 "Aluminium premiums, crude prices hit Vedanta")
Even as the Street expected a tepid performance by Vedanta in the June quarter, falling aluminium premiums and lower crude oil prices have significantly pulled down the company’s overall profits.
The stellar performance by Hindustan Zinc and the copper segment was not enough to offset the pressure seen in the aluminium and oil businesses. Thus, while consolidated sales at Rs 16,952 crore was 3.2 per cent lower than Bloomberg consensus estimates of Rs 17,512 crore, Ebitda (earnings before interest, tax, depreciation and amortisation) margins at Rs 3,992 crore was significantly lower than the estimates of Rs 4,275 crore as well as Rs 5,673 crore reported in the June 2014 quarter. Exchange gains, however, helped net profit (at Rs 866 crore) beat estimates of Rs 703 crore.
Declining crude prices saw the gross contribution of oil and gas business decline from 26 per cent in the June 2014 quarter to 15.5 per cent in the June 2015 quarter, and the segment’s Ebit (earnings before interest, tax) plunge 87 per cent year-on-year to Rs 255 crore. Likewise, aluminium premiums plummeted faster than the white-metal’s price. Average per tonne aluminium prices fell from $1,798 in the year-ago quarter and $1,800 in the March 2015 quarter to $1,767 in the June 2015 quarter. But, per tonne premium at $170 was down sharply from $315 in the March 2015 quarter and $289 in the June 2014 quarter. As a result, the business reported an Ebit loss of Rs 173 crore compared to profits of Rs 814 crore in the March quarter and Rs 254 crore in the year-ago period.
ALSO READ: Vedanta Ltd Q1 net drops 35% to Rs 866 cr
The mined metal output at Hindustan Zinc increased 42 per cent to 0.23 million tonnes (mt) and refined metal output was higher by 27 per cent to 0.22 mt over the year-ago quarter. Increasing volumes were complimented by higher zinc prices, which at $2,192 a tonne were up five per cent sequentially and six per cent year-on-year. Though lead and silver prices declined, higher volumes lent support. Thus, the zinc, lead and silver segments (including Zinc International) revenues increased 18 per cent to Rs 4,435 crore, contributing a fourth to gross revenues.
ALSO READ: Vedanta to produce zinc ore at Gamsberg mine from 2018
The stellar performance by Hindustan Zinc and the copper segment was not enough to offset the pressure seen in the aluminium and oil businesses. Thus, while consolidated sales at Rs 16,952 crore was 3.2 per cent lower than Bloomberg consensus estimates of Rs 17,512 crore, Ebitda (earnings before interest, tax, depreciation and amortisation) margins at Rs 3,992 crore was significantly lower than the estimates of Rs 4,275 crore as well as Rs 5,673 crore reported in the June 2014 quarter. Exchange gains, however, helped net profit (at Rs 866 crore) beat estimates of Rs 703 crore.
Declining crude prices saw the gross contribution of oil and gas business decline from 26 per cent in the June 2014 quarter to 15.5 per cent in the June 2015 quarter, and the segment’s Ebit (earnings before interest, tax) plunge 87 per cent year-on-year to Rs 255 crore. Likewise, aluminium premiums plummeted faster than the white-metal’s price. Average per tonne aluminium prices fell from $1,798 in the year-ago quarter and $1,800 in the March 2015 quarter to $1,767 in the June 2015 quarter. But, per tonne premium at $170 was down sharply from $315 in the March 2015 quarter and $289 in the June 2014 quarter. As a result, the business reported an Ebit loss of Rs 173 crore compared to profits of Rs 814 crore in the March quarter and Rs 254 crore in the year-ago period.
ALSO READ: Vedanta Ltd Q1 net drops 35% to Rs 866 cr
The mined metal output at Hindustan Zinc increased 42 per cent to 0.23 million tonnes (mt) and refined metal output was higher by 27 per cent to 0.22 mt over the year-ago quarter. Increasing volumes were complimented by higher zinc prices, which at $2,192 a tonne were up five per cent sequentially and six per cent year-on-year. Though lead and silver prices declined, higher volumes lent support. Thus, the zinc, lead and silver segments (including Zinc International) revenues increased 18 per cent to Rs 4,435 crore, contributing a fourth to gross revenues.
ALSO READ: Vedanta to produce zinc ore at Gamsberg mine from 2018
While the core business performance was weak in Q1, subdued commodity prices suggests that the stock is unlikely to see a sharp recovery any time soon. The stock has fallen to Rs 131 in about a year, from its 52-week highs of Rs 305.30 in August 2014. The good news is that some experts believe commodity prices seem to be bottoming out. But, unless the Cairn merger goes through smoothly, the stock may remain an underperformer.