Vedanta (VEDL) Q4 15/16 earnings summary

Executive summary

• FY 2015-16 delivered resilient operating performance amid weak commodity prices, supported by cost reductions, record production across several businesses and disciplined capital spending.

• Revenue was ₹63,931 crore and EBITDA ₹15,012 crore; attributable PAT before exceptional items was ₹2,910 crore, while reported consolidated results included a ₹9,323 crore attributable loss after exceptional items.

• Free cash flow after growth capex reached ₹11,572 crore and net debt fell ₹6,254 crore; cash and cash equivalents were ₹52,666 crore in the reported highlights.

Financial highlights

• Revenue fell 13% YoY to ₹63,931 crore and EBITDA declined 33% to ₹15,012 crore, mainly reflecting lower Brent and metal prices; EBITDA margin was 30%, excluding custom smelting.

• Attributable PAT before exceptional items was ₹2,910 crore versus ₹5,097 crore in FY 2014-15; underlying EPS was ₹9.81 versus ₹17.19.

• Consolidated exceptional items totaled ₹12,452 crore, principally including ₹10,074 crore of non-cash oil and gas acquisition-goodwill impairment; consolidated attributable loss was ₹9,323 crore.

• Free cash flow after growth capex was ₹11,572 crore; capex was optimized to US$0.6bn and cost/marketing initiatives delivered US$250mn in savings.

• Finance costs were ₹5,704 crore; blended borrowing cost declined 32 bps YoY to 7.9%, while CRISIL downgraded the rating to AA-/Negative.

Outlook and guidance

• FY 2016-17 capex was expected at ~US$1bn, with half allocated across Gamsberg and Zinc India projects; focus remained on reducing net debt and sustaining free cash flow.

• Oil and gas production in Rajasthan was expected broadly at FY 2015-16 levels; capex was reduced to ~US$100mn, with 80% for development and 20% for exploration.

• Aluminium volumes were expected at 1.2mt in FY 2016-17, with hot-metal cost targeted below US$1,400/t; ramp-up depended partly on bauxite sourcing and smelter commissioning.

• Zinc India expected mined-metal output marginally above FY 2015-16, stable refined integrated zinc production and stable cost excluding royalties; underground mines were expected to supply ~60% of mined metal.

• Zinc International expected FY 2016-17 production of 170–190kt and cost of US$1,200–1,300/t; Gamsberg first ore was planned for 2018, followed by a 9–12 month ramp-up.