Sterlite Industries held its conference call on 24th January 2009 after it announced its results for third quarter ended December 2008. Navin Agrawal, Executive Vice Chairman, with other senior management members addressed the call and discussed the business developments and future plans of the company.
Highlights of the concall
- For Q3 FY09, the consolidated revenue of the company declined by 14% Y-o-Y to Rs 4536 crore and net attributable profit at the end stood at 513.7 crore, 40% lower on Y-o-Y.
Copper Business
- During the quarter, the copper cathode production at the Tuticorin custom smelter was 76,000 tonne (77,000 tonne in Q3 FY08). The production was lower on account of an unplanned shutdown due to damage in the cooling tower in November 2008. The plant is being restored to normal operations.
- The EBITDA in copper segment was lower mainly on account of lower TC/RCs and the sharp fall in by-product realizations. Going forward the company expects Tc/Rcs to improve.
Aluminium Business
- Aluminium production in Q3 FY09 was 92,000 tonne (89,000 tonne in Q3 FY08). The sales volume during the quarter was 85,000 tonne.
- The company has recently temporarily shut down the production in BALCO plant I, where operating costs are high and it sells surplus power from this unit to optimize returns. This plant has annual capacity of 110,000 tonne and about 25% production capacity will be closed.
- The cost control measures, coupled with the drop in input prices have started yielding positive impact on the unit cost of production at BALCO, which was USD 1642 per tonne in Q3 FY09, down from USD 1969 per tonne in the immediately preceding quarter (Q2 FY08). Unit cost of production in December’08 month was at USD 1467 per tonne.
- Going forward, the company expects the trend of reduction in costs to continue and expect to achieve a further reduction in Q4 FY09.
- The 325,000 TPA smelter project at BALCO is progressing well and as per schedule for commissioning in September 2011, as announced earlier.
- Work on the first phase of the 500,000 TPA aluminium smelter and associated captive power plant at Jharsuguda, Orissa is progressing well. The first phase of 250,000 tonne is expected to be fully commissioned by the end of FY09.
- The first stream of the alumina refinery at Lanjigarh is fully operational and the production has been at near rated capacity at 165,000 tonne in Q3 FY09, sufficient to meet captive requirement of the group.
Zinc Business
- During Q3, HZL produced 191,684 tonne of mined metal and 166,539 tonne of saleable metal, an increase of 24% and 40% respectively on Y-o-Y.
- Despite higher volumes and the depreciation of the Indian rupee by 21% the revenues were lower, primarily on account of lower LME prices of zinc and lead by 55% and 62%, respectively in Q3.
- The zinc cost of production during Q3 was USD 780 per tonne (USD 670 in H1 FY09), higher on account of higher input costs of coal, petroleum products, and met coke and lower realization from the sale of by-products. However, towards the end of Q3, the downward trend in the unit cost of key inputs became visible and the management expects the cost of production to come down to USD 670 level in Q4 FY09.
Other
- Work on 2,400 MW (4×600 MW) coal based Independent thermal power plant at Jharsuguda is progressing well and the company expects the progressive commissioning of project from Q4 CY09.
- With melt down in all commodity prices, the company sees opportunity to complete the project as the cost of projects will come down significantly from earlier estimations.
- When all the expansions of the company will complete, the company will have 2.6 million fully integrated aluminium smelting capacity (about 6-8% of world’s overall production) and 1.1 million fully integrated Zinc and Lead capacity (about 8% of world’s zinc production).
- Company targets to cut its cost of production of aluminium to USD 900 per tonne and then to USD 800 per tonne and USD 600 tonne for Zinc.
- The company expects overall tax rate to range 15-16%
- The company has moved to arbitration proceedings for Government’s 49% stake in Balco. The next hearing will be in Feb’09.
- At the end of December 2008, the company has net cash position of Rs 19,034 crore on consolidated basis and consolidate net debt of about Rs 6800 crore.
- For Sterlite Industries on standalone basis (including wholly owned subsidiaries), the company has cash and cash equivalents of Rs 9059 crore and net debt of Rs 4640 crore.