Earnings Review: Segmental dynamics dominated Vedanta’s operations

28 Jul 2022

The profitability of Vedanta Ltd in the quarter ended June was supported mainly by the zinc, lead, and silver operations carried out under its listed subsidiary, Hindustan Zinc Ltd, while the aluminium and other segments proved to a major drag.

In Apr-Jun, Vedanta’s consolidated operating profit went up by just 7% on the year to 107.4 bln rupees despite revenue rising by 35% to 393.6 bln rupees.

Had it not been for a 49% jump in the operating profit of the company’s domestic zinc and lead segment to 52.3 bln rupees, the company’s profitability would have been badly hit.

The aluminium segment reported a substantial fall of 40% on the year to 22.5 bln rupees in Apr-Jun while the rest of the segments collectively saw a fall of 15% to 55.1 bln rupees.

The other segments included iron ore, oil and gas, international zinc, copper, and power.

The aluminium segment’s production output was 3% higher at 565,000 tn and revenue from aluminium sales jumped 43% to 146.4 bln rupees, but the cost of production surged 74% to $2,653 per tn.

The company attributed this sharp rise in cost of production of aluminium to power and fuel costs.

Vedanta’s overall power and fuel costs jumped 2.3 times to 89.5 bln rupees in Apr-Jun from that in the year ago period, and made up for 27% of total expenses.

The operating margin contracted to 32% in Apr-Jun from 41% a year ago.

Besides aluminium sales, the significant revenue increase of 35% was led by domestic zinc, lead, and silver segment whose revenue jumped 45% on the year to 91.8 bln rupees.

The mined metal production from domestic zinc operations rose 14% on the year to 252,000 tn in the June quarter. The company said this rise was “driven by higher ore production and better mill recovery.”

The company’s overall revenue was “supported by higher sales volume across businesses, commodity prices and strategic hedging gain.”

Going forward, Vedanta’s priorities according to its chief executive officer Sunil Duggal would be on volume, timely execution of projects, value added products, vertical integration, cost reduction and commodity price risk management.