Sterlite's closure hits Vedanta copper earnings; revenue drops by 57%

Vedanta's total Ebitda fell 4% to Rs 24,012 crore in FY19

Vedanta’s copper division business reported a loss in earnings before interest, taxes, depreciation, and amortisation (Ebitda) of Rs 235 crore and a revenue drop by 57 per cent to Rs 10,739 crore during 2018-19, compared to a year before, mainly due to shutdown of its smelter at Thoothukudi (Tuticorin) in this state.

In 2017-18, there was an Ebitda profit of Rs 1,055 crore for the division. The margin on this account fell to a negative 2 per cent, from a positive 4 per cent in FY18. Revenue during FY18 was Rs 24,951 crore.

The company’s total Ebitda fell 4 per cent to Rs 24,012 crore in FY19. Apart from the Thoothukudi shutdown, there was input commodity inflation, lower metal prices and higher cost of production, says their annual report for FY19. 

The segment also registered a loss before income tax of Rs 438 crore. In contrast, the other businesses — zinc, lead, silver, oil and gas, aluminium, iron ore, power — showed a profit. Its production of cathode from India fell to 90 kilotonnes (kt), from 403 kt the previous year. 

“The Tuticorin smelter closure affected production in India,” said the company, adding its Silvassa (Goa) refinery and rod plant continued to operate as usual.

Vedanta recently argued at the Madras High Court that there was direct economic interest by foreigners in promoting agitation against Sterlite Copper in Thoothukudi.

The country’s annual import bill for copper was $2 billion, earlier satisfied by the Sterlite output. 

After closure of the plant, around 38 per cent of the country's copper demand, supplied by Sterlite earlier, was being met by foreign companies, said their counsel to the court. Adding that with the facility closed for more than a year, the cost of replacing the machinery inside the factory would itself now cost around Rs 70 crore. 

The plant has been shut since March 2018, after an order from the Tamil Nadu Pollution Control Board. An order for permanent closure from the state government was issued after a public protest against the plant resulted in police firing and death of 13 people.

The company challenged the closure order through an appeal before the National Green Tribunal (NGT). A three-member committee set up by the Tribunal had given a report, based on which the latter set aside the pollution board order and asked it to pass an order for Consent To Operate. The state then petitioned the Supreme Court, which on February 18 this year had set aside the NGT order. The apex court also directed the company to approach the high court, where the matter is being currently heard. 

Separately, the state government’s industrial nvestment promotion agency, SIPCOT, had through a letter of end-May 2018, cancelled the earlier allotment of 342 acres for a phase-2 expansion plan of the company. This is also being contested in court.