We are in the business of producing commodities and supplying energy that impact lives and economies by serving for the essentials of creating infrastructure, like need for transportation and power, and also providing for the material requirements of manufacturing consumer goods. We are also excellently located: Vedanta operates primarily in India and Africa, countries that are endowed with an abundant supply of natural resources, and have growing economies waiting to leverage their potential.
With a business model of growth, constant value creation, and improved operations, our vision is focused towards building the wealth of our shareholders in a sustainable manner while minimising the effect of our operations on the environment, and maximising the benefits for the local communities.
ECONOMIC VALUE GENERATED & DISTRIBUTED (ECG&D)
We saw a better environment for our business in FY 2016-17. The sector benefited from a combination of positive global economic activity, coupled with a progressive tightness of commodity supply. Moreover, the commodities that performed best globally - zinc and oil, are also the ones in which we are strong. This meant that Vedanta's own basket of commodities outperformed the sector generally.
ANIL AGARWAL | CHAIRMAN, VEDANTA RESOURCES PLC
SHAREHOLDERS & LENDERS
Here is a snapshot of our economic performance across the stakeholder spectrum.
We complemented the benefits of better market conditions by maintaining tight financial discipline. Our cost savings programme continued to drive down costs intelligently and safely, while continuing to optimise our plant productivity and achieving material efficiencies across the supply chain.
We believe in the philosophy of working and growing with our investors. During the year, total shareholders' return was 150%. We recently announced a new dividend policy at Vedanta Limited and earlier in the year at Zinc India. In FY 2015-16, we set a target to deliver cost and marketing savings of US$1.3 billion, and we have already delivered cumulative savings of US$814 million over the past 24 months.
In FY 2016-17, our revenue stood at US$11.5 billion compared with US$10.7 billion in FY 2015-16 - a growth of 7%. EBITDA for FY 2016-17 improved by 37% to US$3.2 billion.
This was primarily driven by firmer prices, the ramp-up at our Aluminium and Power businesses, restarting of operations at Iron Ore and cost efficiencies across the business
Vedanta businesses have regularly and consistently announced dividends as it gives a powerful message to shareholders on prospects and performance of the organisation. With a strong operational performance and a supportive market environment, we delivered encouraging numbers for FY 2016-17.
Vedanta Limited announced a dividend of US$1.0 billion, of which US$500 million was received by Vedanta Resources Plc
By contributing to the exchequer and the national economy, creating and supporting direct and indirect employment, and by purchasing goods and services, we have developed and maintained a productive and long-lasting relationship with governments across every country we operate in.
We also help strengthen industry sectors by participating in industry organisations and international bodies, protect the environment by working closely with host governments, and provide more than 70,000 direct and indirect employment opportunities across geographies.
We have not received any direct financial assistance from governments during the reporting year, although as part of various direct tax holidays and similar exemptions, Vedanta did benefit by US$204.8 mn during FY 2015-16.
In accordance with the UK Bribery Act, it is a Vedanta Board policy that neither the Group nor its subsidiaries will make donations or contributions to political parties within the United Kingdom or Euorpean Union. In India, political donations or contributions made within the context of legitimate business operations are made only with the approval of the Board. Last year, no political donation was made by any of our businesses.
We practice a tax strategy which conforms to our Code of Business Conduct & Ethics with zero tolerance on corruption and bribery. Our tax teams around the world are required to operate in accordance with clearly defined principles, including integrity and open communication. Management of tax affairs and tax risks is led by tax professionals who work in accordance with our established governance framework.
Transparency is the key to long-term sustainability and Vedanta firmly believes in it. Irrespective of our country of operations, we remain transparent and open in our tax affairs. We brought out our first Tax Transparency Report (TTR) in 2015-16. The TTR contains all the details of the contributions we made to the public finances in the countries of our operations.
In 2016-17, we also plan to publish TTR on our website to maintain accountability towards our stakeholders.
With over 70,000 employees, Vedanta is not only a natural resources company but also a human resources company.
We provide them best of the remuneration and benefits in the industry, and uphold merit in hiring as well as career progression. To nurture this talent and motivate them, we provide ample scope for personal and professional development, and maintain a conducive work environment.
To read more about our employee-centric initiatives, please refer to the Employees section.
Constructive, lasting relationships are built on the values of trust and goodwill. To continue maintaining a cordial relationship with the community and the wider society, we regularly evaluate our impact on the host communities, understand community expectations from us and find means to meet these expectations.
The remoteness of our operations does not hamper the way we work for the society. We continue to generate employment, develop infrastructure and take up social interventions. We have taken comprehensive steps towards improving our performance on safety, health, the environment and community development, that has earned the license to operate from local and national governments, as well as the communities around our operations. We work to enhance the infrastructure of the nearby villages through Private-Public Partnerships. These projects are identified by the community, brought to our notice by the local panchayats and village development committees and owned by the community collectively
We have been focusing on children's well-being and education through our programmes such as Nand Ghar, women empowerment with the help of Subhalaxmi and Sakhi projects, health through construction of hospitals and conducting mobile health camps, skill enhancement through vocational courses, and farming and animal husbandry through various projects.
To read more about our community initiatives, please refer to the Community section.
INDUSTRY, SUPPLY CHAIN & CUSTOMERS
Mining companies that effectively manage supply chain significantly improve their profitability, productivity and product quality. At Vedanta, where supply chain management affects both, upstream and downstream, supply chain management is a material issue which directly impacts our business. Managing it therefore is important not only from the risk point of view but also as an opportunity to demonstrate our commitment to the communities where we operate.
Local sourcing further helps in improving the skills of the suppliers and improvement in the local infrastructure. We have an established Supplier Code of Conduct, Supplier and Contractor Management Policies, Supplier Screening Checklist that encourage business partners and suppliers to adopt principles and practices comparable to our own.
The Supplier Screening Checklist, which is used by our operations to screen and evaluate contractor compliance includes key aspects on legal compliance, HSE management, labour management, human rights and child labour. This checklist is used by operations to screen suppliers and contractors as part of a prequalification process prior to awarding work.
We focus on extending the life of our mines and oilfields through focused exploration, aimed at increasing our R&R base over and above what we extract each year. We prefer to explore brownfield opportunities across our current asset base, and a few select, large-scale, low-cost greenfield sites.
Our diversified portfolio produces high quality metals and minerals, London Metal Exchange (LME)- branded refined metals, and oil & gas, delivering
(as against 28% in FY 2015-16). Our business activities are underpinned by a well-established Sustainable Development Framework to minimise our environmental footprint.
We develop our resource base to optimise both production and the life of the resource. We also develop processing facilities that are strategically located close to our resources to optimise our costs and access to markets.
PEOPLE & SKILLS
We attract and retain talented employees through management training and development programmes, supported by specific initiatives to encourage gender diversity.
Our operations are focused on mining metals and bulks, extracting oil & gas and generating power. We operate mines in India, Africa, and Australia, extracting zinc, lead, silver, iron ore, bauxite and copper. We produce oil & gas from three operating blocks in India.
We are a substantial contributor to the economies where we operate, both as an employer and a tax payer.
In line with our integrated value chain, we produce refined metals by processing and smelting the ore that we extract. We have smelters and other processing facilities in India and Africa. We generate our own power for most of our operations, selling any surplus. We also sell power generated by our independent power plants and wind farms.
We make an economic and social contribution to the communities where we operate.
While we are primarily upstream, we selectively add value by converting some of our primary metal products into higher margin products such as sheets, rods, bars and rolled products at our zinc, aluminium and copper businesses, depending on the profitability of adding value and the customer demand for these products.
We deliver high quality raw materials for our customers in line with international standards for quality settlement terms and delivery dates.
India has a deficit market and we are a large generator of power in India.
We have a progressive dividend policy and have returned
since the IPO in 2004.
Vedanta is one of the major producers and marketers of the commodities across the world. We understand customers' expectations and provide them with quality products they require in a safe and efficient manner.
To complement the quality products, we use advanced technology that ensures transparency, ease of access and value addition to suppliers. Our SAP supplier portal is highly efficient and secure method of communication between purchasing organisations and vendors. It also allows customers to send requests for quotations, vendor bidding and online auctions.
Our raw material meets the required London Metal Exchange (LME) standards before entering the commodity market. We continue to engage with our customers through pre-defined mediums and channels to understand and meet their requirements. We also evaluate customer satisfaction through third party surveys. All these activities are centred around meeting customers' need in an appropriate manner.
No cases of non-compliance with relevant regulations, anti-competitive behaviour, anti-trust, monopoly and voluntary codes concerning the health and safety impacts of our products and services were observed or reported.
Similarly, no significant fines for non-compliance with laws and regulations concerning the provision and use of products and services were reported.
Technology is changing the natural resources sector in a major way. It has not only increased operational efficiency and productivity, but also led to better safety of individuals associated with working in the sector.
At Vedanta, technology is being considered as one of the answers for major challenges such as sustained competitiveness and productivity, innovation across existing operations and exploration sites, and capital management.
Going forward, we plan to focus on technologies such as 'Big Data' analysis & modelling, core-scanning and drone geophysics to open new avenues for more efficient exploration.
We are also actively incentivising our people to contribute their own ideas. One example is Eureka, our new digital platform to nurture and incubate house innovation and technology, which is currently being embedded throughout the business.
It encourages our employees to come up with innovative ideas focusing on using technology to support mining in a sustainable way by reducing waste and improving energy efficiency.
DURING THE YEAR, WE INITIATED A
US$30millionINVESTMENT FUND FOR IN-HOUSE R&D, SUPPORTING OUR WEALTH OF KNOWLEDGE AND SPIRIT OF INNOVATION WITH MEANINGFUL RESOURCES
TO DATE AROUND
1,000 ideasHAVE BEEN SUBMITTED AND
200WERE SELECTED FOR IMPLEMENTATION, AND WILL BE ROLLED OUT ACROSS OUR OPERATIONS.