Diversified natural resources company Vedanta s attributable profit after tax before exceptional items at a consolidated basis declined a sharp 34% on a year-on-year basis to Rs 2,615 crore for the three months ended March 31, 2019, due to soft commodity prices and ongoing shutdown in its Tuticorin smelter unit impacting copper business.
Despite record production across its commodities portfolio zinc, aluminium, silver, oil and gas and steel lower realisations due to subdued prices partly affected the income from operations which saw a y-o-y decline of over 15% y-o-y on a consolidated level to Rs 23,092 crore. Also, the shutdown of the copper smelter unit, which makes up for about 20% of the topline for Vedanta led to the fall in revenues during the quarter.
The company s management told newspersons over a conference call that due legal process is being followed to achieve a sustainable restart of the operations in the current financial year. Consequently, the Ebitda during the quarter (earnings before interest, tax, depreciation and amortisation) declined by 19% to Rs 6,330 crore. Ebitda margins were lower by 600 basis points to 31% in the three months of January-March 2019.
Arun Kumar, chief financial officer, Vedanta said that while production was at record levels across all commodities during the January-March 2019 quarter, prices last year were high, with zinc for instance above almost $3,000. However, sequentially, the company has performed well as the prices have remained at similar levels, while the volumes have increased, he said.
On a full year basis, Zinc India had a record mined metal production from underground mines, up 29% y-o-y, record production of lead up 18% y-o-y and silver up 22% y-o-y. Similarly, other commodities witnessed an increase in production volumes.
Post the acquisition of Electrosteel under the insolvency process, Vedanta has ramped up the production in its steel business well and had a record annual steel production at 1.2 million tonne, up 17% y-o-y, with an exit production run-rate of about 1.5 million tonne per annum.
Srinivasan Venkatakrishnan, chief executive officer, Vedanta said that the company s goal is to double the steel capacity to 2.5-3 million tonne per annum and it is looking at further reduction in costs through several measures in the pipeline. These will improve the Ebitda margins further and we are also looking to get iron ore from the Jharkhand mine, which is close to the plant to make it a fully integrated plant eventually, he said.
According to Kumar, the business has a potential to become a half a billion dollar portfolio, and could contribute well over 5% to Vedanta’s Ebitda. The company has planned a capex of $1.7 billion for the financial year 2019-2020 spread across oil and gas, zinc and base metal and aluminium.
Vedanta plans $600-m capex
Vedanta will be spending $600 million as capital expenditure to ramp up its oil and gas capacity in FY20, almost 35% of the group capex plan of $1.7 billion for the current financial year. The company, having Rs 39,000 crore surplus for investments, remains committed to contribute 50% to India s oil and gas production in the long term, company executives said in post-result media conference call on Tuesday.
The company has plans to invest a total of $2.3 billion in oil and gas sector in the near term. In FY19, Vedanta, operator of the prolific Barmer field in Rajasthan, bagged an impressive 41 out of the 55 hydrocarbon blocks offered under the Open Acreage Licensing Policy, a critical part of the March 2016-launched Hydrocarbon Exploration Licensing Policy. It also signed contracts for two new blocks in Assam and the Krishna-Godavari basin which were offered under the Discovered Small Fields bid round 2. During the year, production sharing contracts for Rajasthan and Raava blocks were also extended for 10 years.
The company produced around 190,000 barrels of oil equivalent per day in FY19, which was up a marginal 2% compared with the previous year. Along with aluminium and copper, oil and gas vertical contributed most to the group s revenue. For FY19, hydrocarbons business contributed Rs 7,104 crore out of the total revenue of the group which was around Rs 38,100 crore.