Vedanta Resources : HZL announces Q4 results

20 April 2015

Vedanta Resources plc
HZL announces Results for the Fourth Quarter Ended 31 March 2015

Operational Performance

§ Record mined metal production of 887kt

Financial Performance

§ EBITDA up 7% to Rs. 7,420 Crore, the highest ever

§ Net Profit up 18% to Rs. 8,178 Crore, the highest ever

Reserve & Resource

§ Total R&R of 375.1 million MT, a net addition of 10 million MT

Dividend

§ Final dividend of 125%, taking the total dividend for the year to 220%, the highest ever

§ Record mined metal production of 269kt - up 34% y-o-y

§ Record integrated zinc and lead metal production - up 21% and 14% y-o-y respectively

§ EBITDA up 14% to Rs. 1,978

§ Net Profit up 6% to Rs. 1,997

Mumbai, April 20, 2015: Hindustan Zinc Limited today announced its results for the fourth quarter and full year ended March 31, 2015.

Mr. Agnivesh Agarwal, Chairman -

"In our golden jubilee year, we have delivered our best ever performance. The year witnessed favourable zinc market dynamics with falling mine surplus coupled with strong demand, which is likely to boost the price of zinc in coming years too. Another noteworthy event during the year was the enactment of new MMDRA Act 2015, which will bring greater transparency in granting of mineral concessions."

(In Rs. Crore, except as stated )

(1) Excluding captive consumption of 1,910 MT in Q4 FY 2015 and 7,755 MT in FY 2015 as compared with 1,991 MT and 7,262 MT in respective corresponding prior period.

(2) Excluding captive consumption of 9.9 MT in Q4 FY 2015 and 40.2 MT in FY 2015 as compared with 10.4 MT and 38.3 MT in respective corresponding prior period.

(3) Silver occurs in Lead & Zinc ore and is recovered in the smelting and silver-refining processes .

(4) Historical CoP has changed due to re-allocation of administrative expenses between zinc and lead.

Note: Numbers may not add up due to rounding off.

Integrated zinc and lead metal production during the quarter were record high due to higher feed availability and enhanced smelter utilization. Integrated refined zinc production was 217kt, up by 21% y-o-y and 13% sequentially. Production of integrated refined lead was up by 14% y-o-y at 33kt and up 33% sequentially. Integrated saleable silver production during the quarter was up 9% y-o-y and 6% sequentially at 74 MT on account of higher recovery.

The zinc metal cost of production per MT before royalty during the quarter was Rs. 50,831 ($820), lower by 8% from a year ago in dollar terms due to higher production volumes, lower diesel cost and higher acid credits, partly offset by higher landed coal cost and increased employee expense on account of long-term wage agreements signed in mid-year. For FY 2015, net zinc metal cost per MT before royalty was Rs. 53,228 ($870) as compared to Rs. 50,654 ($837) in previous year. The increase was primarily on account of long term wage agreement and higher landed coal cost, partly offset by higher acid realization and lower diesel cost.

The new MMDRA Act, notified towards the end of the financial year, brings greater transparency in granting of mineral concessions. It also removes uncertainties relating to mine lease renewals, providing continuity of all our mining leases. However for existing mining leases, it notifies an amount not exceeding royalty, to be contributed to District Mineral Foundation (DMF) for the benefit of people affected by mining and an additional amount equivalent to 2% of royalty to National Mineral Exploration Trust (NMET). While the exact percentage for DMF contribution has not been notified, it can potentially impact mining of low grade and deep ore bodies which will not be conducive to growth of mining in the country.

Revenues in Q4 FY 2015 were up 13% from a year ago to Rs. 4,073 Crore. The increase was driven by higher zinc sales & LME, partly offset by lower lead & silver prices and silver volumes. For the full year, revenues increased by 8% to Rs. 14,589 Crore primarily on account of higher zinc LME and sulphuric acid realization, partly offset by lower silver prices and lower zinc & silver sales.

The increase in revenue along with reduction in cost of production resulted in 14% y-o-y increase in EBITDA to Rs. 1,978 Crore in Q4. For the year, EBITDA was up 7% to Rs. 7,420 Crore primarily on account of higher revenue and was adversely impacted by higher royalty rates. Zinc royalty increased from 8.4% to 10% and lead royalty increased from 12.7% to 14.5%, w.e.f September 1, 2014. Royalty rates for zinc and lead in India are the highest in the world and much higher compared to other base metals. In addition, an amount equal to 35% of royalty was provided w.e.f January 12, 2015 for DMF (33%) and NMET (2%), even as notification for DMF contribution under the MMDRA Act is awaited.

With effect from April 1, 2014, the Company has revised the estimated useful lives of certain assets based on a technical study and evaluation of the useful life of the assets conducted in this regard and Management's assessment thereof. Consequently, the depreciation charge for the quarter and year ended March 2015 is lower by Rs. 180.5 Crore.

Net profit increased by 6% to Rs. 1,997 Crore in Q4 FY 2015 as compared Rs. 1,881 Crore in corresponding prior quarter. In FY 2015, net profit increased by 18% to Rs. 8,178 Crore accentuated by higher treasury income due to mark-to-market gains on account of fall in interest rates.

The Board of Directors has recommended a final dividend of 125% i.e. Rs. 2.50 per share on equity share of Rs 2.00 each. The total dividend for FY 2015 is 220% i.e. Rs. 4.40, the highest ever, against FY 2014 dividend of 175%. The pay-out ratio is 27% as compared to 25% in FY 2014, inclusive of dividend distribution tax.

The shaft sinking project at Sindesar Khurd is ahead of schedule with the main shaft sinking almost complete; having reached the depth of over 1 km of the planned depth of 1.05 km. Development of associated infrastructure is also progressing well and production from the shaft is planned to commence ahead of schedule, in later half of 2018.

The progress of underground shaft project at Rampura Agucha is behind schedule and has reached a depth of 650 metres of the planned depth of 950 metres. With the planned extension of the open cast mine, our overall production plan will be on track.

During the year, gross addition of 19.4 million MT were made to reserve and resource (R&R), prior to a depletion of 9.4 million MT, adding further to our R&R. Total R&R at March 31, 2015 were 375.1 million MT containing 35.3 million MT of zinc-lead metal and 970 Moz of silver. Overall mine life continues to be 25+ years.

We expect significant progress in terms of mine development and ore production from the underground mine projects. Rampura Agucha will continue to provide majority of mined metal in FY 2016, although overall production from this mine will be less than in FY 2015. The gap in production will be made up primarily by higher volumes from Sindesar Khurd

In FY 2016, mined metal production is expected to be higher from FY 2015, while integrated refined metal production, including silver, will be significantly higher as we will process the available mined metal inventory also.

The cost of production excluding royalty is expected to remain stable. There would be an additional outflow towards DMF and National Exploration Trust in accordance with the MMDRA Act 2015.

The Company's cash and cash equivalents increased by 6% from the end of Q3 FY 2015 and 21% from a year ago. As on March 31, 2015, cash and cash equivalents were Rs. 30,785 Crore, out of which Rs. 23,333 Crore was invested in mutual funds, Rs. 3,921 Crore in bonds and Rs. 3,502 Crore in fixed deposits. The Company follows a conservative investment policy and invests in high quality debt instruments.

The Company will hold an earnings conference call on Tuesday, April 21, 2015 at 11:00 am IST, where senior management will discuss the Company's results and performance. The dial in numbers for the call is given below:

Primary: +91 22 6746 5962 Secondary: +91 22 3960 0762

About Vedanta Resources

Vedanta Resources Plc ("Vedanta") is a London-listed diversified global resources company . The group produces aluminium, copper, zinc, lead, silver, iron ore, oil & gas and commercial energy. Vedanta has operations in India, Zambia, Namibia, South Africa, Ireland, Liberia, Australia and Sri Lanka. With an empowered talent pool globally, Vedanta places strong emphasis on partnering with all its stakeholders based on the core values of entrepreneurship, excellence, trust, inclusiveness and growth. For more information, please visitwww.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.