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

the selling and distribution expenses are proportional to the sales volume. As a percentage of net sales, however, selling and
distribution expenses increased marginally from 1.4% in fiscal 2007 to 1.5% in fiscal 2008.
• General and administrative expenses increased from Rs. 2,633 million in fiscal 2007 to Rs. 4,572 million in fiscal 2008, an increase of
Rs. 1,939 million, or 73.6%, primarily as a result of an increase in exploration and technical consultancy costs at HZL and an increase
in salaries and other general costs as a result of expansion of our business. As a percentage of net sales, general and administrative
expenses increased from 1.1% in fiscal 2007 to 1.9% in fiscal 2008. These expenses increased primarily in our zinc and aluminum
business as a result of an increase in capacities and scale of operations.
• We did not have a gain on sale of real estate in fiscal 2008, compared to Rs. 986 million in fiscal 2007 from the sale of property in
Mumbai comprising land and building for an amount of Rs. 1,000 million.
• We did not incur any voluntary retirement scheme expenses in fiscal 2008, compared to Rs. 97 million in fiscal 2007.
• We incurred guarantees, impairment of investments and loans in fiscal 2008 of Rs. 628 million, compared to nil in fiscal 2007. This
was due to provisions made for corporate guarantees provided to banks and financial institutions.
• Depreciation, depletion and amortization increased from Rs. 5,959 million in fiscal 2007 to Rs. 7,060 million in fiscal 2008, an
increase of Rs. 1,101 million, or 18.5%. This increase related primarily to the capitalization of our expanded capacities in our copper,
zinc, aluminum and wind power businesses.
Copper
Net sales in the copper segment increased from Rs. 115,192 million in fiscal 2007 to Rs. 126,276 million in fiscal 2008, an increase of Rs.
11,084 million, or 9.6%. This increase was primarily due to an increase in sales volume enabled by increased production, higher daily average
copper LME prices and a higher percentage of sales of copper rods. Specifically:
• Copper cathode production increased from 312,720 tons in fiscal 2007 to 339,294 tons in fiscal 2008, an increase of 8.5%, enabled by
a capacity expansion at our Tuticorin facility which increased the anode and cathode capacities to 400,000 tpa in November 2006.
Copper cathode sales decreased from 133,402 tons in fiscal 2007 to 112,411 tons in fiscal 2008, a decrease of 15.7%, as we converted
a higher percentage of our copper cathode production into copper rods in fiscal 2008 as compared to fiscal 2007.
• Production of copper rods increased from 177,882 tons in fiscal 2007 to 224,758 tons in fiscal 2008, an increase of 26.4%. This
increase in production was enabled by the increase in rod plant capacity at Tuticorin in the second half of fiscal 2007. Copper rod sales
increased from 177,746 tons in fiscal 2007 to 224,662 tons in fiscal 2008, an increase of 26.4%. The increase in sales was due to the
increase in production.
• Sales of copper in the Indian market increased from 116,522 tons in fiscal 2007 to 157,037 tons in fiscal 2008, an increase of 34.8%,
and our exports decreased from 194,626 tons in fiscal 2007 to 180,035 tons in fiscal 2008, a decrease of 7.5%. 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 37.5% in fiscal 2007 to 46.6% in fiscal 2008 as the demand in the domestic market increased
more rapidly than our production volume growth.
• The daily average copper cash settlement price on the LME increased from $6,984 per ton in fiscal 2007 to $7,588 per ton in fiscal
2008, an increase of 8.6%.
Operating income in the copper segment decreased from Rs. 17,235 million in fiscal 2007 to Rs. 11,037 million in fiscal 2008, a decrease of
Rs. 6,198 million, or 36.0%. Operating margin decreased from 15.0% in fiscal 2007 to 8.7% in fiscal 2008. The decrease in operating income
was primarily due to significantly reduced TcRc rates and the 11.1% appreciation of the Indian Rupee against the US dollar between fiscal
2007 and fiscal 2008, partially offset by an increase in sales volume combined with a lower cost of production resulting from improved copper
recovery, improved by-product management and higher realization on the sale of sulphuric acid by-product and contribution from the
phosphoric and precious metals businesses. In particular:
• TcRc rates decreased from an average of 31.1¢/lb realized in fiscal 2007 to an average of 15.7¢/lb realized in fiscal 2008 as a result of
a global weakening of the TcRc market resulting in a significant decrease in the market TcRc rate.
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