Vedanta Aluminium reports strong results
Vedanta Aluminium Metal reported very strong results for its first full year as a separately listed company. Profit doubled. Revenue grew 41%. Production reached a record. Debt fell by more than ₹3,000 crore.
The shares still fell about 0.6% on Thursday. Investors were looking at what management said about the coming months.
Vedanta Aluminium, demerged from the Vedanta group earlier this year and now India’s largest aluminium producer, reported consolidated revenue of ₹22,066 crore for the September quarter, up 41% from ₹15,670 crore. EBITDA rose 83% to ₹10,192 crore, with a margin of about 46%. Profit after tax more than doubled to ₹6,187 crore.
It was the second straight quarter in which EBITDA exceeded ₹10,000 crore. Aluminium production reached a record 649,000 tonnes, up 5% from a year earlier.
Output at BALCO, its Chhattisgarh unit, rose 19% to 178,000 tonnes after a capacity expansion. Jharsuguda in Odisha, its largest smelter, produced 470,000 tonnes.
The balance sheet also improved. Net debt fell by ₹3,090 crore in the quarter, and the ratio of net debt to EBITDA improved to 0.7 times from 0.9 times in June.
Aluminium makers do well
Aluminium is one of the few industries where the West Asia conflict has helped profits. The Gulf is a major aluminium exporter, with large smelters in the UAE, Bahrain, Qatar and Saudi Arabia. Shipping disruptions and energy problems in the region have reduced global supply, and buyers have turned to other sources, including India.
Vedanta also has an important cost advantage. It produces much of its own power and alumina, so it depends less on market prices for the most expensive inputs. When energy prices spike, integrated producers like Vedanta hold their margins much better than smelters that buy power and raw materials.
The cautious outlook
The concern is in the guidance. EBITDA fell 3% from the June quarter’s ₹10,499 crore, because aluminium prices on the London Metal Exchange have eased and costs have risen slightly. Management said December-quarter costs are likely to rise about 4% from the September quarter, due to planned maintenance shutdowns and input inflation.
It also expects realised prices in the second half to be about $50 a tonne lower than in the September quarter.
There is also a supply issue. Vedanta’s use of domestic bauxite, the ore used to make aluminium, fell to 37% from 52% a year ago, so it is importing more of this key raw material.
The company aims to raise domestic sourcing above 90% by the end of FY27 as new mines start up. Until then, imported bauxite adds cost and exposure to supply problems.
Reported profit was 6% lower than the June quarter, partly because of a ₹363 crore exceptional charge.
What to watch
Vedanta Aluminium’s results show a business at or near its peak earnings. Production is at a record, margins are very high, and debt is falling. The warnings about the second half suggest profits will ease from here, though still at strong levels.
Investors will focus on two things. The first is aluminium prices, which depend largely on what happens in the Gulf. The second is the bauxite mines, which will determine whether Vedanta can lower its costs further.
If both go well, the company can hold margins close to current levels. If not, the September quarter may turn out to be a peak.
About The Author
