Vedanta Aluminium more than doubles profit; cost cuts in focus to drive earnings

Mumbai: Growth in volumes and a further reduction in production costs will help Vedanta Aluminium's earnings grow from current levels, even if aluminium prices fall, a key executive said.The country’s largest producer of aluminium saw a 41% year-on-year jump in consolidated revenue to 22,066 crore in the September quarter, while earnings before interest, tax, depreciation and amortisation (Ebitda) surged 83% to 10,192 crore.

Net profit for the quarter more than doubled year-on-year to 6,187 crore.“If you compare our Ebitda to the previous year, about 26% of the growth in Ebitda has come from operational factors,” chief financial officer Anup Agarwal told ET in an interview. “Sequentially, even when LME prices were 10% lower, we have delivered 2% more (of Ebitda) on the operational front,” he said.After the onset of the crisis in West Asia and consequent supply disruptions, aluminium prices surged to over $3,700 per tonne.

Prices have since retreated and are expected to fall further after a key smelter in Abu Dhabi resumed operations. The company’s output of both aluminium and alumina, meanwhile, is expected to increase as it ramps up its recently expanded capacities.In the September quarter, record production of both aluminium and alumina, along with higher aluminium prices, boosted earnings. Vedanta Aluminium produced 649,000 tonnes of aluminium during the quarter, up 5% from a year earlier, while alumina output surged 37% to 895,000 tonnes.

Aluminium prices on the London Metal Exchange (LME) were 23% higher during the quarter at $3,226 per tonne.Live EventsAdjusted for hedges executed at various price points, earnings will rise even if prices are lower, Agarwal said. He expects aluminium production costs to decline by around 6% from current levels by the end of the year, helped by higher availability of bauxite from captive sources.“The $1,700 cost that we have today should go down to at least $1,600,” he said.

The company’s cost of aluminium production stood at $1,722 per tonne in the September quarter, compared with $1,804 per tonne in the June quarter and $1,826 per tonne a year ago.Vedanta Aluminium reported its earnings during market hours on Wednesday. Its shares closed at 359.20 on the BSE, up 1.3% from the previous close.(You can now subscribe to our ETMarkets WhatsApp channel)