Vedanta Q2 net profit at Rs 11.35 bn, down 43% from same period last year

Increased fuel costs drag operating profit even as net sales witness 5% rise

Anil Agarwal-led Vedanta Limited on Wednesday reported a lower-than-expected consolidated net profit of Rs 11.35 billion, down 43 per cent from same period last year on the back of increased power and fuel costs even as net sales moved up in the period under review.

Topline of the company was higher-than-estimates, as it stood at Rs 227.05 billion in the September quarter, up 5 per cent from corresponding period last year as oil & gas, aluminium and power businesses made sizeable contribution.

"I am pleased with the growth in volume this quarter at our businesses. The company is uniquely poised to grow in commodities that have rising demand, especially in India with an enviable growth pipeline which is systematically being brought to fruition. I see a strong second half in both volumes and profitability across the businesses," said Srinivasan Venkatakrishnan, chief executive officer said at the earnings conference call.

As per Bloomberg estimates, the company's net sales were seen at Rs 206.04 billion in the quarter gone by, while the bottomline was expected to be at Rs 13.92 billion.

Though the EBITDA declined 8 per cent on a year-on-year basis to Rs 53.42 billion, the benefit of Rs 3.20 billion from exceptional item lent some support to the bottomline.

Impairment reversal of Rs 26.1 million relating to property, plant and equipment and exploration assets in oil & gas business and Rs 0.59 billion reversal pursuant to Supreme Court order together made up the Rs 3.20 billion benefit.

“Though our margins have taken a bit of a hit this quarter, our overall ramping up plans for zinc and oil&gas businesses remain intact and we aim to increase zinc (India) volumes coupled with reduction in costs,” said Venkatakrishnan.

In the period under review, the company’s power&fuel costs went up by 36 per cent to Rs 47.23 billion.

The management informed that the company continues to maintain a strong balance sheet with net debt reduced by Rs 35.53 billion in the quarter ended September maintaining a net debt/EBITDA at 1.0x---lowest among domestic peers. Also, the company has strong financial position with total cash & liquid investments of Rs 400.15 billion as on September 30.

On standalone basis, the company’s performance has been a dismal as it showed a widened operational loss of Rs 2.37 billion in the period under review.

With a capex guidance of $1.6 billion for FY19, up 60 per cent from last year, Vedanta aims to invest the amount towards its cash cows—the oil & gas and zinc businesses. Alongside, the management informed that it aims to invest and expand in its newly acquired Electrosteel unit to take the capacity to 2.5 million tonne over next 18 months from 1.3 million tonne at present.

Though aluminium contributed sizably to the overall revenue stream, the management said it is not happy with its current performance and aims to source larger quantity of bauxite captively, improve captive coal linkages and bring down cost and double margins in coming months.