Vedanta Resources net falls 67% as input costs soar
The company attributed the fall in profit and operating margins to an increase in raw materials such as imported alumina, thermal coal, carbon and coking coal
PremiumMumbai: Rising raw material cost has pushed the profit of Anil Agarwal-promoted Vedanta Resources Ltd. down by a massive 67% during the fiscal year that ended on 31 March.
While announcing their annual financials prepared on a “going concern basis", the London-based metals, mining and energy conglomerate, on Thursday, said its consolidated net profit has shrunk to $838 million in FY2023 from $ 2.58 billion in FY2022.
The company attributed the fall in profit and operating margins to an increase in raw materials such as imported alumina, thermal coal, carbon and coking coal.
During FY2023, Vedanta’s revenue saw a meagre 3% growth to $18.14 billion as compared to $17.62 billion in FY2022. The growth could have been higher, had aluminium, copper, lead, and silver prices not fallen.
The company’s consolidated operating profit slipped by 26% to $ 4.6 billion in FY2023 from $ 6.3 billion in FY2022; operating profit margin down at 29% from 40% in FY2022; return on capital employed down to 20% from 32% in FY2022; liquidity position weakening with cash and cash equivalents down at $ 2.6 billion from $ 4.4 billion in FY2022; and net debt increasing to $ 12.7 billion from $ 11.7 billion in FY2022, primarily due to dividend payment and capex outflow.
The company’s net debt increased primarily due to dividend payment and capex outflow, partially offset by strong cash flow from operations and working capital release.
“The macroeconomic factors and risks faced by advanced economies going into recession may pose potential challenges to metal demand," said Agarwal.
While announcing the group’s lackadaisical performance, the company said its profit (attributable to equity holders) has come down to merely $ 49 million from $ 825 million in FY2022.
The company’s free cash flow too has come down to $ 1.6 billion from $ 2.1 billion in FY2022, primarily due to capex payments during FY2023.
Vedanta’s leverage ratio (net debt to operating profit) has worsened during FY2023 at 2.8 times as compared to 1.9 times for FY2022.
The company said that during FY2023, it has invested $ 1.2 billion in the form of growth capex to augment the group’s assets and production.
In the ongoing fiscal Vedanta has committed an additional capex of another $ 1.7 billion towards growth projects.
Vedanta, however, said the group continues to be in a “comfortable position to address all its debt maturities with a strong balance sheet, robust liquidity at its operating subsidiaries and strong track record of raising funds through relationship banks."
In the Aluminium business, Vedanta said during FY2023 it completed the Jharsuguda capacity ramp-up to 1.8 MTPA and going forward, Lanjigarh refinery expansion from 2 MTPA to 5 MTPA remains the group’s key focus area.
In the oil and gas segment, Vedanta has been focusing on adding reserves and resources, and during the coming months the company will work on development projects to unlock the potential of its contingent resource base, said the company in a regulatory filing.
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