Anil Agarwal-led Vedanta
Ltd today reported a consolidated net profit of Rs 2,615 crore for March quarter, down 34 per cent from same period last year on the back of lower revenues which declined as copper smelter
In the period under review, Vedanta's top line of Vedanta
was higher than expected at Rs 23,092 crore, down 15 per cent from same period last year partly due to lower commodity prices and shutdown of the copper smelter
which normally contributes about 20 per cent to the company's total revenue.
Base metal prices have been under pressure amid US-China tariff tensions. The 90-day ceasefire between the two nations on imposition of new tariffs had kept prices of base metals under pressure and they were unlikely to move up in the first quarter of 2019. The ceasefire was scheduled to expire March 1.
There were no exceptional items during the quarter, said the company.
Exceptional gains for FY2019, at Rs 320 crore, were mainly due reversal of previously recorded impairment of Rs 261 crore in the KG ONN block
of the oil and gas business and reversal of a Rs 59 crore charge relating to arbitration of a historical vendor claim pursuant to Supreme Court Order in Aluminium business.
The exceptional gain for FY2018 was at Rs 2,897 crore primarily because of reversal of previously recorded impairment of Rs 7,016 crore at Oil and Gas business partially offset by impairment of Iron Ore Goa assets of Rs 2,329 crore due to suspension of mining operations pursuant to Supreme Court Order and reclassification of FCTR (foreign currency translation differences while consolidating foreign operations) relating to subsidiary investment companies
under liquidation of Rs 1,485 crore.
As per Bloomberg estimates, the company’s consolidated net profit was seen at Rs 1,413 crore in the quarter gone by, while the revenue was expected to be at Rs 22,541 crore.
The drop in revenue impacted the company’s EBITDA
for the March quarter as it stood at Rs 6,330 crore, down 19 per cent from corresponding period last year. Though the EBITDA
margin contracted to 31 per cent from 37 per cent last year, for FY19 the company maintained EBITDA
margin of 30 per cent.
“On the EBITDA margin front, the copper business contributes just about 6-7 per cent of total, so we are not worried to that extent. But since copper contributes nearly 20 per cent to the topline, the absence of smelter
operations is evident in the topline,” informed the management in the conference call held today.
Meanwhile, the company remained bullish over its steel business as it achieved the production goal of 1.5 million tonne. Vedanta
aims to take the capacity to 3 million tonne hot metal production which will improve cost structure and strengthen EBITDA margins, it said.
“Steel will be a handsome contributor going ahead and we expect it to contribute over 5 per cent in total EBITDA. The steel unit also has a mine nearby in Jharkhand which will be augmented in coming months making the facility fully integrated,” said Srinivasan Venkatakrishnan, chief executive officer at Vedanta.
Last year, Vedanta forayed into steel business via acquisition of stressed Electrosteel Steel. The company aims to increase capacity of this unit via brownfield expansion.
For its copper business in India, the company said legal process is being followed to achieve a sustainable restart of the operations.
"Looking ahead, FY2020 will be an exciting year of growth in our key businesses – zinc-lead-silver, oil & gas and aluminium, being pursued with a strict capital allocation framework," said Venkatakrishnan.
In FY19, the company had a record aluminium production at 2 million tonne, up 17 per cent year-on-year as increased local bauxite supply met 30 per cent of company's requirement. In oil&gas, the average gross production stood at 189,000 boepd for FY2019, up 2 per cent year-on-year. Contract signed for 2 new blocks in Assam and KG basin under Discovered Small Field (SMF) Bid Round II.
During the quarter, Vedanta produced 744 kg of silver, placing itself among the top 10 producers of silver in the world. Silver gets produced as a byproduct of the electrolytic refining zinc
in the ores. Going ahead, the management informed that it aims to be among the top three silver producers in the world.
For FY20, the company’s capex is distributed between oil & gas, zinc
and aluminium with $600 million, $400 million and $100 million, respectively.
As on March 31, 2019, the company's net debt stood at Rs 26,956 crore, up by Rs 4,998 crore from last year, primarily due acquisition of Electrosteel Steel. However, the net debt to EBITDA for FY19 was at 1.1x
"We have robust cash and liquid investments of Rs 39,269 crore. The company follows a Board-approved investment policy and invests in high quality debt instruments with mutual funds, bonds and fixed deposits with banks," said the company statement.
Company’s finance cost for FY2019 was at Rs 5,689 crore, higher 11 per cent y-o-y, due to increase in gross borrowing due to Electrosteel Steel acquisition, temporary borrowing at Zinc
India and higher average borrowing cost in line with market trends, partially offset by higher capitalisation of borrowing cost.
On the investment income front, the company said that income was at Rs 1,599 crore, higher by Rs 557 crore quarter-on-quarter, mainly due to mark to market gain on a treasury investment made by Vedanta’s overseas subsidiary through purchase of economic interest in a structured investment in Anglo American Plc from its ultimate parent, Volcan Investment Limited, partially offset by lower investment corpus.
Investment Income for FY2019 was at Rs 3,618 crore, higher by 13 per cent year-on-year, primarily due to mark to market gains on a treasury investment made as described above, partially offset by lower investment corpus.