Vedanta (VEDL) Q4 18/19 earnings summary

Executive summary

• FY2019 delivered record production in underground zinc, lead, silver, aluminium, alumina, steel and power; revenue and EBITDA declined amid the Tuticorin shutdown, lower metal prices and input-cost inflation.

• Free cash flow post-capex rose 47% YoY to ₹11,553 crore; adjusted EBITDA margin was 30%, and net debt increased to ₹26,958 crore, mainly due to the ESL acquisition.

• Growth priorities for FY2020 include ramping up Gamsberg, zinc volumes and oil & gas production, while lowering aluminium costs and progressing exploration and development projects.

Financial highlights

• Consolidated revenue was ₹90,901 crore, down 1% YoY; EBITDA was ₹24,012 crore, down 4%, with adjusted EBITDA margin of 30% versus 35%.

• Profit after tax after exceptional items fell 29% to ₹9,698 crore; attributable PAT before exceptional items and DDT was ₹6,857 crore, down 15%.

• Basic EPS before exceptional items and DDT was ₹18.50, down 16%; total dividend was ₹18.85 per share, with ₹7,005 crore paid during FY2019.

• Free cash flow post-capex was ₹11,553 crore versus ₹7,880 crore; cash and liquid investments were ₹39,268 crore at year-end.

• Gross debt reached ₹66,226 crore and net debt ₹26,958 crore; increases reflected the ESL acquisition and temporary Zinc India borrowing.

Outlook and guidance

• FY2020 zinc India mined and finished metal production target: ~1.0mt; silver 750–800 tonnes; zinc production cost excluding royalty below US$1,000/tonne.

• FY2020 Oil & Gas production is expected at 200–220kboepd, with operating costs of ~US$7.5/boe; growth projects aim to progress toward 270–300kboepd.

• Aluminium FY2020 targets include Lanjigarh alumina of 1.7–1.8mt, stable smelter output and hot-metal cost of US$1,725–1,775/tonne.

• Zinc International targets 180–200kt from Gamsberg and over 170kt from Skorpion and BMM; steel hot-metal output is expected at ~1.5mtpa, with EBITDA margin of US$130–140/tonne.

• FY2020 growth agenda includes Gamsberg ramp-up, resumption efforts at Tuticorin and Goa, disciplined capex and projects stress-tested to deliver 20%+ returns on conservative price assumptions.