Vedanta Q2 results: Net loss of Rs 915 crore despite strong EBITDA
The financial results reported by Vedanta Ltd for the July-September quarter highlight a significant shift from the previous year, with the company recording a net loss of Rs 915 crore compared to a net profit of Rs 2,690 crore in the same period last year. However, it’s important to note that the net loss was a result of exceptional expenses. Excluding these exceptional expenses, the company’s net profit stood at a considerable Rs 4,403 crore.
Despite the challenges leading to the net loss, the company’s revenue witnessed a modest 6.4 percent increase, reaching Rs 38,546 crore, the highest-ever recorded in the second quarter, as compared to the previous year’s figure of Rs 36,237 crore. This growth in revenue suggests an uptick in the company’s business operations, likely driven by factors such as increased demand for its products, effective cost management strategies, or other favorable market dynamics.
While the exceptional expenses had an adverse impact on the company’s bottom line, the substantial increase in revenue, along with the noteworthy net profit when excluding these exceptional expenses, underscores Vedanta Ltd’s underlying operational strength and resilience.
This resilience could be attributed to the company’s efficient business strategies, strong market positioning, and the effective management of operational challenges. Going forward, continued efforts to optimize operational efficiencies and mitigate exceptional expenses will be crucial in sustaining the company’s growth trajectory and profitability in the long term.
The financial results for the second quarter of FY2024 reflect a notable sequential growth in revenue, which increased by 16 percent. This significant upswing in revenue points toward a positive trajectory for Vedanta Ltd, potentially driven by factors such as increased demand for its products, improved market conditions, or effective strategic initiatives implemented by the company.
Furthermore, the company exhibited substantial improvement on the operational front, as evidenced by the expansion of the Q2 EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin to 28.7 percent from 20.1 percent in the corresponding period. This notable expansion in the EBITDA margin suggests improved operational efficiency, cost management, or a favorable product mix that has contributed to enhancing the company’s profitability.
In line with the improved operational performance, the 2QFY24 EBITDA witnessed an impressive 47 percent year-on-year increase, amounting to Rs 11,834 crore. This growth can be attributed to various factors, including improved operational efficiencies, the mitigation of input commodity inflation, a favorable arbitration award, and despite the impact of lower output commodity prices. Additionally, the reported EBITDA for the quarter marked the highest-ever recorded in the second quarter, underlining Vedanta Ltd’s strong operational capabilities and its ability to navigate challenging market conditions effectively.
Vedanta Ltd’s positive performance on both the revenue and operational fronts signifies the effectiveness of its business strategies and the resilience of its operations, despite facing various external challenges. Going forward, continued efforts to optimize operational efficiencies, manage input costs, and capitalize on favorable market conditions will be crucial for sustaining the company’s growth momentum and further enhancing its financial performance.
“Strong believer of expanding our portfolio, we are steadfast in our growth journey and are progressing well in all growth projects announced so far with capital expenditure worth ~$8.4 billion. With this our revenue is estimated to uptick by $4 billion and EBITDA by $1 billion,” Arun Misra, Executive Director, Vedanta stated in an exchange filing.
Vedanta Ltd has outlined its production and cost guidance for various segments across its portfolio for the fiscal year 2024. These projections provide insights into the company’s expectations and plans for its different business segments:
1. Zinc: The company targets a production range of 1,075 to 1,100 kilotonnes (KT) of mined metal and 1,050 to 1,075 KT of finished metal from its Indian units for FY24. In terms of silver production, Vedanta aims to produce 725 to 750 tonnes of silver during the fiscal year. The estimated cost of production for the segment is expected to be in the range of $1,125/tonne to $1,175/tonne, excluding royalty.
Additionally, the company forecasts zinc production of 190 to 220 KT from its Gamberg plant and 60 to 70 KT from its BMM plant for its international units. The cost of production at these units is anticipated to be between $1,300/tonne and $1,400/tonne.
2. Aluminium: Vedanta aims to produce 1.9 to 2.1 metric tonnes of alumina and 2.2 to 2.3 million tonnes of aluminium during FY24. The estimated cost of production for both alumina and aluminium is projected to be in the range of $1,800/tonne to $1,900/tonne.
3. Iron Ore: The company expects iron ore production from various locations, including 5.5 to 6.0 million tonnes from its plants in Karnataka, 6.0 to 6.5 million tonnes from Orissa, 1.0 to 1.5 million tonnes from Goa, and 0.8 to 1 million tonnes from Liberia. Additionally, Vedanta aims to produce 850 to 900 KT of pig iron during FY24.
These production and cost guidance figures provide a comprehensive overview of Vedanta Ltd’s anticipated operational activities and strategic targets for the fiscal year 2024, reflecting the company’s proactive approach in managing its diverse portfolio of resources and commodities.
The mining conglomerate has taken notable strides in reducing its net debt, which stood at Rs 57,771 crore at the end of the September quarter, reflecting a sequential decrease of Rs 1,420 crore. This reduction in net debt has contributed to the moderation of the company’s net debt-to-EBITDA ratio, which improved to 1.64 times compared to 1.88 times in the previous quarter. The improved debt profile signals the company’s commitment to effectively managing its financial obligations and strengthening its overall financial health.
Furthermore, the company recently unveiled a comprehensive restructuring plan that involves the division of its business into six distinct listed companies, namely aluminum, oil and gas, power, steel and ferrous, base metals, and an incubator for new businesses, including semiconductors. This strategic demerger initiative aims to unlock the intrinsic value of the conglomerate’s diverse businesses, thereby alleviating the burden of its substantial debt obligations.
According to data from Bloomberg, the conglomerate is facing significant bond repayments amounting to $3.2 billion over the next two years. Notably, approximately $2 billion of bonds are set to mature in 2024, with half of this amount due as early as January, and an additional $1.2 billion in bond repayments scheduled for 2025.
The conglomerate’s concerted efforts to reduce debt and restructure its business segments signify a proactive approach to enhance its financial sustainability and operational resilience. The strategic initiatives, combined with a focus on optimizing operational efficiencies and capitalizing on emerging market opportunities, will be critical in the company’s endeavors to strengthen its financial position, mitigate debt-related challenges, and drive sustainable growth in the long term.
