Vedanta loss at Rs 11,181 cr as revenue drops 11%

Company takes non-cash impairment charge of Rs 12,304 crore largely due to Cairn India acquisition goodwill

Vedanta reported a consolidated net loss of Rs 11,181 crore in the quarter ended March against a net loss of Rs 19,228 crore in the corresponding period last year.

This was on lower revenue as realisations from almost all businesses took a hit due to weak commodity prices. Prices of copper, aluminium and zinc were 16-20 per cent down year-on-year on the London Metal Exchange. Aluminium premiums (price over benchmark rates) were down 75 per cent (y-o-y).

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The year-ago period had also seen exceptional items of Rs 19,981 crore. However, excluding these one-offs, Vedanta's net profit for the March 2016 quarter stood at Rs 955 crore against Rs 505 crore in the year-ago period and Rs 24 crore in the December quarter of 2015. This was better than analysts’ estimates of Rs 563 crore, according to Bloomberg poll. Similarly, operating earnings at Rs 3,472 crore was ahead of estimates of Rs 3,249 crore.

Net sales stood at Rs 15,829 crore during the quarter, down 11 per cent from the same period a year ago, but marginally higher than the Bloomberg estimate of Rs 15,481 crore.

Though the bottom line did receive some support from lower expenses and improved other income, a non-cash impairment charge of Rs 12,304 crore, largely relating to Cairn India’s acquisition, pulled it down.

Of the total impairment, Rs 10,074 crore was incurred on account of loss of goodwill over acquisition of Cairn India and Rs 284 crore due to a write-off in exploratory assets in the oil and gas business.

The impairment was triggered by the continued fall in crude oil prices during the year, the company said. Further, in light of declining iron ore prices, both the acquisition goodwill and carrying value of exploratory assets in West Africa had also been impaired by Rs 1,490 crore, Vedanta said.

In addition, certain fixed assets and goodwill at copper mines in Tasmania and iron ore mines in Bellary, Karnataka, incurred an impairment charge of Rs 456 crore, the company said.

Vedanta’s other income during the quarter was Rs 1,289 crore against Rs 41.14 crore in the same period a year ago.

“Other income was significantly higher both sequentially and year on year largely due to timing differences wherein income earned on certain investments are recognised at maturity. During the quarter, a substantial portion of investments were liquidated at Hindustan Zinc on account of an announcement of special dividend and at Cairn India,” Vedanta said.

Though the company's iron ore business managed to move into Rs 80 crore profits during the quarter, this was nullified by Rs 64 crore losses incurred by the oil and gas business. Earnings from the aluminium business declined 92.5 per cent to Rs 61 crore against  Rs 812 crore in year-ago period.  However, on sequential basis, the aluminium business has turned in profits which the company attributed to cost efficiencies. In fact, except for copper, all divisions reported an increase in segment profit compared to the December 2015 quarter.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) declined 13 per cent, year on year, to Rs 3,508 crore during the quarter.

On its progress on the merger with Cairn India, Vedanta said it remained important for simplification of the group and would consolidate assets, improve financial flexibility and deliver superior returns. “We are committed to the transaction and continue to work towards completion,” it added.

In the year ended March 2016, Vedanta's net debt declined by Rs 6,254 crore with cash and cash equivalents at Rs 52,666 crore. The company's debt stood at Rs 77,952 crore in 2015-16.

“Our focus will continue to remain on deleveraging our balance sheet and maximising free cash flow,” Tom Albanese, chief executive officer of Vedanta, was quoted as saying.