On July 21, 2023, Vedanta Ltd, the metals and mining conglomerate led by billionaire Anil Agarwal, reported its financial results for the first quarter of the fiscal year 2024. The company experienced a 40 percent drop in consolidated net profit, which stood at Rs 2,640 crore compared to Rs 4,421 crore in the same quarter of the previous year. Despite the significant decline, the figure surpassed analysts’ expectations, who had predicted a profit in the range of Rs 1,410 crore.
Key points:
- Net Profit: Vedanta reported a 40% decline in consolidated net profit for Q1 FY2024, amounting to Rs 2,640 crore, compared to Rs 4,421 crore in the same quarter last year.
- Analyst Expectations: Despite the drop in profits, the company’s performance exceeded analyst expectations, as they had predicted a profit in the range of Rs 1,410 crore.
- Revenue: The consolidated revenue for Q1 FY2024 fell by 13% to Rs 33,342 crore from Rs 38,251 crore in the year-ago quarter, a decline that was larger than what had been estimated by industry analysts.
- CEO Retirement: The company’s Chief Executive Officer (CEO), Sunil Duggal, is set to retire from his position as whole-time director and CEO, with effect from July 31, 2023.
The main contributing factor to the decline in profits was the impact of weaker commodity prices across various segments, particularly in zinc and aluminium. Revenue for the company also experienced a decline, falling 13 percent to Rs 33,342 crore from Rs 38,251 crore in the year-ago quarter. This decrease was greater than what had been estimated by industry analysts.
However, it is noteworthy that Vedanta reported a one-time gain of Rs 1,780 crore in this quarter compared to nil in the same period the previous year, which partially offset the overall decline in profit.
The earnings before interest, taxes, depreciation, and amortisation (EBITDA) also witnessed a sharp drop, declining by 39 percent year on year to Rs 6,029 crore compared to Rs 9,826 crore in Q1FY23. Consequently, EBITDA margins contracted by 760 basis points, reaching 18.1 percent from 25.7 percent.
Vedanta’s CEO, Sunil Duggal, is set to retire from his post as whole-time director and CEO with effect from July 31, 2023. Commenting on the quarterly performance, Duggal affirmed the company’s commitment to maximizing shareholder returns through best-in-class and low-cost operations while emphasizing sustainability.
Segment-wise, revenue from zinc, lead, and silver recorded a 23 percent decline, amounting to Rs 7,062 crore. The aluminium revenue followed a similar trend, dropping by 19 percent to Rs 11,905 crore. Copper and iron ore segments also experienced a decline in revenue.
For the full fiscal year 2024, Vedanta has estimated a capital expenditure of $1.7 billion, indicating a higher investment compared to $1.2 billion in FY23.
In other developments, Vedanta’s plans to build India’s first semiconductor and display fabs in Dholera Special Investment Region in Ahmedabad district, Gujarat, remain intact. This commitment comes after the company’s joint venture with electronics manufacturing giant Foxconn was called off on July 10. The joint venture had initially planned to invest $19.5 billion in setting up a semiconductor manufacturing unit in Gujarat.
Despite the challenging market conditions, Vedanta’s Q1 FY2024 results have managed to surpass analysts’ predictions, showing the company’s resilience in navigating the impact of weaker commodity prices in specific segments. Investors will be closely monitoring Vedanta’s strategies and performance in the coming quarters to gauge its ability to rebound in the ever-changing market landscape.
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