Anil Agarwal-led metals and mining conglomerate, Vedanta Ltd, is likely to report a fall in earnings in the June quarter primarily due to the impact of weaker commodity prices across various segments, particularly in zinc and aluminium. The firm will report its earnings on Friday.
Vedanta's consolidated revenue is expected to decline by 15% year-on-year (YoY) to Rs 32,800 crore. The EBITDA (earnings before interest, taxes, depreciation, and amortization) is expected to reach Rs 7,040 crore, down 31% YoY. The adjusted profit is likely to decline sharply to Rs 1,410 crore compared to Rs 4,420 crore a year ago. This reduction is primarily caused by the impact of lower realizations across all business segments of Vedanta, analysts added.
Analysts expect that Vedanta's EBITDA, excluding the Hindustan Zinc division, is likely to decrease by 30% quarter-on-quarter (QoQ) due to lower metal prices. The Zinc International and Aluminium businesses are expected to experience EBITDA declines of around 56% and 20%, respectively, primarily due to lower LME prices. However, this impact will be partially offset by an improved cost of production (CoP) due to the availability of coal at lower prices.
Vedanta's aluminium business, the conglomerate's largest segment, will likely face an EBITDA decline of 22% year-on-year led by lower realizations and suppressed global prices, which may be partially offset by lower costs, according to Kotak Institutional Equities.
The steel division may have been affected in the June quarter by both lower prices and reduced volume, contributing to its decline. Additionally, the power segment is also expected to report a decline in EBITDA, considering that the previous quarter (Q4) included a few one-off gains that won't be replicated, analysts added.
"We forecast (1) Aluminum EBITDA to decline sequentially by 5% (-22% YoY) mainly led by lower realizations, partially offset by lower costs (2) Oil and Gas division to witness a -16% QoQ drop in EBITDA due to lower gas prices and likely discounts to OMCs (3) Zinc India division to see a -25% QoQ decrease in EBITDA on the back of a sharp decline in zinc prices," said Kotak Institutional Equities in its recent note.
Investors will also look out for any announcement on how the company secures funds to support the deleveraging exercise of its parent, the London-headquartered Vedanta Resources.
The cash and cash equivalents of Vedanta have declined due to dividend payouts. Vedanta paid dividends an unprecedented five times in the financial year that ended in March, boosting total disbursements to about Rs 37,700 crore. Analysts suggest that due to the plunge in commodity prices, the ability to pay the dividend of the company will reduce.
Analysts and shareholders will also look for cues on the company's semiconductor business and dividend announcement. Vedanta has reaffirmed its dedication to constructing India's first semiconductor and display fabs in Gujarat's Dholera Special Investment Region, even after the dissolution of its joint venture with Foxconn. The original investment plan was set at $19.5 billion for establishing the semiconductor manufacturing unit.
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