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Sesa Q4 net drops 2.6% on-quarter, but beats street estimates

Wednesday, 30 April 2014 - 9:45am IST | Agency: DNA
Higher oil output, improved aluminium, copper ops aid

The Vedanta Group-owned Sesa Sterlite's consolidated net profit for January-March quarter declined 2.6% sequentially to Rs 3,472.95 crore on account of higher tax payment and exceptional loss. The earnings were, however, better than street expectations on higher oil output at Cairn India and improvement in aluminium and copper operations, analysts said.

Net profit after minority share and associate profit and loss came in Rs 1,621.55 crore. The mining and metal conglomerate reported 7.05% increase in consolidated revenues on higher volumes across businesses. "During Q4, there were exceptional items charge of Rs 167 crore, which included Rs 67 crore on account of idle assets at the Lanjigarh alumina refinery relating to the Niyamgiri mining project and Rs 100 crore on account of payment of land tax to the Goa state government for mining dumps pertaining to earlier years," the company said in a statement.

Other income during Q4 was higher compared with Q3, on account of higher recognition of income on maturity of investments at Cairn India and Zinc India. Sesa Sterlite's earning is not comparable with the year ago quarter as the merger between Sesa Goa and Sterlite Industries India was completed in August 2013.

The mining giants operating margins for the quarter improved 2% on quarter and were at 45% due to strong operating performance of Cairn India, Zinc India and Jharsuguda aluminium smelter, partially offset by lower EBITDA due to reduced volumes at the iron ore business, Australian copper mines and Zinc International.

Apart from spending $3 billion for development of Rajasthan oil block of Cairn India, Sesa Sterlite plans to spend $500-$600 million per annum on capital expenditure over next three years, newly appointed CEO, Tom Albanese said. The company's debt equity ratio is 0.8:1 and it gross debt stands Rs 80,000 crore.

Iron ore mining operations of the company which were shut since the mining ban by the Supreme Court continued to weigh on overall profitability. While the apex court has lifted ban on mining and capped overall production in the state at 20 MT, it will take a while for the company to start actual mining. The Supreme Court has held that all mining leases in the State of Goa, including those of Sesa Sterlite, have expired in 2007. "Consequently, no mining operations can be carried out until renewal/execution of mining lease deeds by the State government. We are working towards securing the necessary permissions for commencement of operations at the earliest," the company said.

It has however resumed operation at full fledged in Narrain mine at Karnataka in December and achieved production of 1.5 mt of approved annual capacity of 2.29 mt. However, it managed to sell only 27,000 tn during the year.

Aluminium operations of the company have been under stress over past two years as the company has been struggling to bring all its aluminium capacity online due to raw material and power related constraints. The operating profits of this operations improved in this quarter despite higher alumina sourcing from outside on operational efficiency and higher premiums. The company received $443/tn of premium of aluminium products in domestic market, Roongta head of aluminium operations at the company said in earnings call.

The company started the Korba-III 3,25,000 tn smelter of BALCO achieving first metal tapping in Q4.. It aims to produce nearly 190,000 tn of metal in current fiscal of which 50000 tn would be trial production.

The company has been awaiting government approval since many quarters to use surplus power generated through it 1200 MW plant which it may get in this quarter, Roongta said.

Sesa's copper operations improved on higher utilisation and better treatment and refining charges. Tc/Rc in the fourth quarter increased to 18.5 US cents/lb, which was 25% higher as compared to the corresponding prior period. Tc/Rc is expected to remain robust on the back of rising global mine supply from brownfield and greenfield expansions, the company said. The Tuticorin smelter which operated at 98% capacity in Q4 expected to continue at same rate except planned maintenance shutdown which started on 26 April 2014 and will last for 22 days.




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