Sterlite Industries

Sterlite Industries reported a 24% increase in net sales to Rs 10303.67 crore in Q3FY'12 compared to Q3FY'11 on the back of 9% increase in copper revenues to Rs 4935.11 crore, 37% increase in zinc, lead and silver revenues to Rs 3755.34 crore, 347% increase in power revenues to Rs 591.01 crore and flat Aluminium revenues of Rs 800.93 crore while bottomline fell 17% to Rs 913.52 crore.

Consequent to acquisition of zinc business at Namibia, South Africa and Ireland in the second half of the FY 2010-11, the results for the quarter and nine months ended 31st December 2011 are not strictly comparable with corresponding previous periods.

OPM fell 120 bps to 22.5% as power, fuel and water expenditure as a percentage to net sales rose to 10.4% from 6.6%, employees cost increased to 4.1% from 3.0% and other expenses rose to 15.7% from 13.3% compensated by 660 bps fall in consumption of raw materials to 47.0%. As a result operating profits rose 17% to Rs 2318.31 crore.

Other income rose 29% to Rs 617.44 crore, interest cost jumped to Rs 323.36 compared to Rs 70.54 crore while depreciation increased 84% to Rs 457.52 crore due to capitalization of Dariba lead smelter at Zinc - India operations, wind power project and two units of 600 MW at SEL, Jharsuguda besides Rs 142 crore charged during the quarter on the assets of our Zinc International business. It resulted in 1% increase in PBT to Rs 2154.87 crore. The company had an EO expenditure amounting Rs 6.43 crore representing amount incurred under Voluntary Retirement Scheme at a subsidiary engaged in Zinc, lead & Silver and Aluminium operations. PBT after EO rose 1% to Rs 2148.44 crore. Effective rate of taxes rose 380 bps to 23.5% from 19.8% leading 4% fall in PAT to Rs 1643.14 crore. After considering MI and share of profit and loss of associate the final net profit fell 17% to Rs 913.52 crore.

PBIT margins of Sterlite Industries decreased 290 bps during the quarter to 18.3% mainly due to negative Aluminium PBIT margins on account of higher costs of production and lower LME prices, partly offset by the rupee depreciation. During Q3FY'12 the COP of hot metal produced was at Rs 98,234 per tonne, 22% higher in INR, compared with the corresponding prior quarter. The increase in cost was primarily due to increase in costs of coal, alumina and carbon. Zinc, lead and Silver PBIT margins fell 1260 bps to 39.6%. Power PBIT margins fell 550 bps to 9% while Copper PBIT margins rose 230 bps to 6.6%.

Due to depreciation of Indian Rupee, the net impact of foreign currency exchange fluctuations during the quarter resulted in a loss of Rs 425.39 crore.

For nine months ended December 2011, Sterlite Industries recorded 49% increase in net sales on a Y-o-Y basis to Rs 30360.07 crore. 49% increase in net sales was contributed by 41% increase in copper revenues to Rs 14568.44 crore, 64% increase in Zinc, Lead and Silver revenues to Rs 11168.81 crore, 3% increase in Aluminium revenues to Rs 2243.13 crore. Power sales were up 230% to Rs 1827.92 crore. OPM of the company rose 40 bps to 24.9% leading to a 51% growth in operating profits to Rs 7558.63 crore. Other income of the company rose 18% to Rs 2056.32 crore, interest cost rose 333% to Rs 853.20 crore and depreciation increased 95% to Rs 1322.57 crore. It resulted 27% increase in PBT to Rs 7439.18 crore. The company had an EO expenditure amounting Rs 40.77 crore compared to Rs 25.26 crore in the corresponding previous year period PBT after EO rose 27% to Rs 7398.41 crore. Effective rate of taxes increased to 21.9% from 21.3% leading 26% increase in PAT to Rs 5774.51 crore. After considering MI and share of profit and loss of associate the final net profit rose 14% to Rs 3551.03 crore

In the pending Special Leave Petition (SLP) filed by the company against the closure order of the copper smelter at Tuticorin, the Honourable Supreme Court in subsequent hearings, directed Tamil Nadu Pollution Control Board (TNPCB) to issue directions to implement the improvement measures suggested by National Environment Engineering Research Institute (NEERI), Central Pollution Control Board (CPCB) and TNPCB. The matter was last heard on 17 January 2012 and listed for further hearing on March 28 2012. Interim stay order granted by the Supreme Court continues and the unit continues to operate at rated capacity.

Vedanta Aluminum (VAL), an associate of the company, is in the process of expanding its alumina refinery and its aluminium smelter in the state of Orissa. Ministry of Environment and Forests ('MoEF') has rejected the forest clearance for Niyamgiri Mining lease of Orissa Mining Corporation (OMC), which is one of the sources of supply of bauxite to the alumina refinery of VAL. OMC, has filed a petition in the Hon'ble Supreme Court, which is listed for hearing on January 30, 2012. MoEF has also denied VAL's application for expansion of alumina refinery, which was challenged by VAL before the Hon'ble Orissa High Court. The Hon'ble Orissa High Court has upheld the order of the MoEF. VAL had filed a review petition in the Hon'ble Orissa High Court for review of the judgment, which has been dismissed by the Hon'ble Orissa High Court. VAL is in the process of examining the matter for approriate action. The management of the company has evaluated and considered good, its loans granted and investment made in VAL, aggregating Rs 10,175 crore.

During the quarter, THL Zinc Holding BV, a wholly owned subsidiary of the company acquired the entire ordinary share capital of Lakomasko BV for a consideration of $37.7 million from Vedanta Resources Holding (a wholly owned subsidiary of Vedanta Resources Plc). Consequently, Lakomasko BV became subsidiary of Sterlite Industries (India) Limited. Further THL Zinc Holding Cooperatief U.A ceased to be a subsidiary of the company due to its liquidation

The company has continued to account for its share of losses of its associate company, Vedanta Aluminum (VAL) even though the carrying amount of the equity investment under the equity method has reduced to Nil. The additional losses (including share of hedging reserves) to the extent of Rs 348 Crore and Rs 564 Crore have been recognized for the quarter and nine months ended 31 December 2011 as the company intends to make additional equity investment in VAL to maintain its share of holding in that company

The scrip is currently trading at Rs 111.15.

Sterlite Consolidated results

Sterlite Segment Results