Vedanta’s metals and oil businesses reported strong earnings for the September quarter, while steel and power units lagged. Higher commodity prices helped profits double for zinc and aluminium. Interim CEO Jim Johnny Gast said, "We're beginning to see the green shoots of the production reversal," as oil output slowly recovers.
Mumbai: Higher commodity prices lifted earnings at billionaire Anil Agarwal-led Vedanta's metals and oil and gas businesses in the September quarter, while its steel and power units reported muted performance.
Vedanta Ltd, which holds Hindustan Zinc Ltd, and Vedanta Aluminium Metal Ltd more than doubled their profits from a year earlier, aided by elevated zinc and aluminium prices and cost rationalization.
Vedanta Oil and Gas Ltd also returned to profit, helped by higher crude oil prices despite a prolonged decline in production. The company is now banking on new recovery techniques and exploration to revive output.
It plans to begin the alkaline surfactant polymer (ASP) injection process in "a few weeks", interim chief executive Jim Johnny Gast said on Thursday evening. The process could raise output from its key oil fields and help reverse a production decline that has lasted more than a decade.
"We're beginning to see the green shoots of the production reversal and the decline management initiatives that we've put in place are positive," he said.
The company is also exploring new opportunities to find oil, including in north-east India, Gast said.
"As our chairman has said, you know, 300,000 barrels of oil equivalent a day is not unimaginable," he said. Vedanta Oil and Gas produced an average of 72,200 barrels per day in the July-September quarter, down from a peak of 211,000 barrels a day in FY15.
The company's revenue rose 6% year-on-year to ₹2,488 crore. Profit attributable to shareholders was ₹746 crore, compared with a loss of ₹91 crore a year earlier.
Ebitda rose 80% to ₹1,351 crore, while the Ebitda margin expanded by nearly 23 percentage points to 54.3%.
Vedanta Aluminium Metal Ltd's revenue rose 40% from a year earlier to ₹22,324 crore, while its profit more than doubled to ₹5,167 crore.
"Vedanta Ltd's strong earnings were largely driven by Hindustan Zinc, which reported a good set of numbers. Aluminium also performed well, with revenue growing 40-43% and Ebitda rising 83%, supported by elevated aluminium prices during the quarter," said Suman Kumar, AVP, metals and mining, Phillip Capital India Pvt. Ltd.
However, aluminium prices have since softened, which could weigh on earnings in the third quarter, Kumar said. Vedanta Aluminium was also procuring bauxite, the ore used to produce aluminium, from Odisha Mining Corporation at higher prices following a dispute, which could put pressure on margins, he added.
Steel and power lag
While the metals and oil and gas businesses reported strong performances, Vedanta Iron and Steel Ltd, which operates a steel unit and multiple iron ore mines, reported a loss of ₹311 crore, compared with a loss of ₹465 crore in the year-earlier period.
Its revenue fell 2% to ₹2,788 crore, while Ebitda rose by more than a third to ₹48 crore. Its Ebitda margin remained below 2%, making it the weakest performer among the five Vedanta companies.
Vedanta Power Ltd reported a profit of ₹83 crore, compared with a loss of ₹1,688 crore a year earlier. Revenue rose by more than a third to ₹2,908 crore, supported by higher power prices during the quarter.
The improvement was also reflected in Ebitda, which more than doubled to ₹421 crore. The Ebitda margin expanded by more than five percentage points to 14.5%.