Vedanta Limited announces about 12% drop in net profit in Q1 FY20; alumina production cost falls by 17%

Vedanta Limited announced its unaudited consolidated results for the First quarter (Q1) ended 30 June 2019 on Friday, July 26.

Revenue for Q1 FY 2020 stood at INR 21,167 crore, lower 4% y-o-y, primarily due to lower commodity prices partially offset by higher aluminium sales, volume addition from ESL and currency depreciation. EBITDA for Q1 dropped 20% YoY to INR 5,188 crore, mainly due to lower commodity prices partially offset by easing of input commodity inflation, rupee depreciation and volume addition from ESL acquisition. The consolidated net profit (Profit after Tax) fell 11.9% to INR 1,351 crore. Its gross debt stood at INR 59,517 crore, down by INR 6,708 crore in Q1 June 2019 over Q4 March 2019.

Mr. Srinivasan Venkatakrishnan, Chief Executive Officer, Vedanta, said “Our businesses stayed resilient in a quarter with low commodity prices and uncertain market environment and we continued to ramp up across the key verticals, Zinc & Oil & Gas…Aluminium business is steadily moving towards its target cost. We are also pleased with the superior returns that have been achieved with the unwinding of the structured investment transaction at CIHL for the benefit of all shareholders of Vedanta.”

On the operational side, Vedanta recorded 37% YoY rise in quarterly alumina production to 446 thousand tonnes. In FY19, Vedanta’s alumina output rose by 24 per cent to 1.5 million tonnes. Vedanta Ltd also reported its alumina making cost fell by 17 per cent YoY to $284 per tonne in Q1. This is the most competitive cost achieved by Vedanta at its Lanjigarh refinery in last two years. In FY19, Vedanta’s average alumina production cost stood at US$322 per tonne.

The drop in cost was attributed to local bauxite sourcing facilitated by Odisha Mining Corporation (OMC). OMC signed an agreement to supply 70 per cent of the bauxite mined from its Kodingamali mine to Vedanta’s Lanjigarh refinery. Vedanta can now also participate in bauxite auctions hosted by OMC twice a year along with other aluminium producers.

The company has announced a ramp-up plan for the Lanjigarh refinery, with its capacity upgraded to 2.7 million tonne per annum in the first phase, finally reaching 6 million tonne. Vedanta is investing INR 6,483 crore on the refinery ramp-up so that it can cut down its dependence on alumina import. Vedanta has also proposed to install a caustic soda production unit at Dhamra with an estimated investment of INR 6,500 crore.

Hot metal cost of production stood at US$ 1,764 per tonne, lower by 8% YoY.

Vedanta shares fell 4.24% to INR 157.10 on BSE after the announcement of the results.