Vedanta's Q3 aluminium revenue up 27% to $532 million

Firm LME prices, volume ramp-up, lower input prices and cost cutting initiatives bolster earnings

London listed metals and mining conglomerate Vedanta has recorded 27 per cent growth in revenue from its aluminium operations for the quarter ended December 31, 2016. Revenue from aluminium business shot up from $418.9 million to $531.9 million as firm LME prices, volume ramp-up, lower input prices and cost cutting initiatives bolstered earnings. EBITDA (earnings before interest, taxes, amortisation and depreciation) in the quarter was significantly higher at $95 for the same reasons and also due to rupee depreciation. Aluminium prices on the LME were robust during Q3 averaging $1710 per tonne compared to $1495 a tonne in the year-ago period.

For the April-December period, total revenue from aluminium operations moved up 10 per cent to $1396 million whereas EBITDA stood at $197 million. In this nine-month period, aluminium production by Vedanta was higher by 23 per cent year-on-year at 0.86 million tonne (mt) on the back of ramp-up of additional smelters at Balco-II and Jharsuguda smelters. Alumina production, too, was up 18 per cent at 0.89 mt as the Lanjigarh refinery in Odisha re-commenced second stream operations.

In Q3, the first line of the 1.25 mtpa Jharsuguda-II smelter was impacted by a transformer failure incident in mid- January. Rectification work is in process and 80 pots of the 336 pots are currently operational. The first line is expected to be ramped up by the end of June 2018 post rectification. The second line is fully ramped up and is expected to be capitalised in Q4 of this financial year.

The average cost of aluminium production in this period was $1429 per tonne. The smelter at Jharsuguda reported hot metal production cost of $1388 a tonne. Though Vedanta’s power costs were lower, higher alumina import price ($304 per tonne) weighed on.

In alumina, the two streams of the Lanjigarh refinery produced 0.32 mt in October-December period. The refinery currently has a de-bottlenecked capacity of 1.7 - 2.0 mt per annum and we expect to produce 1.3 mt in FY17 to offset high alumina import prices, Vedanta stated in a statement.

It is aiming to produce 1-1.1 mt aluminium by the end of this financial year excluding trial run production. The cost of production is expected to be in the range of $1450-1475 per tonne in FY17. The bauxite mines at Balco are ramping up production and are set to end the financial year with a run rate of two mt per annum.