17th Nov 2005 07:03
Vedanta Resources PLC17 November 2005 November 17, 2005 Vedanta Resources plc Interim results for the six months ended 30 September 2005 Highlights • Financial Performance - Group Revenue up 104% to $1,384.6m and Group EBITDA up 110% to $336.5m, driven by better prices and strong volume growth - Operating profit up 114% to $258.2 million - Strong balance sheet with net assets of $1.9 billion and gearing of 20% - ROCE (excluding project capital work in progress) at 28% - Underlying EPS up 213% at 37.6 US cents - Interim dividend declared at 5.7 US cents per share • Operations - Production of all key metals significantly higher - Copper expansion fully ramped up ahead of schedule - Zinc expansion ramp up on schedule - Commissioning of new Korba aluminium smelter on track and contributing to half-year production (in US$ millions, except as stated)--------------------------------------------------------------------------------Consolidated Group Results H1 2006 H1 2005 Change (restated)*--------------------------------------------------------------------------------Revenue 1,384.6 677.4 104.4%EBITDA 336.5 159.9 110.4% EBITDA Margins 24.3% 23.6%Operating Profit 258.2 120.7 113.9%Attributable Profit 107.9 34.3 214.6%Basic Earnings per Share (in US cents) 37.6 12.0 213.3%ROCE (excluding project capital work in progress) 27.8% 26.4%Interim Dividend (US cents per share) 5.7 5.5--------------------------------------------------------------------------------(* Restated for the impact of adopting IFRS) "Vedanta has produced another strong set of results, demonstrating delivery onour strategy and the benefits of growth across all our metals." said AnilAgarwal, Executive Chairman, Vedanta Resources plc. "The next phase of ourgrowth strategy across all our businesses is now underway, and I look forward toreporting on further progress in the second half." For further information, please contact: Sumanth Cidambi Associate Director - Investor Relations [email protected] Resources plc Tel: +91 22 5646 1444 Faeth Birch Robin WalkerFinsbury Tel: +44 20 7251 3801 Executive Chairman's Statement This has been an important six month period in Vedanta's growth story. Grouprevenue and operating profit in the first half of this year have more thandoubled compared to the corresponding period last year, reflecting both theincreased volumes and improved prices across the Group's metals as well as thecontribution of KCM. Our 27.8% return on capital employed after excludingcapital work in progress is higher than the corresponding period last year. We have made excellent progress, both at existing operations, which areoperating at capacity and at the growth projects announced since our IPO. Ourzinc facilities in Chanderiya were commissioned in May 2005 and our recentlyexpanded copper smelter in Tuticorin is now operating at its full ratedcapacity. The expansion of our aluminium smelter at Korba and the new aluminarefinery at Lanjigarh are progressing on schedule and within budget. We arepleased that the Central Committee has submitted its recommendations. Thissubmission allows the approval process for the mine to move forward. We remainconfident in commissioning the Orissa Alumina refinery early in 2007. We havealso recently announced the $300 million 170,000 tpa zinc expansion atChanderiya, due early in 2008, as well as the $400 million KDMP expansion due in2009. We are also expanding the capacity of the Nkana smelter to 300,000 tpa byputting up a new primary smelting stream at a capital cost of $125 million tocater to the requirement of additional smelting of sulphide ore. These expansionprojects are an integral part of pursuing our goal as a world class metals andmining group. We seek continually to improve operational efficiencies and optimise theperformance of our assets and to drive down our total costs of production.Measures introduced in this regard have improved our controllable costs duringthe period, although, like many of our peer group, we have not been immune toexternal factors such as energy and fuel costs. Optimising our controllable costbase is essential to our goal of delivering strong financial returns. Given India's industrial growth and the consequent expanding domestic demand formetal, our growth projects continue to look attractive. There are also signs ofgrowth in other markets and we expect this to yield additional export-ledopportunities. In light of this environment, we are evaluating the developmentof a 500,000 tpa aluminium smelter at Jharsuguda in the state of Orissa. Whilst greenfield and brownfield projects have been central to our growth,another pillar of our strategy continues to be leveraging our established skillsthrough acquisition and KCM is a good example of this approach. KCM'scontribution to our results demonstrates our ability to integrate companies weacquire into the Vedanta fold. We have put a strong team of experiencedprofessionals into KCM, and are focusing on achieving operational efficienciesand process improvements. Vedanta has a long-standing turnaround track recordand the transfer of best practices from other parts of the Group shouldfacilitate achieving operational efficiencies in our Zambian operations. Weexpect these measures to result in higher output and lower costs in the secondhalf of the financial year. Our efforts continue with regard to the consolidation of our corporatestructure. For KCM, an independent expert has been commissioned by both partiesin relation to the exercise of our call option over a 28.4% stake in thatcompany, as required under the terms of that option. As previously stated, wealso aim to increase our economic interest in BALCO, but the process is takinglonger than we had originally anticipated. Vedanta's success would not be possible without our people. It is the energy ofour people that makes our work environment exciting and challenging. Our growthhas led us to put effective strategies in place to identify and develop talentacross our organisation. These initiatives include developing career options forour diverse workforce, cultivating cross-disciplinary competencies and offeringour managers challenging assignments and responsibility early on in theircareers. Our goal is to be regarded as an employer-of-choice in the metals andmining industry, enabling us to readily access talent pools in the geographiesin which we operate. We have created decentralised organisations at each of oursubsidiary entities whilst aligning them to the common group goals. This enablesthem to efficiently accelerate their decision-making cycles. Mr. Peter Sydney-Smith, our Group Finance Director left the Board in August andMr. D D Jalan has been appointed as our Group Chief Financial Officer. Looking ahead for the rest of the year, we continue to see solid and steadygrowth in the underlying demand for our metals. The additional volumes comingfrom our newly commissioned projects meet this strong demand. The prospects ofour outstanding project pipeline combined with the cost reduction and efficiencymeasures which we are implementing lead me to express a positive outlook for the remainder of the year. I look forward to reporting further progress in our businessat the year end. Anil AgarwalExecutive Chairman Operating and Finance Review Summary During the first half of the year, the Group has delivered further growth inRevenue and profitability. Compared with the first half of last year, Grouprevenue is up 104.4% to $1,384.6 million, Group EBITDA is up 110.4% to$336.5 million and operating profit is up 113.9% to $258.2 million. Attributableprofit was up 214.6% to $107.9 million and basic earnings per share (based onAttributable Profit) are 213.3% higher at 37.6 US cents. These results includethe full contribution from KCM for the six month period and reflect stronggrowth in production volumes in each of our key metals and a favourable priceenvironment. Like several of our peers we have experienced some upward pressureon account of fuel, coal prices and other input costs, but we have sought tomanage these costs closely to limit their impact on our profitability. Operatingconditions were fairly stable, and with the completion of the ramp-up of ournewly commissioned facilities in the second half of this financial year and thelower cost power increasingly becoming available from our captive power plants,we expect to see an appreciable reduction in our operating costs. Segmental Revenue and EBITDA are presented in the table below. (in US$ millions, except as stated)-------------------------------------------------------------------------------- H1 2006 H1 2005 (restated)*RevenueAluminium 155.8 122.8Copper India 596.5 316.8 Zambia 304.9Zinc 271.9 196.0Others 55.5 41.8 1,384.6 677.4 ========= ======= EBITDAAluminium 37.6 33.8Copper India / Australia 81.5 42.0 Zambia 90.3Zinc 124.0 84.0Others 3.1 0.1 336.5 159.9 ======= =======--------------------------------------------------------------------------------(* Restated for the impact of adopting IFRS) Production volumes We reported significant increases in production volumes across all the threemetals, in our production report release of 11 October 2005. The increase involumes comes largely from our newly commissioned facilities. Production ofcopper at KCM was marginally affected by an industrial action, which was quicklyresolved. Projects As the various projects that we have started since the IPO come on line, ourproduction volumes continue to ramp up significantly. The ramp up of our 120,000 tpa copper smelter at Tuticorin is now complete andis delivering to its rated capacity. A total of 121 pots out of 288 are now commissioned at our 250,000 tpa aluminiumexpansion at Korba together with three out of the four 135 MW power units of the540 MW captive power plant. The remaining power unit and pots are expected to becommissioned by December 2005 and March 2006, respectively as scheduled. The mine expansion at Rampura Agucha is complete and is performing at its ratedcapacity. The ramp up of the 170,000 tpa zinc smelter at Chanderiya isprogressing. The smelter ramp up at Chanderiya initially faced teething issuesthat have since been resolved. The project is expected to stabilise shortly andis likely to be fully ramped-up in the second half of the current financialyear. To cater for increasing Indian and global demand, a second 170,000 tpasmelter will be built at Chanderiya at a cost of $300 million. Preliminary workon this project in terms of ordering equipment has begun. This project isexpected to be completed by early 2008. We have also announced the $400 million KDMP expansion to increase the copperore output from the Konkola mine from 2 million tpa to 6 million tpa. Thisproject is due for completion in late 2009. We are expanding the capacity of ourNkana smelter to 300,000 tpa by putting up a primary smelting stream. Thisexpansion is expected to have a capital cost of $125 million and will cater tothe requirement of additional smelting of sulphide ore. This smelter is expectedto be completed by 2008. The detailed engineering for our proposed 1.4 million tpa alumina refinery atLanjigarh is largely complete and deliveries of major equipment and vessels areon schedule. Overall, construction at the alumina refinery is progressing well.Mechanical completion of the refinery is expected in mid 2006. In response tothe public interest submission, we are pleased that the Central Committee hassubmitted its recommendations. This submission allows the approval process forthe mine to move forward. We remain confident in commissioning the OrissaAlumina refinery early in 2007. Effective interest/minorities The Company has exercised its call option over the Indian government's 49% stakein BALCO and the completion of this process is taking longer than anticipated.An independent valuation process of the 28.4% stake owned by ZCI in KCM iscurrently underway to determine an exercise price for the group's call optionover that stake. The company has no obligation to purchase ZCI's stake, uponconclusion of the independent expert's work, expected by the end of December2005. Dividend The Board has recommended an interim dividend of 5.70 US cents per share. Thisis marginally higher than one third of last year's dividend of 17.05 US centsper share. In accordance with our dividend policy, the Board will pay an interimdividend which is one third of the previous year's full payment. Demand The Indian economy is currently demonstrating a GDP growth of around 8% per annum. Industrial production grew at around 9% per annum in the first half of financial 2006 accompanied by a robust growth of around 10% per annum in the manufacturing sector, during the same period, according to estimates by the Centre for Monitoring Indian Economy; and is expected to grow at this pace for the remainder of the year. Increased activity in the manufacturing sector, continuing liberalisation and a high rate of infrastructure growth in areas such as construction and power have lead to an increased demand for metals, which are likely to witness double digit growth rates. Outlook We believe that the additional volumes delivered through our projects combinedwith strong demand and a favourable price environment provides a positiveoutlook for the remainder of the financial year. Operating Review Aluminium (in US$ millions, except as stated)-------------------------------------------------------------------------------- H1 2006 H1 2005 Change FY2005 (restated)* (restated)* Revenue 155.8 122.8 26.9% 281.7EBITDA 37.6 33.8 11.2% 75.6 EBITDA Margins 24.1% 27.5% 26.8%Operating Profit 27.8 26.1 6.5% 57.4 Production Volume (000 tons) 82 66 24.2% 136 Aluminium 142 130 9.2% 279 Alumina Average LME Prices (US$/ton) 1810 1694 6.8% 1779 Unit Costs (US$/ ton) BALCO 1551 1303 19.0% 1347 MALCO 1530 1395 9.7% 1466 --------------------------------------------------------------------------------(*Restated for the impact of adopting IFRS) The existing production facilities at BALCO and MALCO continue to operate atfull capacity and have benefited from the increase in metal prices. Continualefforts are being made to improve efficiencies and productivity at the existingplants. The new Korba smelter produced about 12,000 tons of metal in the six monthperiod and was the main contributor to the increased production compared withH1 2005. Three out of the four power units have been commissioned and 121 potshave now been brought on line. We expect the remaining power unit and pots to becommissioned by December 2005 and March 2006, respectively as scheduled. EBITDA has risen by 11% over the corresponding period of the previous year,driven by strong metal prices and volumes. Energy costs and the rising cost ofcoal, power, and other inputs during the period accounted for nearly all of theincrease in unit costs compared with H1 2005. Coal prices continue to be highand, given the current policy framework, we plan to meet part of our requirementof coal through imports which will have a further adverse impact on the costs ofpower. Operating costs of the new Korba smelter are expected to stabilise onceoperations are closer to capacity. We continue to source alumina from externalsources at prevailing market prices for the expanded capacity at Korba. Demand for aluminium in India continues to grow at approximately 10% per annum,driven mainly by the power and construction sectors. Power transmission andelectrical applications continue to be the largest users of aluminium in thecountry. With the increased capacity coming on line, we are well positioned toservice this market. Copper - India and Australia (in US$ millions, except as stated)-------------------------------------------------------------------------------- H1 2006 H1 2005 Change FY2005 (restated)* (restated)*Revenue 596.5 316.8 88.3% 765.5EBITDA 81.5 42.0 94.0% 87.0 EBITDA Margins 13.7% 13.3% 11.4%Operating Profit 62.3 25.0 149.2% 50.5 Production Volume (000 tons) Cathode 124 77 61.0% 172 Rod 80 53 50.9% 125 Mined metal content 18 20 (10.0%) 40 Average LME Prices (US cents/lb) 162.3 127.9 26.9% 136.0TC/RCs (US cents/lb) 15.7 6.6 137.9% 8.6 Unit Costs (US cents/lb) 6.5 8.5 (23.5%) 7.1--------------------------------------------------------------------------------(* Restated for the impact of adopting IFRS) Revenue rose strongly by 88% to $596.5 million on the back of both highervolumes and LME prices. The benefit of the increase in LME prices was largelyoffset by the matching rise in the purchase cost of copper concentrate. EBITDAincreased by 94% to $81.5 million primarily on account of improved TC/RCs andlower costs of production, despite reductions in metal tariffs. The expanded capacity of the smelter at Tuticorin has been ramped up swiftly andahead of schedule and the benefit of this in terms of increased volumes ofcathode production is now being achieved. Lower mine production reflects theclosure of TCM in July 2005 for which closure costs were fully provided. Average TC/RCs improved significantly during the current six month period to15.7 US cents/lb from 6.6 US cents/lb in the comparable prior period. We expectaverage TC/RCs to improve further in the remainder of FY 2006. Unit costs were further reduced to 6.5 US cents /lb during the current six monthperiod compared to 8.5 US cents/lb in the comparable prior period, as a resultof additional volumes arising out of our expanded capacity, better metalrecovery and improved by-product management. Demand for copper in India continues to grow at around 7% per annum. Thisconsumption is driven mainly by the power sector, construction and theautomotive sectors. With power generation facilities set to double by 2012, theoutlook for copper demand in India looks promising. Copper - Zambia (in US$ millions, except as stated)-------------------------------------------------------------------------------- H12006 H1 2005 Change FY2005 (restated)* (restated)*, **Revenue 304.9 - NA 249.2EBITDA 90.3 - NA 76.0 EBITDA Margins 29.6% - NA 30.5%Operating Profit 63.3 - NA 52.7 Production Volume (000 tons) Cathode 81 - NA 68 Mined metal content 54 - NA 43 Average LME Prices (US cents/lb) 162.3 - NA 136.0 Unit Costs (US cents/lb) 113.2 - NA 106.2-------------------------------------------------------------------------------- (* Restated for the impact of adopting IFRS, ** Pertains to the five monthsfrom November 2004 to March 2005) The group's 51% interest in KCM was acquired in November 2004. The results ofKCM are fully consolidated with the Group results for the six months ended 30September 2005. No prior period comparatives are available. Industrial action in July 2005 marginally affected production at KCM but wasquickly resolved. Despite this temporary setback and a nationwide fuel crisis inZambia, production levels remained relatively unchanged. We have undertakenseveral initiatives including process improvements, transfer of best practices,the construction of a new acid plant and the appointment of a new managementteam. We believe the impact of these actions will be reflected in KCM'sperformance for the second half of FY 2006 and onwards. Zinc (in US$ millions, except as stated)-------------------------------------------------------------------------------- H12006 H1 2005 Change FY2005 (restated)* (restated)*Revenue 271.9 196.0 38.7% 486.4EBITDA 124.0 84.0 47.6% 218.5 EBITDA Margins 45.6% 42.9% 44.9%Operating Profit 102.0 69.7 46.3% 190.6 Production Volume (000 tons) Refined metal 123 104 18.3% 212 Mined metal content 220 167 31.7% 355 Average LME Prices (US$/ton) 1286 1003 28.2% 1108 Unit Costs (US$/ton) 707 683 3.5% 695--------------------------------------------------------------------------------(* Restated for the impact of adopting IFRS) Revenues have increased by 38.7% and EBITDA by 47.6% in the first half ofFY 2006 on higher volumes and improved prices despite the impact of tariffreductions. The expansion and the ramp up of the Rampura Agucha mine was reflected in thesubstantial increase in production of zinc concentrate. Refined zinc productionin the first half of the year reflects the ramp up of the new 170,000 tpasmelter at Chanderiya, which contributed 21,000 tons of metal in the first halfof the year. The smelter ramp up at Chanderiya initially faced teething issuesthat have since been resolved. Costs of production of refined zinc increased to $707 per ton largely due toincreases in coal costs, and increases in royalties which are linked to the LMEprice. We expect the full production ramp up and availability of cheap captivepower to result in lower costs during the second half of the year. Demand for zinc in India continues to grow at around 12% per annum, fuelled bydemand for galvanised steel used in the infrastructure, power and automotivesectors. The group's domestic market share in zinc remains strong and has grownsince last year. We believe the outlook for zinc continues to be strong in bothdomestic and export markets. To cater to this increased demand, we aredeveloping a further 170,000 tpa smelter at Chanderiya. Additionally, our new50,000 tpa lead plant is likely to be commissioned in the current quarter. As aresult of this expansion, our production of lead and silver as by-products willincrease. Finance Review Summary consolidated financial information (in US$ millions, except as stated)-------------------------------------------------------------------------------- H12006 H1 2005 Change FY2005 (restated)* (restated)*Revenue 1,384.6 677.4 104.4% 1884.2EBITDA 336.5 159.9 110.4% 454.0 EBITDA Margin 24.3% 23.6% 24.1%Operating Profit 258.2 120.7 113.9% 328.0Profit Before Tax 257.1 111.9 129.8% 386.3Profit After Tax 185.5 70.6 162.7% 299.3Attributable Profit 107.9 34.3 214.6% 178.9Underlying Profit 107.9 34.6 211.8% 140.1Basic EPS (US cents) 37.6 12.0 213.3% 62.5 Return on Capital Employed (excluding project capital work in progress) 27.8% 26.4% 32.0%Net Assets (per share) 6.47 4.67 38.5% 6.09Net (Debt)/Cash (455.7) 113.7 (74.3)Gearing 19.7% NA 4.1%Expansion capital expenditure 315.1 357.6 1028.9--------------------------------------------------------------------------------(* Restated for the impact of adopting IFRS) Operating Profit and Profit Before Tax Group operating profit increased by 113.9% to $258.2 million compared with theprior period. Had the impact of KCM been excluded, group operating profit wouldhave been $194.9 million, an increase of 61.5%. Profit before tax increased by129.8% to $257.1 million compared with H1 2005. Had the impact of KCM beenexcluded, profit before tax would have increased by 70% to $190.1 million. Tax The projected effective tax rate for FY 2006 is approximately 27.0% comparedwith 22.5% for FY 2005. The effective tax rate in FY 2005 was 29.4%, unadjustedfor the effect of the IFRS restatement. The lower projected effective tax ratein the current year reflects a reduction in the nominal tax rate in India from36.6% last year to 33.7% in the current year. The tax rate is also sensitive tothe availability of various tax incentives which differ from subsidiary tosubsidiary and also due to differing tax rates in India and Zambia, which affectthe profit mix. Attributable Profit and Earnings Per Share Attributable profit is for H1 2006 was $107.9 million, up 214.6% as compared tothe previous period. The increase is primarily due to an increase in profit forthe period as well as a decrease in the share of minority interests in profits.Share of minority interests in profits has reduced to 41.8% for the period ascompared to 51.4% for the comparable prior period. EPS based on AttributableProfit has increased by 213.3% to 37.6 US cents compared with the correspondingprior period. Balance Sheet Capital employed is $2.3 billion at 30 September 2005 compared with $1.8 billionat 31 March 2005. Approximately half this increase is attributable to fixedassets and the remainder to increases in working capital. Working capital hasincreased largely due to higher levels of inventory and trade receivables.Inventory values, across our metals, primarily reflect higher LME prices,increasing production capacities and higher precious metal content. Trade andother receivables reflect higher volumes and prices. We expect working capitallevels to decline in the second half of the current financial year. ROCE (excluding project capital work in progress), one of our key performanceindicators, at 27.8 % is higher than the corresponding period of the previousyear by 1.4% reflecting the incremental returns generated by our assetexpansions and ongoing efficiency measures. Cash flow and debt The group's gearing continues to be low with net debt of $456 millionrepresenting a gearing ratio of 19.7 per cent compared with 4.1 per cent at 31March 2005. Net debt comprises cash and other liquid funds totalling $1,459million and borrowings of $1,915 million. Net debt has increased by $381 millionsince March 2005 primarily on account of project funding and higher workingcapital in Sterlite. The Group's capital expenditure for the period was $355million. Interest cover is 14.6 times and the Company's credit rating continuesto be at the level of India's sovereign rating. Impact of IFRS On 27 September 2005, Vedanta Resources plc issued an IFRS restatement relatingto its 2005 financial statements. The adoption of IFRS has had an immaterialimpact upon the group's EBITDA and cash flows. All comparative amounts set outin this document are in line with the IFRS restatement. DisclaimerThis press release contains "forward-looking statements" - that is, statementsrelated to future, not past, events. In this context, forward-looking statementsoften address our expected future business and financial performance, and oftencontain words such as "expects," "anticipates," "intends," "plans," "believes,""seeks," or "will." Forward-looking statements by their nature address mattersthat are, to different degrees, uncertain. For Vedanta, particular uncertaintiesarise from the behavior of financial and metals markets including the LondonMetal Exchange, fluctuations in interest and or exchange rates and metal prices;from future integration of acquired businesses; and from numerous other mattersof national, regional and global scale, including those of political, economic,business, competitive or regulatory nature. These uncertainties may cause ouractual future results to be materially different that those expressed in ourforward-looking statements. Vedanta Resources plc does not undertake to updateour forward-looking statements." About Vedanta Resources plcVedanta Resources plc is a London listed diversified metals and mining group.Its principal operations are located throughout India, with further operationsin Zambia and Australia. The major metals produced are aluminium, copper, zincand lead. For further information, please visit www.vedantaresources.com. Consolidated Income Statement------------------------------------------------------------------------------------ Note Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005 US $ million US $ million US $ million ------------------------------------------------------------------------------------Revenue Continuing operations 1,384.6 677.4 1,635.0Acquisitions - - 249.2------------------------------------------------------------------------------------Group revenue 3 1,384.6 677.4 1,884.2Cost of sales (1,055.2) (506.5) (1,415.7)------------------------------------------------------------------------------------Gross profit 329.4 170.9 468.5 Other operating income 16.2 9.7 25.9Distribution costs (30.2) (18.7) (51.5)Administrative expenses (57.2) (40.0) (92.6)Administrative expenses - special items 4a - (1.2) (22.3)------------------------------------------------------------------------------------Operating profit 3 258.2 120.7 328.0Investment revenues 22.3 17.1 37.5Finance costs (23.1) (24.1) (30.1)Share of loss of associate (0.3) (1.8) (5.6)Special item - negative goodwill 4b - - 56.5------------------------------------------------------------------------------------Profit before taxation 257.1 111.9 386.3Income tax expense 5 (71.6) (41.3) (87.0)------------------------------------------------------------------------------------Profit for the period/year 185.5 70.6 299.3==================================================================================== Attributable to:Equity holders of the parent 107.9 34.3 178.9Minority interests 77.6 36.3 120.4------------------------------------------------------------------------------------ 185.5 70.6 299.3==================================================================================== Basic earnings per ordinary share (US Cents)(not annualised) 6 37.6 12.0 62.5Diluted earnings perordinary share (US Cents)(not annualised) 6 37.3 11.4 61.5 ------------------------------------------------------------------------------------ Consolidated Balance Sheet------------------------------------------------------------------------------------ As at As at As at 30 September 2005 30 September 2004 31 March 2005 US $ million US $ million US $ million------------------------------------------------------------------------------------ASSETSNon-current assetsGoodwill 12.1 11.5 12.2Property, plant and equipment 2,550.9 1,533.6 2,288.6Investment in associate 2.9 5.1 3.3Financial asset investments 27.3 23.5 24.8Other non-current assets 21.0 23.4 34.6Other financial assets (derivatives) 37.5 - -Deferred tax asset 87.7 - 90.0------------------------------------------------------------------------------------ 2,739.4 1,597.1 2,453.5------------------------------------------------------------------------------------Current assets Inventories 646.8 265.2 337.7Trade and other receivables 441.1 241.9 339.6Current asset investments 292.9 132.9 262.0Cash and cash equivalents 1,166.3 838.1 1,185.6------------------------------------------------------------------------------------ 2,547.1 1,478.1 2,124.9------------------------------------------------------------------------------------TOTAL ASSETS 5,286.5 3,075.2 4,578.4------------------------------------------------------------------------------------LIABILITIESCurrent liabilitiesShort term borrowings (516.5) (198.0) (194.7)Convertible loan notes (5.9) (49.5) (23.7)Trade and other payables (817.0) (583.8) (675.0)Other current financial liabilities (derivatives) (46.6) - -Provisions (12.8) (11.6) (37.0)Current tax liabilities (19.6) (23.6) (15.1)------------------------------------------------------------------------------------ (1,418.4) (866.5) (945.5)------------------------------------------------------------------------------------Net current assets 1,128.7 611.6 1,179.4------------------------------------------------------------------------------------Non-current liabilitiesMedium and long termborrowings (1,349.8) (609.8) (1,303.5)Trade and other payables (12.1) (12.1) (41.2)Other financial liabilities(derivatives) (76.9) - -Deferred tax liabilities (245.8) (226.1) (234.9)Provisions (266.8) (22.0) (247.2)Non equity minority interests (59.4) - (59.4)------------------------------------------------------------------------------------ (2,010.8) (870.0) (1,886.2)------------------------------------------------------------------------------------Total liabilities (3,429.2) (1,736.5) (2,831.7)------------------------------------------------------------------------------------Net Assets 1,857.3 1,338.7 1,746.7==================================================================================== EQUITYShare capital 28.7 28.6 28.7Share premium account 18.6 18.6 18.6Share based payment reserves 3.1 1.8 2.5Other reserves 143.5 (20.6) 43.9Retained earnings 958.5 918.9 1,016.8------------------------------------------------------------------------------------Equity attributable toequity holders of the parent 1,152.4 947.3 1,110.5Minority interests 704.9 391.4 636.2------------------------------------------------------------------------------------Total Equity 1,857.3 1,338.7 1,746.7==================================================================================== Consolidated Cash Flow Statement-------------------------------------------------------------------------------------- Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005 US $ million US $ million US $ million-------------------------------------------------------------------------------------- Operating activities Profit before taxation 257.1 111.9 386.3Adjustments for:Depreciation 78.4 38.1 103.8Investment income (22.3) (17.1) (37.5)Interest expense 23.1 24.1 30.1Other non-cash items (5.9) 2.2 (27.3)Other adjustments 0.3 (1.6) 6.0--------------------------------------------------------------------------------------Operating cash flows before movementsin working capital 330.7 157.6 461.4Increase in inventories (304.1) (79.6) (61.0)Increase in receivables (96.2) (38.2) (79.1)Increase/(decrease) in payables 106.9 57.0 (18.1)--------------------------------------------------------------------------------------Cash generated from operations 37.3 96.8 303.2Interest / investment income received 20.5 33.1 60.6Interest paid (26.6) (31.8) (64.1)Income taxes paid (37.9) (15.0) (65.8)Dividends paid (33.1) (15.8) (15.8)--------------------------------------------------------------------------------------Net cash from operating activities (39.8) 67.3 218.1-------------------------------------------------------------------------------------- Cash flows from investing activitiesAcquisition of subsidiary - (4.4) (28.3)Cash acquired with subsidiary - - 41.2Purchases of property, plant and equipment (270.7) (270.2) (535.3)Proceeds on disposal of property, plant and equipment - 1.6 14.1Dividends paid to minority interests of subsidiaries (9.0) (1.7) (7.7)Purchase of current asset investments (32.3) (74.3) (193.4)Investment in associate - - (6.2)Purchase of financial asset investments - (0.2) -Buyback of shares from minority interests of subsidiaries - - (2.3)Other movements - - 29.4--------------------------------------------------------------------------------------Net cash used ininvesting activities (312.0) (349.2) (688.5)-------------------------------------------------------------------------------------- Cash flows from financing activitiesIssue of ordinary shares - - 0.1Proceeds from rights issue of subsidiary company - 0.6 -Increase/(decrease) in shortterm borrowings 258.9 (195.8) (96.6)Increase in long-term borrowings 80.8 169.0 607.0Proceeds from issue of shares tominority interests of subsidiaries - - 1.7--------------------------------------------------------------------------------------Net cash from financing activities 339.7 (26.2) 512.2--------------------------------------------------------------------------------------Net (decrease)/increase in cash and cash equivalents (12.1) (308.1) 41.8--------------------------------------------------------------------------------------Exchange difference (7.2) (1.1) (3.5)Cash and cash equivalents atbeginning of period/year 1,185.6 1,147.3 1,147.3--------------------------------------------------------------------------------------Cash and cash equivalents atend of period/year 1,166.3 838.1 1,185.6====================================================================================== Consolidated Statement of Changes in Equity------------------------------------------------------------------------------------------------------------------------ Attributable to equity holders of the Company------------------------------------------------------------------------------------------------------------------------ Share based S$ million Share Share payment Other Retained Minority Total capital premium reserves reserves* earnings Total interests equity------------------------------------------------------------------------------------------------------------------------As at 31 March 2005 28.7 18.6 2.5 43.9 1,016.8 1,110.5 636.2 1,746.7Adjustment for adoptionof IAS 39** - - - (3.2) (8.9) (12.1) (2.1) (14.2)------------------------------------------------------------------------------------------------------------------------As at 1 April 2005 28.7 18.6 2.5 40.7 1,007.9 1,098.4 634.1 1,732.5Profit for the period - - - - 107.9 107.9 77.6 185.5Movement on increase inminority interests - - - - 0.2 0.2 16.8 17.0Exchange differences ontranslation of foreignoperations - - - (5.5) - (5.5) (4.0) (9.5)Transfers - - - 125.0 (125.0) - - -IPO related credit - - - - 0.6 0.6 - 0.6Movement in fair value ofcash flow hedges andfinancial investments - - - (16.7) - (16.7) (10.6) (27.3)Dividends paid - - - - (33.1) (33.1) (9.0) (42.1)Recognition of share based payment - - 0.6 - - 0.6 - 0.6------------------------------------------------------------------------------------------------------------------------As at 30 September 2005 28.7 18.6 3.1 143.5 958.5 1,152.4 704.9 1,857.3======================================================================================================================== ------------------------------------------------------------------------------------------------------------------------ Attributable to equity holders of the Company------------------------------------------------------------------------------------------------------------------------ Share based S$ million Share Share payment Other Retained Minority Total capital premium reserves reserves* earnings Total interests equity------------------------------------------------------------------------------------------------------------------------As at 1 April 2004 28.6 18.6 - 12.7 919.9 979.8 367.0 1,346.8Profit for the period - - - - 34.3 34.3 36.3 70.6Movement on decrease inminority interests - - - - (19.5) (19.5) 18.3 (1.2)Exchange differences ontranslation of foreignoperations - - - (33.3) - (33.3) (22.6) (55.9)Dividends paid - - - - 15.8) (15.8) (7.6) (23.4)Recognition of share based payment - - 1.8 - - 1.8 - 1.8------------------------------------------------------------------------------------------------------------------------As at 30 September 2004 28.6 18.6 1.8 (20.6) 918.9 947.3 391.4 1,338.7======================================================================================================================== ------------------------------------------------------------------------------------------------------------------------ Attributable to equity holders of the Company------------------------------------------------------------------------------------------------------------------------ Share based S$ million Share Share payment Other Retained Minority Total capital premium reserves reserves* earnings Total interests equity------------------------------------------------------------------------------------------------------------------------As at 1 April 2004 28.6 18.6 - 12.7 919.9 979.8 367.0 1,346.8Profit for the year - - - - 178.9 178.9 120.4 299.3Acquisition of subsidiary - - - - - - 98.7 98.7Movement on decrease inminority interests - - - - (32.4) (32.4) 56.3 23.9Exchange differences ontranslation of foreignoperations - - - 13.2 - 13.2 1.5 14.7Transfers - - - 18.0 (18.0) - - -Shares issued underReward Plan 0.1 - - - - 0.1 - 0.1Dividends paid - - - - (31.6) (31.6) (7.7) (39.3)Recognition of share based payment - - 2.5 - - 2.5 - 2.5------------------------------------------------------------------------------------------------------------------------As at 31 March 2005 28.7 18.6 2.5 43.9 1,016.8 1,110.5 636.2 1,746.7======================================================================================================================== * Other reserves comprise hedging reserves, currency translation reserve, merger reserve, investment revaluation reserve and the general reserves established in the statutory accounts of the Group's Indian subsidiaries.** Details of the accounting policy change are provided in note 10. Notes to the Financial Information 1. Basis of preparation The financial information in this interim financial report is stated underInternational Financial Reporting Standards ('IFRS'). The financial informationfor the year ended 31 March 2005 has been derived from the Group's statutoryaccounts prepared under United Kingdom Generally Accepted Accounting Principles('UK GAAP'), for that period as filed with the Registrar of Companies andsubsequently under IFRS. The auditors' report on the statutory accounts for theyear ended 31 March 2005 was unqualified and did not contain statements undersection 237(2) of the Companies Act 1985 (regarding adequacy of accountingrecords and returns) or under section 237(3) (regarding provision of necessaryinformation and explanations). The Company published details of the restatement of its financial informationunder IFRS for the year ended 31 March 2005 and the six month period ended 30September 2004 on 27 September 2005 entitled 'Adoption of InternationalFinancial Reporting Standards'. Details of the Company's news release, includingfull disclosure of its accounting policies, the restatements under IFRS,together with the auditors' reports thereon, are available on the Company'swebsite at www.vedantaresources.com . A summary of the IFRS reconciliationsderived from this news release is included herewith as note 9. The financial information prepared under International Financial ReportingStandards ('IFRSs') in respect of the six months ended 30 September 2005 isunaudited but has been reviewed by the auditors and their report is set out onpage 28. The interim financial information including comparatives does notconstitute statutory accounts as defined under section 240 of the Companies Act1985. 2. Accounting policies This interim financial report, including all comparatives, has been preparedusing the same accounting policies and methods of computation as are followed inthe report published by the Company in its news release on 27 September 2005.These financial statements are covered by IFRS 1 First-time adoption ofInternational Financial Reporting Standards, because they form part of theperiod included in the Group's first IFRS financial statements for the yearending 31 March 2006. The policies have been consistently applied to all periodspresented, except for those relating to the classification and measurement offinancial instruments. In addition, this interim report for the six month periodended 30 September 2005 has been prepared under International AccountingStandard ('IAS') 34 Interim financial reporting. IFRSs and International Financial Reporting Interpretations Committee ('IFRIC')interpretations are subject to ongoing review and possible amendment orinterpretative guidance which may affect the financial statements for the yearending 31 March 2006. Financial instruments The Group has taken the exemption under IFRS 1 whichc enables it to apply IAS 32Financial Instruments: Disclosure and Presentation and IAS 39 FinancialInstruments: Recognition and Measurement prospectively from 1 April 2005. Assuch, the financial information presented for the periods ended 30 September2004 and 31 March 2005 exclude any adjustments relating to adoption of these twostandards. The effects on the balance sheet as at 1 April 2005 of the adoptionof IAS 32 and 39 are detailed in note 10. 3. Segmental analysis (a) Business segments The following tables present revenue and profit information regarding theGroup's business segments for the six months ended 30 September 2005 and 30September 2004 and for the year ended 31 March 2005. Items after operatingprofit are not allocated by segment. Six months ended Continuing Operations 30 September 2005 US$ million Aluminium Copper Zinc Other Elimination Total Operations---------------------------------------------------------------------------------------RevenueSales to external customers 155.8 901.4 271.9 55.5 - 1,384.6Inter-segment sales 14.5 109.5 - - (124.0) - --------------------------------------------------------------------Segment revenue 170.3 1,010.9 271.9 55.5 (124.0) 1,384.6 --------------------------------------------------------------------ResultOperating profit 27.8 125.6 102.0 2.8 - 258.2--------------------------------------------------------------------------------------- Six months ended Continuing Operations 30 September 2004 US$ million Aluminium Copper Zinc Other Elimination Total Operations---------------------------------------------------------------------------------------RevenueSales to externalcustomers 122.8 316.8 196.0 41.8 - 677.4Inter-segment sales - 90.3 - - (90.3) - --------------------------------------------------------------------Segment revenue 122.8 407.1 196.0 41.8 (90.3) 677.4 --------------------------------------------------------------------Result Operating profit 26.1 25.0 69.7 (0.1) - 120.7--------------------------------------------------------------------------------------- Six months ended Continuing Operations 31 March 2005 US$ million Aluminium Copper Zinc Other Elimination Total Operations--------------------------------------------------------------------------------------- RevenueSales to externalcustomers 281.7 1,014.7 486.4 101.4 - 1,884.2Inter-segment sales 26.3 193.0 - - (219.3) - --------------------------------------------------------------------Segment revenue 308.0 1,207.7 486.4 101.4 (219.3) 1,884.2 --------------------------------------------------------------------ResultOperating profit 57.4 103.2 190.6 (23.2) - 328.0--------------------------------------------------------------------------------------- (b) EBITDA(*) by Segment months ended Six months ended 30 Year ended 30 September 2005 September 2004 31 March 2005 $ million $ million $ million-----------------------------------------------------------------------------------Copper 171.8 42.0 163.0------------------------------------------------------------------------------------ India/Australia 81.5 42.0 87.0- Zambia 90.3 - 76.0-----------------------------------------------------------------------------------Aluminium 37.6 33.8 75.6Zinc 124.0 84.0 218.5Others 3.1 0.1 (3.1)-----------------------------------------------------------------------------------Group EBITDA 336.5 159.9 454.0Depreciation (78.3) (38.0) (103.7)Operating special items - (1.2) (22.3)-----------------------------------------------------------------------------------Group operating profit 258.2 120.7 328.0----------------------------------------------------------------------------------- (*) EBITDA being Earnings before interest, taxation, depreciation and amortisation, and special items (note 4). 4. Special items (a) Administrative expenses Six months ended Six months ended 30 Year ended 30 September 2005 September 2004 31 March 2005 $ million $ million $ million-------------------------------------------------------------------------------------Restructuring and redundancies - (2.6) (4.1)Impairment of non-core assets - - (17.8)Profit/(loss)on sale of assets - 1.4 (0.4)------------------------------------------------------------------------------------- - (1.2) (22.3)------------------------------------------------------------------------------------- (b) Negative goodwill Six months ended Six months ended 30 Year ended 30 September 2005 September 2004 31 March 2005 $ million $ million $ million-------------------------------------------------------------------------------------Release of negative goodwill (**) - - 56.5------------------------------------------------------------------------------------- - - 56.5------------------------------------------------------------------------------------- (**) As set out in note 26 of the Group's financial statements for the year ended 31 March 2005 as presented under UK GAAP, the Group acquired KCM in November 2004. The assets and liabilities acquired were included at provisional fair values. The difference between the total consideration of $46.1 million and provisional fair value of net assets acquired ($102.0 million) was recognised in the UK GAAP financial statements as negative goodwill totaling $56.5 million. As explained in the press release dated 27 September 2005 (see note 1), under IFRS negative goodwill is not recognised in the balance sheet but is recognised immediately in the income statement. 5. Income tax expense------------------------------------------------------------------------------------- Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005 $ million $ million $ million-------------------------------------------------------------------------------------Current tax:UK Corporation tax 0.4 - (0.6)Foreign tax 42.3 28.8 66.0------------------------------------------------------------------------------------- 42.7 28.8 65.4-------------------------------------------------------------------------------------Deferred tax:Current year 28.9 12.5 37.0Attributable to decrease in the rate of corporation tax - - (15.4)------------------------------------------------------------------------------------- 28.9 12.5 21.6-------------------------------------------------------------------------------------Total income tax expense 71.6 41.3 87.0-------------------------------------------------------------------------------------Effective tax rate 27.8% 36.9% 22.5%===================================================================================== 6. Earnings per share Basic earnings per share amounts are calculated by dividing net profit for theperiod attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the net profitattributable to ordinary shareholders by the weighted average number of ordinaryshares outstanding during the period (adjusted for the effects of dilutiveoptions). The following reflects the income and share data used in the basic and dilutedearnings per share computations: ------------------------------------------------------------------------------------- Six months ended Six months ended Year ended 30 September 2005 September 2004 31 March 2005 $ million $ million $ million-------------------------------------------------------------------------------------Net profitattributable to equityholders of the parent 107.9 34.3 178.9------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- Six months ended Six months ended Year ended 30 September 2005 September 2004 31 March 2005 $ million $ million $ million-------------------------------------------------------------------------------------Weighted average numberof ordinary shares forbasic earnings per share 286.7 286.4 286.4Effect of dilution: Share options 1.5 2.0 1.5-------------------------------------------------------------------------------------Adjusted weightedaverage number of ordinaryshares for diluted earningsper share 288.2 288.4 287.9===================================================================================== (a) Earnings per share based on profit for the period/year -------------------------------------------------------------------------------------Basic earnings per share on the profit for the period/year Six months ended Six months ended Year ended 30 September 2005 30 September 2005 31 March 2005-------------------------------------------------------------------------------------Profit for the periodattributable to equity holdersof the parent($ million) 107.9 34.3 178.9Weighted average number of shares of the Company in issue(million) 286.7 286.4 286.4-------------------------------------------------------------------------------------Earnings per share on profit for theperiod/year (US cents per share) 37.6 12.0 62.5====================================================================================== -------------------------------------------------------------------------------------Diluted earnings per share on the profit for the period/year Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005-------------------------------------------------------------------------------------Profit for the period/yearattributable to equityholders of the parent($ million) 107.9 34.3 178.9Adjustment in respect ofconvertible bonds in Sterlite(million) (0.4) (1.4) (1.9)-------------------------------------------------------------------------------------Profit for the period/yearafter dilutive adjustment 107.5 32.9 177.0-------------------------------------------------------------------------------------Adjusted weighted average numberof shares of the Company inissue (million) 288.2 288.4 287.9-------------------------------------------------------------------------------------Diluted earnings per share onprofit for the period/year(US cents per share) 37.3 11.4 61.5===================================================================================== Shares issued during the year ended 31 March 2005 were 303,000 on 18 March 2005and 85,000 on 31 March 2005 pursuant to the exercise of the second tranche ofawards under the Reward Plan. The issue of these shares has been included indetermining the 2005 weighted average number of shares. No shares have beenissued during the six months ended 30 September 2005. Profit for the period would be diluted if holders of the convertible bonds inSterlite exercised their right to convert their bond holdings into Sterliteequity. The impact on profit for the period of this conversion would be thedifference between interest payable on the convertible bond and the highercharge attributable to minority interests if conversion was to occur. The outstanding awards under the LTIP are reflected in the diluted EPS figurethrough an increased number of weighted average shares. There have been no other transactions involving ordinary shares or potentialordinary shares since the reporting date and before the completion of thesefinancial statements. (b) Earnings per share based on Underlying Profit for the period/year The Group's Underlying Profit is the profit for the period/year after addingback special items and their resultant tax and minority interest effects, asshown in the table below: -------------------------------------------------------------------------------------- Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005 $ million $ million $ million--------------------------------------------------------------------------------------Profit for the period/yearattributable to equityholders of the parent 107.9 34.3 178.9Administrative expenses - special items - 1.2 22.3Special item - negative goodwill - - (56.5)Tax effect of special items - (0.4) (1.6)Minority interest effect ofspecial items - (0.5) (3.0)--------------------------------------------------------------------------------------Underlying profit for theperiod/year 107.9 34.6 140.1====================================================================================== --------------------------------------------------------------------------------------Basic earnings per share on Underlying Profit for the period/year Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005--------------------------------------------------------------------------------------Underlying profit for theperiod/year ($million) 107.9 34.6 140.1Weighted average number of sharesof the Company in issue (million) 286.7 286.4 286.4--------------------------------------------------------------------------------------Earnings per share on UnderlyingProfit for the period/year(US cents per share) 37.6 12.1 48.9====================================================================================== --------------------------------------------------------------------------------------Diluted earnings per share on Underlying Profit for the period/year Six months ended Six months ended Year ended 30 September 2005 30 September 2004 31 March 2005-----------------------------------------------------------------------------------------Underlying profit for theperiod/year ($million) 107.9 34.6 140.1-----------------------------------------------------------------------------------------Adjustment in respect ofconvertible bonds inSterlite ($million) (0.4) (1.4) (1.9)-----------------------------------------------------------------------------------------Underlying profit for theperiod/year after dilutiveadjustment ($ million) 107.5 33.2 138.2-----------------------------------------------------------------------------------------Adjusted weighted averagenumber of shares of the Company in issue (million) 288.2 288.4 287.9-----------------------------------------------------------------------------------------Diluted earnings per share on UnderlyingProfit/year for the period(US cents per share) 37.3 11.5 48.0========================================================================================= 7. Movement in net debt (*) Debt due within one year Debt due after one year------------------------------------------------------------------------------------------------------------------------ CurrentUS$ million Cash and Debt Debt financial cash carrying Debt related carrying Debt related asset Total net equivalent value derivatives(**) value derivatives(**) investments debt ------------------------------------------------------------------------------------------------------------------------Opening balance at 1 April 2005 1,185.6 (218.4) - (1,303.5) - 262.0 (74.3)IAS 32 and IAS39 adjustments 1.0 5.4 (15.1) 15.8 (17.5) - (10.4)------------------------------------------------------------------------------------------------------------------------Adjusted openingbalance sheetat 1 April 2005 1,186.6 (213.0) (15.1) (1,287.7) (17.5) 262.0 (84.7)Cash flow (12.1) (258.9) - (80.8) - 32.3 (319.5)Other non-cash changes (1.0) (52.7) 11.7 14.0 (21.9) - (49.9)Foreign exchangedifferences (7.2) 2.2 - 4.8 - (1.4) (1.6)------------------------------------------------------------------------------------------------------------------------As at 30 September 2005 1,166.3 (522.4) (3.4) (1,349.7) (39.4) 292.9 (455.7) ======================================================================================================================== (*) Net debt being total debt after fair value adjustments under IAS 32 and 39, cash and cash equivalents and current asset investments. (**) Debt related derivatives exclude commodity related derivative financial assets and liabilities. 8. Other disclosures Capital commitments Contractual commitments to acquire fixed assets were US$434.2 million at 30September 2005 (at 31 March 2005: US$538.3 million). Contingent liabilities There were no material changes in contingent liabilities during the period. Related party transactions The information below sets out transactions and balances between the Group andvarious related parties for the period. These related parties include SOTL,Sterlite Gold Limited ("Sterlite Gold"), Volcan and Duratube Limited("Duratube") which are related by virtue of having the same controlling party asthe Group. As IFL is an associate of the Group, it is also regarded as a relatedparty. The tables below set out transactions with related parties that occurred in thenormal course of trading. SOTL-------------------------------------------------------------------------------- Six months ended Year ended 30 September 2005 31 March 2005 $ million $ million--------------------------------------------------------------------------------Sales to SOTL 2.6 24.7Acquisition of fixed assets - 0.1--------------------------------------------------------------------------------Amounts receivable at period/year end 1.9 16.7-------------------------------------------------------------------------------- Sterlite Gold-------------------------------------------------------------------------------- Six months ended Year ended 30 September 2005 31 March 2005 $ million $ million--------------------------------------------------------------------------------Provision of commercial services and others - 0.2--------------------------------------------------------------------------------Amounts receivable at period/year end - 0.2-------------------------------------------------------------------------------- Volcan-------------------------------------------------------------------------------- Six months ended Year ended 30 September 2005 31 March 2005 $ million $ million-------------------------------------------------------------------------------- Benefit of tax deduction gained by Vedanta - 3.8Reimbursement of bank charges 0.2 (0.5)--------------------------------------------------------------------------------Amounts receivable at period/year end - --------------------------------------------------------------------------------- Duratube-------------------------------------------------------------------------------- Six months ended Year ended 30 September 2005 31 March 2005 $ million $ million-------------------------------------------------------------------------------- Acquisition of fixed assets - 0.1-------------------------------------------------------------------------------- IFL-------------------------------------------------------------------------------- Six months ended Year ended 30 September 2005 31 March 2005 $ million $ million--------------------------------------------------------------------------------Sales to IFL 16.2 24.4Net interest received 0.3 0.3--------------------------------------------------------------------------------Trade debtors receivable 2.9 3.6Loan balance receivable 6.2 6.2--------------------------------------------------------------------------------Amounts receivable at period/year end 9.1 9.8-------------------------------------------------------------------------------- In addition, a limited number of employees are seconded from Sterlite to IFL,SOTL and Sterlite Gold and similarly from IFL, SOTL and Sterlite Gold toSterlite. The company which benefits from the seconded employee bears theiremployment costs. During the year ended 31 March 2005, Sterlite advanced loans to IFL amounting to$6.2 million for working capital purposes. The loans were advanced from 2 April2004 to 7 February 2005 and are repayable within two years. The loans bearinterest at 7% per annum and interest accrued during the year ended 31 March2005 amounted to $0.3 million. The loan has been classified as investment inassociate. During the period ended 30 September 2005, Sterlite advanced nofurther loans to IFL. Transactions with Volcan • Vedanta Resources plc Pursuant to the terms of the Tax Deed of Indemnity dated 1 December 2003 enteredinto by the Company, Volcan and its shareholders, Volcan was paid $3.8 millionby the Company on 4 January 2005. The payment equated to the estimated taxdeduction that was expected to be utilised by the Company in its tax computationfor the period ended 31 March 2004, and related to the shares transferred to MrBP Gilbertson, a former Chairman of the Company at the time of Listing. To theextent the Company does not benefit from this tax deduction, including thecircumstance where the deduction may be disallowed by HM Revenue & Customs,Volcan has agreed that it will reimburse the Company. Transactions with Sterlite Gold and SOTL Pursuant to the terms of the Shared Services Agreement dated 5 December 2003entered into by the Company, Sterlite, SOTL and Sterlite Gold, the Company andSterlite provide various commercial services in relation to SOTL's and SterliteGold's businesses on an arms length basis and at normal commercial terms. For the period from 10 December 2003 to 31 March 2005, the commercial servicesprovided to SOTL and Sterlite Gold were performed by certain senior employees ofthe Group on terms set out in the Shared Services Agreement. The servicesprovided to SOTL and Sterlite Gold during this period amounted to $0.03 millionand $0.1 million, respectively. There was no material charge during the sixmonths ended 30 September 2005. Political and Public Awareness Trust During the period, the Group contributed did not contribute to the Political andPublic Awareness Trust in the period (2005: $1.3 million). This trust makescontributions to political parties and related causes. The trust is a relatedparty as it is controlled by members of the Agarwal family. Sterlite Foundation During the period, $0.3 million was paid by HZL to the Sterlite Foundation(2005: $0.8 million paid by Balco and HZL). The Sterlite Foundation is aregistered not-for-profit entity engaged in computer education and other relatedsocial and charitable activities. The major activity of the Sterlite Foundationis providing computer education for disadvantaged students. The SterliteFoundation is a related party as it is controlled by members of the Agarwalfamily. 9. IFRS Reconciliations (a) Reconciliation of "shareholders' equity" under UK GAAP to "equity attributable to equity holders of the parent" under IFRS (excluding IAS 32/39) -------------------------------------------------------------------------------- As at As at As at 31 March 2005 30 September 01 April 2004 ----------------------------------------------------- US $ million US $ million US $ million--------------------------------------------------------------------------------Shareholders' equity under UK GAAP 1,047.1 956.2 990.9Reversal of negativegoodwill and amortisation 64.6 8.2 8.6Post retirement benefits (6.6) (6.2) (6.6)Deferred tax (88.6) (94.8) (100.3)Interim dividend (15.8) - -Proposed dividend 48.9 15.8 15.8Minority interest 45.3 52.3 56.3Capitalisation of trial run expenses 12.8 12.1 12.9Capitalisation of majoroverhaul expenses 0.5 1.1 0.6Capitalisation of interest cost 0.8 0.9 0.3Depreciation (1.2) (1.1) (1.2)Discounting of long term provision 0.8 0.8 0.3Dismantling cost 0.4 0.4 0.5Inventory valuation 1.5 1.6 1.7--------------------------------------------------------------------------------Equity attributable toequity holders of theparent under IFRS 1,110.5 947.3 979.8================================================================================ (b) Reconciliation of "Profit for the year/period" under UK GAAP to "equity attributable to equity holders of the parent" under IFRS (excluding IAS 32/39) Year ended Six months ended 31 March 2005 30 September 2004 US $ million US $ million-------------------------------------------------------------------------------------Profit for the year/period under UK GAAP 234.7 70.6Overhaul expenses (0.1) 0.6Share based payments (2.5) (1.8)Capitalisation of interest income/ expense 0.9 0.6Deferred tax 10.6 0.2Reversal of goodwill amortisation (0.4) 0.2Inventory valuation (0.4) 0.2Negative goodwill generated during the year/period 56.5 --------------------------------------------------------------------------------------Profit for the year/period under IFRS 299.3 70.6===================================================================================== 10. Adoption of IAS 32 and IAS 39 The consolidated balance sheet as at 31 March 2005 has been adjusted to applyIAS 32 and IAS 39 prospectively from 1 April 2005 as set out below: -------------------------------------------------------------------------------- IFRS IFRS 31 March 2005 IAS 32/39 1 April 2005 US $ million US $ million US $ million--------------------------------------------------------------------------------ASSETSNon-current assetsGoodwill 12.2 - 12.2Property, plant and equipment 2,288.6 - 2,288.6Investment in associate 3.3 - 3.3Financial asset investments 24.8 1.3 26.1Other non-current assets 34.6 (12.4) 22.2Other financial assets (derivatives) - 12.4 12.4Deferred tax asset 90.0 - 90.0-------------------------------------------------------------------------------- 2,453.5 1.3 2,454.8--------------------------------------------------------------------------------Current assetsInventories 337.7 - 337.7Trade and other receivables 339.6 - 339.6Other current financial assets (derivatives) - 2.5 2.5Current asset investments 262.0 - 262.0Cash and cash equivalents 1,185.6 1.0 1,186.6-------------------------------------------------------------------------------- 2,124.9 3.5 2,128.4--------------------------------------------------------------------------------TOTAL ASSETS 4,578.4 4.8 4,583.2--------------------------------------------------------------------------------LIABILITIESCurrent liabilitiesShort term borrowings (194.7) - (194.7)Convertible loan notes (23.7) 5.4 (18.3)Trade and other payables (675.0) 3.2 (671.8)Other current financial liabilities (derivatives) - (38.7) (38.7)Provisions (37.0) - (37.0)Current tax liabilities (15.1) - (15.1)-------------------------------------------------------------------------------- (945.5) (30.1) (975.6)--------------------------------------------------------------------------------Net current assets/(liabilities) 1,179.4 (26.6) 1,152.8--------------------------------------------------------------------------------Non-current liabilitiesMedium and long term borrowings (1,303.5) 15.8 (1,287.7)Trade and other payables (41.2) 18.6 (22.6)Other financials liabilities(derivatives) - (29.9) (29.9)Deferred tax liabilities (234.9) 6.6 (228.3)Provisions (247.2) - (247.2)Non equity minority interests (59.4) - (59.4)-------------------------------------------------------------------------------- (1,886.2) 11.1 (1,875.1)--------------------------------------------------------------------------------Total liabilities (2,831.7) (19.0) (2,850.7)--------------------------------------------------------------------------------Net Assets 1,746.7 (14.2) 1,732.5================================================================================ EQUITYShare capital 28.7 - 28.7Share premium account 18.6 - 18.6Share based payment reserves 2.5 - 2.5Other reserves 43.9 (3.2) 40.7Retained earnings 1,016.8 (8.9) 1,007.9--------------------------------------------------------------------------------Equity attributable to equityholders of the parent 1,110.5 (12.1) 1,098.4Minority interests 636.2 (2.1) 634.1--------------------------------------------------------------------------------Total Equity 1,746.7 (14.2) 1,732.5================================================================================ Independent Review Report to Vedanta Resources plc We have been instructed by the company to review the financial information forthe six months ended 30 September 2005 which comprises the consolidated incomestatement, the consolidated balance sheet, the consolidated cash flow statement,the consolidated statement of changes in equity, and related notes 1 to 10. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority and the requirements of InternationalAccounting Standard 34, "Interim Financial Reporting" (IAS 34) which requirethat the accounting policies and presentation applied to the interim figures areconsistent with those applied in preparing the preceding annual accounts exceptwhere any changes, and the reasons for them, are disclosed. International Financial Reporting Standards (IFRSs) As disclosed in note 2, the next annual financial statements of the Group willbe prepared in accordance with IFRSs as adopted for use in the EU. Accordingly,the interim report has been prepared in accordance with and the requirements ofIFRS 1, "First-time Adoption of International Financial Reporting Standards" andIAS 34 relevant to interim reports. The accounting policies are consistent withthose that the directors intend to use in the annual financial statements. Thereis, however, a possibility that the directors may determine that some changes tothese policies are necessary when preparing the full annual financial statementsfor the first time in accordance with IFRSs as adopted for use in the EU. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005. Deloitte & Touche LLPChartered AccountantsLondon16 November 2005 Glossary and Definitions Aluminium Business The aluminium business of the Group comprising its Fully-integrated bauxite mining, alumina refining and aluminium smelting in India Attributable Profit Profit for the financial year before dividends to the shareholders of Vedanta Resources plc BALCO Bharat Aluminium Company Limited, a company incorporated in India Board The board of directors of the Company Businesses The Aluminium Business, the Copper Business and the Zinc Business together Capital Employed Net assets before net (debt)/cash Cash Tax Rate Current taxation as a percentage of profit on ordinary activities before taxation CMT Copper Mines of Tasmania Pty Ltd, a company incorporated in Australia Company or Vedanta Vedanta Resources plc Copper Business The copper business of the Group comprising a copper smelter, a refinery and two copper rod plants in India, two copper mines in Australia and an integrated operation in Zambia consisting of three mines, a leaching plant and a smelter CSR Corporate social responsibility Directors The directors of the Company Dollar or $ United States dollars, the currency of the United States of America EBITDA Earnings before interest, taxation, depreciation, goodwill amortisation and special items (see note 3) EBITDA Margin EBITDA as a percentage of turnover Effective Holdings and Economic Interest The Group's Economic Interest in operating companies is different from its Effective Holdings as a consequence of the Sterlite shares owned by the SEWT. The Effective Holdings are derived by combining the Group's direct and indirect shareholdings in the operating companies. The shares held by the SEWT in Sterlite are recorded as a reduction in shareholders' funds, as if the shares were cancelled. This has the effect of the Group's Economic Interest being higher compared to its Effective Holdings. The Group's Economic Interest is the basis on which the Attributable Profit and net assets are determined in the consolidated accounts EPS Earnings per Ordinary Share Executive Directors The executive directors of the Company Expansion Capital Expenditure Capital expenditure that increases the Group's operating capacity Free Cash Flow Cash flow arising from EBITDA after net interest, taxation, Sustaining Capital Expenditure and working capital movements (see Financial Review) GAAP Generally Accepted Accounting Principles Gearing Net debt as a percentage of Capital Employed Government The Government of the Republic of India Group The Company and its subsidiary undertakings and, where appropriate, its associate undertaking HSE Health, safety and environment HZL Hindustan Zinc Limited, a company incorporated in India IFL India Foils Limited, a company incorporated in India IFRS International Financial Reporting Standards Interest Cover EBITDA divided by finance cost KCM or Konkola Copper Mines Konkola Copper Mines PLC, a company incorporated in Zambia KDMP Konkola Deep Mining Project LIBOR London Inter Bank Offered Rate Listing The listing of the Company's Ordinary Shares on the London Stock Exchange on 10 December 2003 Listing Particulars The listing particulars dated 5 December 2003 issued by the Company in connection with its Listing LME London Metals Exchange London Stock Exchange London Stock Exchange plc LTIP Vedanta Resources Long Term Incentive Plan MALCO The Madras Aluminium Company Limited, a company incorporated in India mt or tonnes Metric tonnes MW Megawatts of electrical power Non-executive Directors The non-executive directors of the Company Ordinary Shares Ordinary shares of $0.10 each in the Company Return on Capital Employed or ROCE Profit before interest, taxation, special items, tax effected at the Group's effective tax rate as a percentage of Capital Employed Reward Plan Vedanta Resources Share Reward Plan SEWT Sterlite Employee Welfare Trust, a long-term investment plan for Sterlite senior management SOTL Sterlite Optical Technologies Limited, a company incorporated in India SOVL Sterlite Opportunities and Ventures Limited, a company incorporated in India Special items Items which derive from events and transactions that need to be disclosed separately by virtue of their size or nature Sterlite Sterlite Industries (India) Limited, a company incorporated in India Sustaining Capital Expenditure Capital expenditure to maintain the Group's operating capacity TC/RC Treatment charge/refining charge being the terms used to set the smelting and refining costs tpa Metric tonnes per annum TCM Thalanga Copper Mines Pty Limited, a company incorporated in Australia Twin Star Twin Star Holdings Limited, a company incorporated in Mauritius Twin Star Holdings Group Twin Star and its subsidiaries and associated undertaking Underlying Profit Profit for the year after adding back special items and their resultant tax and minority interest effects VAL Vedanta Alumina Limited, a company incorporated in India Volcan Volcan Investments Limited, a company incorporated in the Bahamas VRHL Vedanta Resources Holdings Limited, a company incorporated in the United Kingdom ZCI Zambia Copper Investment Limited, a company incorporated in Bermuda ZCCM ZCCM Investments Holdings plc, a company incorporated in Zambia Zinc Business The zinc-lead business of the Group comprising its fully integrated zinc-lead mining and smelting operations in India This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Vedanta Resources