20th Mar 2015 07:51
LONDON (Alliance News) - Vedanta Resources PLC Friday said it has cut its 2015 capital expenditure budget by USD400 million and halved its budget for 2016 in order to reach its desired gearing of 25% and to ensure it can maintain a "progressive dividend policy".
The mining company said it has slashed its capital expenditure budget for 2015 to USD1.5 billion from the previous USD1.9 billion budget, while its capital expenditure budget for 2016 has been halved to USD1.0 billion from USD2.0 billion.
"The group has revised its capital expenditure plans in order to optimise free cash flow against the backdrop of the recent downturn in commodity prices," said the company. "Vedanta remains focused on delivering volume benefits, optimising operational and capital expenditure and consolidating its market positions."
It said the reduction in capital expenditure, combined with ongoing cost reductions will contribute towards the company's target of achieving a gearing of 25% in the medium term, whilst maintaining a progressive dividend policy, it said in a statement ahead of capital markets day in London.
"With a clear focus on operational excellence, Vedanta will continue to carry out productivity improvements, and reduce operating costs. Specifically, Vedanta is undertaking an exercise to drive significant savings and efficiencies in its procurement and marketing spend. This includes over USD800 million of underlying savings in procurement and more than USD500 million of additional value from marketing the products to a broader selection of customers and markets over the next four years," said the company.
Vedanta is aiming to increase copper equivalent production from its assets by 59% in the near-term.
Vedanta also highlighted that India "continues to provide significant opportunities" and remains a "major resource market". The company currently has five subsidiaries operating in India focusing on copper, zinc, aluminium, iron ore, power and Cairn India Ltd which focuses on oil and gas and is currently subject to legal issues.
Vedanta Resources said last Friday that its subsidiary, Cairn India, is facing a substantial tax order from the Indian Income Tax Department in relation to the fiscal year 2006 to 2007. Vedanta and Cairn India said on March 13 that the total demand is for around USD3.27 billion, but Vedanta has not stated how this will directly affect the company.
At the beginning of March, Cairn India, in which Vedanta holds a 59.8% stake, slashed its capital expenditure budget to USD500 million from USD1.2 billion due to the fall in oil prices since the middle of 2014 after deferring some spending into 2016.
However, Vedanta said Friday India has substantial reserves with a favourable regulatory and investment environment, and said it is fully committed to creating further investment in the country.
"Vedanta's diversified and well-invested asset base, low cost of production and exposure to the fast - growing Indian market puts us in a strong position to manage the volatility in the commodity markets," said Chief Executive Tom Albanese.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
Vedanta Resources