BackSesa Sterlite’s Q3 profit falls 11%
The company's net profit fell to `1,588 crore in the December quarter from `1,780 crore a year earlier
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Mumbai: Oil and base metals firm Sesa Sterlite Ltd said third-quarter profit declined 11%, beating analysts’ estimates.
The company’s net profit fell to ₹ 1,588 crore in the December quarter from ₹ 1,780 crore a year earlier. Revenue fell 1% to ₹ 19,128 crore from ₹ 19,414 crore.
A Bloomberg poll of 18 analysts had expected profit to drop almost 20% to ₹ 1,415 crore while 16 analysts had predicted net sales to fall by 0.6% to ₹ 19,292 crore.
A note issued by Sesa Sterlite on Thursday said the marginal fall in revenue was mainly due to fall in several commodity prices—oil 29%, copper 7%, lead 5%, and silver 21%, whereas zinc and aluminium prices were stronger by 17% and 11%, respectively.
Tom Albanese, group chief executive officer, Sesa Sterlite, said: “Strong operating performance of aluminium and zinc businesses led to the reduction in gross debt by ₹ 400 crore. We are focused on disciplined capital allocation, coupled with deferred and phased development spending in zinc, oil and gas and other businesses which will help optimize our assets and drive strong cash flow in the near future."
Shares of Sesa Sterlite fell 0.2% to ₹ 200.40 on Thursday on BSE, while the benchmark Sensex gained 0.41% to close at 29,681.77 points. The BSE Metals Index gained 0.6%.
The firm undertook a major restructuring, merging copper maker Sterlite Industries Ltd with iron ore miner Sesa Goa Ltd, to form the current firm that came into being in August 2013. Therefore, the quarter under review has been compared with the adjusted results from the same quarter a year ago.
During the quarter, the company posted earnings before interest, tax, depreciation and amortization (Ebitda, a measure of a company’s operating profit) at ₹ 6,234 crore and Ebitda margin of 43%. This compares with an Ebitda of ₹ 6,565 crore and a margin of 34% posted in the year earlier.
“The better operating performance and benefit of currency depreciation was more than offset by lower Brent and commodity prices," the company statement said.
From the preceding September quarter, net sales fell 1.65% from ₹ 19,448 crore in the fiscal second quarter and profit fell by 3.17% from ₹ 1,654 crore this fiscal year.
The diversified Sesa Sterlite group gets majority of its revenue and profit from crude oil producer Cairn India Ltd and its Indian zinc operations under Hindustan Zinc Ltd.
A sharp fall in Brent crude oil prices to an average of $77.07 per barrel in the third quarter from $103.46 per barrel in the second quarter halved Cairn India’s net profit for the third quarter thereby impacting the net profit of Sesa Sterlite as well. Although a better performance from Hindustan Zinc salvaged the profits to some extent.
Sesa Sterlite, as a whole, contributes over 90% of parent Vedanta’s operating profit mainly on the back of Cairn India and Hindustan Zinc.
Analysts say Sesa Sterlite might also see higher contribution from its aluminium, power and copper business. However, falling crude prices can spoil the show for the company.
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