARKETS DAY

  22. Slide 22: Exploration: Objective, Approach & Track Record

    Exploration: Objective, Approach & Track Record Objective:  Grow R&R through brownfield & greenfield exploration to sustain growth opportunities Approach  Identify, secure projects for execution by dedicated teams  Utilise global leading exploration technologies &  Access specialist expertise di

  23. Slide 23: Strong Exploration Opportunities

    Strong Exploration Opportunities Current contained Target R&R and Exploration Focus metal R&R 36mt  Targeting 60mt Zinc – India (Zn and Pb)  Focus: Zawar, Kayad, Sindesar Khurd and Bamnia Kalan 32kt Ag  Potential to double R&R Zinc Intl. 23mt (Zn)  Focus: Gamsberg, Swartberg, Big Syn and Skorpio

  24. Slide 24: Financial Update

    Vedanta Resources Plc FY2018 Interim Results and Capital Markets Day Financial Update Ashwin Bajaj - Head of Investor Relations 10 November 2017 VEDANTA RESOURCES PLC – ZINC–LEAD–SILVER | OIL & GAS | ALUMINIUM | COPPER | IRON ORE | POWER VEDANTA RESOURCES PLC – FY2018 INTERIM RESULTS AND CAPITAL MAR

  25. Slide 25: Strong EBITDA Growth

    Strong EBITDA Growth  EBITDA higher 37% y-o-y, driven by higher production volumes and commodity prices, partially offset by input raw material inflation  Gross Debt1 reduced by $2.0bn in H1 FY2018; Proactive refinancing of $1.84bn at Vedanta Plc completed in August 2017 $mn or as stated H1 FY18 H

  26. Slide 26: EBITDA Bridge

    EBITDA Bridge H1 FY18 vs. H1 FY17 ($mn) Zinc 313 Al 256 Zinc 187 Copper 50 Al 56 Brent 38 INR (48) Oil & Gas (25) Brent Disc 5 Kwacha (13) Power and Others (30) IO (58) ZAR (12) 604 188 1,694 1,580 6 (43) (31) (175) (73) (15) 1,233 Market & Regulatory Operational $347mn $145mn H1 FY17 LME, Brent Inp

  27. Slide 27: Income Statement

    Income Statement Depreciation & amortisation $mn or as stated H1 FY18 H1 FY17  Higher on account of capitalisation at Aluminum & Power EBITDA 1,694 1,233 business, higher production at Zinc India partly offset by Depreciation & amortisation (526) (513) lower volume at Cairn & Copper Zambia EBIT 1,1

  28. Slide 28: Vedanta Plc Maturity Enhanced to >4 Years Along With Yield Improvement

    Vedanta Plc Maturity Enhanced to >4 Years Along With Yield Improvement Maturity Profile of Vedanta Plc Term Debt ($6.1bn) – No single large maturities over next 12-15 months 1.8 Mar 17 Sep 17 1.5 1.4 1.3 1.1 1.0 1.0 0.9 0.5 0.5 0.4 0.4 0.3 0.1 0.1 - FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 Debt numbe

  29. Slide 29: Optimising Capex to Drive Cash Flow Generation

    Optimising Capex to Drive Cash Flow Generation  Prioritised capital to high-return, low-risk projects to Growth Capex Profile and Free Cash Flow pre capex $bn maximise cash flows Oil & Gas Zinc Al & Power Copper Optionality Capex Free Cash Flow (pre-capex)  H1 Capex spent $0.3bn, H2 FY2018 expecte

  30. Slide 30: Capital Allocation Framework: Focus on Shareholder Returns

    Capital Allocation Framework: Focus on Shareholder Returns World class assets and operational excellence to deliver strong and sustainable cash flows Production growth and asset optimization Strong Shareholder Returns Maintain Strong Balance Sheet Grow Existing Businesses  Dividend policies at:  C

  31. Slide 31: H1 Business Review

    Vedanta Resources Plc FY2018 Interim Results and Capital Markets Day H1 Business Review Kuldip Kaura - Chief Executive Officer Steven Din – CEO, Copper Zambia 10 November 2017 VEDANTA RESOURCES PLC – ZINC–LEAD–SILVER | OIL & GAS | ALUMINIUM | COPPER | IRON ORE | POWER VEDANTA RESOURCES PLC – FY2018

  32. Slide 32: Zinc India

    Zinc India H1 FY2018 Results  MIC at 452kt; refined zinc-lead production at 459kt  Refined silver production at 8.2mn ounces  CoP at $979/t; impacted by higher input commodity prices Projects – key highlights  Capacity expansion to 1.2mtpa MIC by FY2020 on track  RAM U/G mine main shaft service

  33. Slide 33: Zinc International

    Zinc International H1 FY2018 Results Significant progress at 250kt Gamsberg project  Total production at 74kt  On target for first production by mid CY2018, with  Skorpion at 36kt, lower y-o-y mainly due to planned Production ramp-up to its full capacity in the next 9-12 acid plant shutdown in Q1

  34. Slide 34: Cairn: Oil & Gas

    Cairn: Oil & Gas MPT: Facility modifications H1 FY2018 Results  H1 FY2018 gross average production at 184,062 boepd  Rajasthan production at 156,278 boepd  Commenced 15 wells infill drilling campaign at Mangala with first well brought online in Sept 2017; 4 wells online currently  Aishwariya Bar

  35. Slide 35: Copper – Zambia

    Copper – Zambia H1 FY2018 Results Production (kt)  Higher integrated mined metal in H1 FY2018 vs H2 FY2017 due to: 32 32  Improved fleet availability at Konkola UG & Nchanga 27 open pit 25  Positive impact of OEM’s supervision 21 20  Improved dewatering efficiency and development 16 15 rates  I

  36. Slide 36: Copper – Zambia (contd.)

    Copper – Zambia (contd.) Regulatory Update KCM: One of world’s highest grade copper mines Top 25 producing copper mines by contained copper (mt)  Power supply situation has stabilised 140 Contained Cu in R&R  Backlog VAT receivable: continued engagement with 120 Zambia Revenue Authority 100 80 (mt

  37. Slide 37: Aluminium

    Aluminium H1 FY2018 Results Aluminium Costs and Margins  Record Aluminium production of 753kt and Alumina 572kt ($/t, for Q2 FY2018)  Aluminum CoP at $1,798/t, higher due to high power cost on Q1 18 1,909 98 62 2,070 (745) (607) (373) (72) $271/t (172) (339) (240) (718) account of coal shortages a

  38. Slide 38: Power

    Power Talwandi Sabo Power Limited (TSPL) Other IPPs  1,980 MW Thermal Power Plant (3 units of 660 MW  BALCO 600MW: H1 PLF of 47% on account of temporary each) coal shortage  Plant availability of 20% in Q1 and 87% in Q2; targeting  Jharsuguda 600MW: Low PLF of 26% due to shut down availability o

  39. Slide 39: Iron Ore and Copper India

    Iron Ore and Copper India Iron Ore Volumes:  Sales of 3mt and production of 4.5mt (Goa and Karnataka)  Volumes at Goa impacted by low pricing environment  Karnataka to achieve full allocation production in Q3  FY2018 production allocation: 5.5mtpa at Goa & 2.3mtpa at Karnataka  Engaged with res

  40. Slide 40: Copper India: 400kt Expansion

    Copper India: 400kt Expansion Business Case Project Details  Robust future for copper in India:  Incremental project cost of c.$576mn, excluding cost of  Per capita copper consumption of 0.5kg in India vs c.$141mn already invested 1.9kg globally  Project on hold since 2010 pending statutory  Gr

  41. Slide 41: Strategic Priorities

    Strategic Priorities Production Growth and Asset optimisation Optimise Capital Allocation and Maintain Strong Balance Sheet Protect and preserve our License to Operate Identify next generation of Resources VEDANTA RESOURCES PLC – FY2018 INTERIM RESULTS AND CAPITAL MARKETS DAY 41

  42. Slide 42: Q&A

    Vedanta Resources Plc FY2018 Interim Results and Capital Markets Day Q&A 10 November 2017 VEDANTA RESOURCES PLC – ZINC–LEAD–SILVER | OIL & GAS | ALUMINIUM | COPPER | IRON ORE | POWER VEDANTA RESOURCES PLC – FY2018 INTERIM RESULTS AND CAPITAL MARKETS DAY

  43. Slide 43: FY2018 Guidance

    FY2018 Guidance Segment FY18e Comments Earlier guidance on CoP for FY2018 was marginally Zinc-Lead Integrated: 950kt; Silver volume: +500 tonnes Zinc India higher than FY17 CoP. Revised guidance due to CoP ($/t): $900-950/t input commodity inflation Zinc-Lead volume: c.160kt Zinc International Gamsb

  44. Slide 44: Project Capex

    Project Capex Capex6 Spent upto7 Spent in Unspent as at Capex in Progress Status ($mn) Mar 17 H1 FY18 30 Sep 171 Cairn India – Mangala Infill, Liquid handling, 842* 56 22 764 Bhagyam & Aishwariya EOR, Tight Oil & Gas etc *(capex upto FY20) Aluminium Sector BALCO – Korba-II 325ktpa Smelter and 1,200M

  45. Slide 45: Segment-wise Summary

    Segment-wise Summary Oil & Gas H1 FY18 H1 FY17 Zinc-India H1 FY18 H1 FY17 Average Daily Gross Operated Mined Metal (kt) 452 318 Production (boepd) 184,062 196,629 Refined Zinc – Integrated (kt) 386 250 Rajasthan 156,278 167,323 Refined Lead – Integrated (kt)1 73 55 Ravva 17,810 19,228 Saleable Silve

  46. Slide 46: Segment-wise Summary (contd.)

    Segment-wise Summary (contd.) Copper-Zambia H1 FY18 H1 FY17 Aluminium H1 FY18 H1 FY17 Mined Metal (kt) 45 58 Aluminium Production (kt) 753 541 Finished Metal – Total (kt) 101 92 Jharsuguda I - 500kt 191 261 Integrated (kt) 43 55 Jharsuguda II - 1,250kt1 277 77 Custom Smelting (kt) 58 36 Korba-I 245k

  47. Slide 47: Segment-wise Summary (contd.)

    Segment-wise Summary (contd.) Power Iron Ore and Pig Iron H1 H1 H1 H1 FY2018 FY2017 FY2018 FY2017 Power Sales (million units) 4,787 6,039 Sales (mt) 3.0 3.4 Jharsuguda 600MW 657 1,497 Goa 2.0 2.4 BALCO 600MW 682 1,156 Karnataka 1.0 1.0 MALCO 100MW3 4 115 Production (mt) 4.5 4.7 Talwandi Sabo 1980MW

  48. Slide 48: Entity Wise Cash and Debt

    Entity Wise Cash and Debt Net Debt Summary ($mn) 30 Sep 2017 31 Mar 2017 30 Sep 2016 Company Debt Cash & LI Net Debt Debt Cash & LI Net Debt Debt Cash & LI Net Debt Vedanta plc1 6,116 15 6,101 6,173 17 6,156 6,145 19 6,126 KCM 467 9 458 554 1 553 642 1 641 Vedanta Ltd. Standalone 5,850 1,891 3,959 7

  49. Slide 49: Entity-wise Financials

    Entity-wise Financials H1 FY2018 VED Plc VED Ltd VED Ltd ($mn or as stated) Consol KCM Plc Cos Elim Consol stand-alone CIHL1 HZL ZI BALCO TS Others2 Elim Group Revenue 6,767 622 - (26) 6,171 2,990 320 1,521 257 588 242 458 (205) EBITDA 1,694 17 14 - 1,663 409 191 851 111 54 53 (6) - Depreciation and

  50. Slide 50: Debt Profile

    Debt Profile Diversified Funding Sources for Term Debt ($12.2bn) Debt Breakdown (as of 30 Sep 2017) (as of 30 Sep 2017) 1% Debt breakdown as of 30 Sep 2017 ($bn) Term debt 12.2 Bonds - USD Working capital 0.2 28% Bonds - INR Short term borrowing 2.1 31% Term Loan - INR Temporary short term borrowing

  51. Slide 51: Net Debt for H1 FY2018

    Net Debt for H1 FY2018 ($mn) 9,018 707 (1,080) 8,504 381 39 8,311 467 Free Cash Flow post Capex $232mn Net Debt Cash Flow from WC movement Capex FX translation Adjusted Net Debt Dividend¹ Reported Net Debt (1 Apr 2017) Operations & Others (30 Sep 2017) (30 Sept 2017) 1. Dividend includes special Div

  52. Slide 52: Maturity Profile

    Maturity Profile Maturity Profile of Term Debt ($12.2bn) (as of 30th Sep 2017) Debt at VED plc Term Debt at Subsidiaries 4.0 1.0 2.1 2.1 1.5 1.4 0.7 1.1 1.2 3.0 1.1 1.4 0.8 1.3 0.9 0.3 0.4 0.1 FY18 FY19 FY20 FY21 FY22 FY23 and later Debt numbers at face value; As of date, term debt of $12.2bn ($6.1b

  53. Slide 53: Credit Metrics

    Credit Metrics Covenant FY2017 H1 FY18 (Up to Sep 2017) Net Debt/EBITDA 2.7x 2.5x <3.75x EBITDA/Net Interest Expense1 4.0x 3.6x >3.00x Net Assets/Debt 1.42x 1.48x >1.40x Several of our facilities initially had the covenants of Net Debt/EBITDA of <2.75x and EBITDA/Net Interest of >4.0x, as disclosed

  54. Slide 54: Currency and Commodity Sensitivities

    Currency and Commodity Sensitivities Foreign Currency - Impact of a 10% depreciation in FX Rate H1 FY18 H1 FY18 Currency Average FX rate EBITDA ($mn) INR/USD 64.37 120 Commodity prices – Impact of a 10% increase in Commodity Prices H1 FY18 H1 FY18 Commodity Average price EBITDA ($mn) Oil ($/bbl) 51

  55. Slide 55: Sales Summary

    Sales Summary Sales volume H1 FY18 H1 FY17 Sales volume H1 FY18 H1 FY17 Iron-Ore Sales Zinc-India Sales Goa (mn DMT) 2.0 2.4 Refined Zinc (kt) 383 268 Karnataka (mn DMT) 1.0 1.0 Refined Lead (kt) 73 55 Total (mn DMT) 3.0 3.4 Zinc Concentrate (MIC) - - Pig Iron (kt) 288 370 Lead Concentrate (MIC) - -

  56. Slide 56: Group Structure

    Group Structure Vedanta Resources Plc Divisions of Vedanta Limited 79.4% 50.1%  Sesa Iron Ore  Sterlite Copper (Tuticorin) Konkola Copper Vedanta Ltd  Power (600MW Jharsuguda) Mines (KCM)  Aluminium (Odisha aluminium and power assets)  Cairn India (O&G)1 Subsidiaries of Vedanta Ltd 64.9% 51% 10

  57. Slide 57: Results and Capital Markets Day Webcast and Conference Call Details

    Results and Capital Markets Day Webcast and Conference Call Details Results conference call is scheduled at 9:00 AM (UK Time) on Friday, 10 November 2017 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

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