Sterlite Industries (India) Limited - Sterlite Industries India Ltd.

Aluminum
Net sales to external customers in the aluminum segment decreased from Rs. 41,596 million in fiscal 2008 to Rs. 39,170 million
($770.0 million) in fiscal 2009, a decrease of Rs. 2,426 million, or 5.8%. This decrease was primarily due to a 14.8% decrease in daily average
aluminum LME prices in fiscal 2009 compared to fiscal 2008, partially offset by a depreciation of the Indian Rupee against the US dollar by
14.1% between fiscal 2008 and 2009. Specifically:
• Aluminum production decreased slightly by 0.5%, from 358,671 tons in fiscal 2008 to 356,782 tons in fiscal 2009. Our new Korba
smelter of 245,000 tpa capacity increased production from 249,392 tons in fiscal 2008 to 250,499 tons in fiscal 2009, which was fully
offset by the decrease in the existing smelter production from 109,279 tons in fiscal 2008 to 106,283 tons in fiscal 2009, primarily due
to the planned permanent shutdown of 204 out of 408 pots at the old Korba smelter in February and March 2009 due to the smelter’s
higher cost of production. The export of power in fiscal 2009 increased to 320 million units from 194 million units in fiscal 2008, due
to the sale of surplus power from captive power plants during the period that the old Korba smelter was partially shut down.
• Aluminum sales decreased from 358,328 tons in fiscal 2008 to 356,512 tons in fiscal 2009, a decrease of 0.5%. Sales of aluminum
ingots decreased from 195,785 tons in fiscal 2008 to 172,173 tons in fiscal 2009, a decrease of 12.1%, as a result of the partial shut
down of the old Korba smelter in the fourth quarter of fiscal 2009 due to higher operational costs. Wire rod sales increased from
101,316 tons in fiscal 2008 to 127,019 tons in fiscal 2009, an increase of 25.4%, as a result of increased production due to the addition
of a wire rod mill at the new Korba smelter and increased demand for this product, particularly in the electrical sector, and reflects our
continued focus on the sale of value-added products. Rolled product sales decreased from 61,693 tons in fiscal 2008 to 57,399 tons in
fiscal 2009, a decrease of 7.0%, primarily due to decreased demand in the construction and transport sector.
• Aluminum sales in the domestic market increased from 265,839 tons in fiscal 2008 to 289,991 tons in fiscal 2009, an increase of 9.1%,
as a result of increased demand in the electrical sector. Our aluminum exports decreased from 92,489 tons in fiscal 2008 to 66,523 tons
in fiscal 2009, a decrease of 28.1%, as a result of lower premiums globally and higher demand in the domestic market. We endeavor to
sell as large a quantity of our products as possible domestically, where we receive an Indian market premium. Our domestic sales as a
percentage of total sales increased from 74.2% in fiscal 2008 to 81.3% in fiscal 2009 as the demand in the domestic market increased
while our production volume decreased slightly.
• The daily average aluminum cash settlement price on the LME declined from $2,620 per ton in fiscal 2008 to $2,234 per ton in fiscal
2009, a decrease of 14.8%.
Operating income in the aluminum segment decreased from Rs. 11,581 million in fiscal 2008 to Rs. 6,364 million ($125.1 million) in fiscal
2009, a decrease of Rs. 5,217 million, or 45.1%. Operating margin decreased from 27.8% in fiscal 2008 to 16.2% in fiscal 2009. The decrease
in operating income was primarily due to a decrease in the daily average aluminum LME price.
Power
Operating income in our commercial power generation business segment was Rs. 184 million ($3.6 million) in fiscal 2009. Our power business
is still under development and we expect to have meaningful operating results for our commercial power generation business segment in fiscal
2010, when Sterlite Energy’s first power project is expected to begin commissioning.
Corporate and Others
Operating loss in our corporate and other business segment was Rs. 6 million ($0.1 million) in fiscal 2009.
Interest and Dividend Income
Interest and dividend income increased from Rs. 6,548 million in fiscal 2008 to Rs. 16,728 million ($328.8 million) in fiscal 2009, an
increase of Rs. 10,180 million, or 155.5%, primarily due to interest income on the proceeds from our ADS offering that we have currently
invested and an operating surplus in HZL of Rs. 21,960 million that we have invested.
Interest Expense
Interest expense increased from Rs. 3,386 million in fiscal 2008 to Rs. 6,874 million ($135.1 million) in fiscal 2009, an increase of Rs.
3,488 million, or 103.0%. The increase in interest expense was primarily due to an increase in our outstanding debt in fiscal 2009.
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