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Sesa Sterlite, subsidiary of Vedanta Resources Plc, posted a 32 per cent year-on-year decline in its net profit during the second quarter ended September. But the net profit of Rs 1,658 crore was slightly higher than the Bloomberg consensus estimates of Rs 1,619 crore.
The total income was Rs 19,549 crore for the quarter against Rs 25,356 crore in the year-ago period. However, this was marginally higher than the consensus estimates of Rs 19,448 crore. The earnings before interest, taxes, depreciation and amortisation was Rs 6,327 crore against an expectation of Rs 6,374 crore.
The company said due to the amalgamation scheme, the results were not comparable with a year ago’s. "The scheme of amalgamation and arrangement among Sterlite Energy, Sterlite Industries (India), Vedanta Aluminium, Ekaterina, Madras Aluminium Company and the company had been sanctioned by the Chennai high court and Mumbai high court," said a statement. The scheme had been given effect in the quarter ended September 2013.
On Wednesday, shares of Sesa Sterlite went up by 2.12 per cent to close at Rs 255.55 on BSE. The results came just a few minutes before closing of market hours.
According to the company statement, attributable profit after tax is up 15 per cent while there is an 8 per cent growth in revenues.
Tom Albanese, Group CEO said, “Main performance drivers during the quarter were Copper, Aluminium and Zinc India businesses, while Oil & Gas production at Rajasthan has normalised after completion of the maintenance of the Mangala Processing Terminal. Combined with efficient cost management, we are focused on optimising our assets and generating strong cash flows."
The company continues gaining from improving base metal prices. While Aluminium prices at $1995 a tonne on the London Metal Exchange (LME) are up 12 per cent over September’13 quarter, sequentially they improved 11 per cent. Zinc prices on the other hand have improved 26 per cent year-on-year and lead prices by seven per cent. Thus, in spite of the mined metal production at Zinc India coming lower, the revenues improved. Nevertheless, at Zinc International the decline in mined production was too steep (down 27 per cent) which impacted revenues.
Copper, the largest segment for the company, however, drove the revenues and profitability as treatment and refining charges (TcRc) improved from USD 14.8 cents in September’13 quarter to USD 20.8 cents in September’14 quarter. The aluminum segment also saw a rise in revenues but due to reduction in availability of linkage coal from Coal India, company’s profitability at BALCO and Lanjigarh got impacted.
The company expects the same to improve as coal availability from Coal India typically improves in second half of the financial year. Thus, expected improvement in Aluminum profitability, good copper profitability, and better mined metal production from Hindustan Zinc in second half coupled with expected improvement in iron-ore mining keeps analysts positive on the prospects of Sesa Sterlite. Also, the base metal price outlook is unlikely to be weak as perceived earlier. In fact, after seeing a fall, prices of most base metals have started rising since early October.
