Sesa Goa Limited Announced Results for 4Q and Full Year

OREANDA-NEWS. April 26, 2011. Sesa Goa Limited ("Sesa Goa" or the "Company") announced its results for the fourth quarter ("Q4") and full year ended ("FY 2011") 31 March 2011.

All iron ore volumes are reported on a dry metric tonne (DMT) basis as against earlier basis of wet metric tonne (WMT), as international sale prices are quoted in DMT.

Iron ore sales is inclusive of captive consumption in Pig Iron Division (0.30 million tonnes in FY 2011 as compared to 0.31 million tonnes in previous year)

Operating Performance

Production of iron ore was 5.5 million tonnes (6.3 million tonnes on a WMT basis) in Q4, 20% lower than the corresponding prior period, due to the state-wide export ban in Karnataka since end July 2010 and termination of the third party mining agreement in Orissa in November 2010. Production for the full year was marginally lower at 18.8 million tonnes (21.1 million tonnes on a WMT basis). On 5 April 2011, the Supreme Court issued a ruling that the Karnataka export ban is to be lifted from 20 April 2011. The final hearing of the case is expected in the first week of May 2011.

Sales of iron ore were 6.7 million tonnes (7.5 million tonnes on a WMT basis) in Q4 as compared with 6.6 million tonnes (7.4 million tonnes on a WMT basis) in the corresponding prior quarter. Sales for the year were 18.1 million tonnes (20.4 million tonnes on a WMT basis), in line with 18.4 million tonnes (20.5 million tonnes on a WMT basis) sold during the prior year.

During Q4, pig iron production declined by 2% at 67,289 tonnes and sales volumes decreased by 7% at 64,661 tonnes compared with the corresponding prior periods, primarily due to change in grade mix and lower demand of pig iron due to increased availability of scrap. Production and sales volumes of pig iron in the full year was at 276,117 tonnes and 266,090 tonnes, a decrease of 1% and 5% respectively over the corresponding period of the previous year.

Expansion Progress

The iron ore capacity expansion programme is on track for completion by the end of FY 2013. Expansion of the pig iron capacity to 625 ktpa and the associated expansion of metallurgical coke capacity to 560 ktpa is progressing well for commissioning by Q3 FY 2012.

Exploration

The Company's strong focus on exploration activities at its operations at Goa and Karnataka have yielded yet another year of significant reserves and resources accretion, with a gross addition of 53 million tonnes of reserves and resources base prior to a depletion of 21 million tonnes during the year.

Total reserves and resources as on 31 March 2011 stands at 306 million tonnes (at the mines that the Company holds on lease and/or right to mine) as compared with 274 million tonnes as on 31 March 2010. (Post the closure of Orissa Mine since 30 November 2010 our resource base which was reported as on 31 March 2010 at 353 million tonnes was reduced to 274 million tonnes).

The reserves and resources position has been independently reviewed and certified as per JORC standard.

Financial Performance

Cash Profit (PBDT) for Q4 and FY 2011 were  2,277 crore and  5,656 crore, an increase of 41% and 61% respectively compared with the corresponding prior periods. Cash profit was higher on account of higher realisations. These were partially off-set by increased export duties and higher logistic costs.

During the year, Government of India increased the export duty from 5% and 15% for fines and lumps respectively to 20% for both.

Dividend

The board of directors has recommended a dividend of 350% i.e.  3.50 per equity share of  1/- each for the current financial year, as against 325% declared in the previous year (i.e.  3.25 per equity share of  1/-)

ACQUISITIONS

Acquired 10.4% Stake in Cairn India Ltd from Petronas

On 19 April 2011, Sesa Goa acquired 200 million shares amounting to 10.4% stake in Cairn India from Petronas International Corporation Ltd ("Petronas") at a price of  331 per share. The acquisition is in addition to the Open Offer launched by Sesa Goa as stated below.

Open Offer

During the quarter, SGL received the clearance from Securities and Exchange Board of India ("SEBI") to proceed with the Open Offer of up to 20% of the shares of Cairn India. SGL has launched the Open Offer from 11 April 2011 at a price of  355 per Cairn India share which will close on 30 April 2011.

Acquisition of Assets of Bellary Steel and Alloys Limited ("BSAL")

During the quarter, SGL acquired the assets of the upcoming Steel Plant Unit of BSAL for a cash consideration of  220.00 crore. BSAL was in the process of putting up a 0.5 mtpa Steel Plant Project at Bellary. The properties of the under construction plant acquired are free hold land of

~700 acres, building and structures, plant and machinery and other assets of the Steel Plant. The assets have been transferred on an "As is where is" Basis to SGL as of 22 March 2011.

The above acquisition has been challenged by JSW Steel Ltd in the Supreme Court. The Court has asked the parties to maintain status quo till the matter is decided.

Amalgamation of Sesa Industries Limited with Sesa Goa Limited

The Hon'ble Supreme Court of India by its Order dated 7 February 2011 has approved the Scheme of Amalgamation of Sesa Industries Limited (SIL) with Sesa Goa Limited (SGL) with appointed date of 1 April, 2005.

Liquidity and Investment

As at 31 March 2011, the Company had cash and cash equivalents of  10,682 crore consisting of  8,800 crore in debt mutual funds, inter corporate deposit of  1,000 crore (since repaid) and  882 crore in fixed deposits and cash with banks. The Company follows a conservative investment policy and invests in high quality debt instruments.