Aluminium operations, Hindustan Zinc drag down Sterlite Industries

Adarsh Gopalakrishnan BL Research Bureau | Updated on November 15, 2017


Diversified mining major Sterlite Industries put up a poor show in the March quarter. Compared to the year-ago period, consolidated sales grew just 7.6 per cent to Rs 10,818 crore, while profits dropped 34 per cent to Rs 1,277 crore.

Hindustan Zinc, which has traditionally been the knight in shining armour for the Sterlite, lost sheen this quarter. This weighed on Sterlite's consolidated performance.

Higher output of lead and power at subsidiaries Hindustan Zinc and Sterlite Energy, respectively, did little to mask the fall in output and realisations in the company's main profit-generator — zinc produced and sold by Hindustan Zinc.

The March 2012 quarter saw Hindustan Zinc's revenue from the zinc and lead business slip by 10.5 per cent to Rs 2,652 crore, after a fall in lead and zinc realisations.

The prices of both metals averaged 20 per cent and 15 per cent lower than in the same period a year ago.

Reining in the potentially sharper dip in sales was the ramped-up output of lead and silver. This was, however, insufficient to compensate for the dip in income from major segments such copper, zinc and aluminium.


On an operating level, costs as a percentage of sales rose by three per cent to 76 per cent in the three months ended March compared with the same period a year ago.

Sterlite is currently in the midst of expanding capacity at both its 100 per cent subsidiary Sterlite Energy and Vedanta Aluminium, in which it holds around 30 per cent. This has entailed higher levels of borrowing. The company's consolidated borrowings have risen by a third over the last year to around Rs 14,000 crore.

This contributed to a near-three fold increase in interest costs. Hurting net profits was also the one-time damages of Rs 430 crore paid to copper major ASARCO on a botched deal few years ago.

The company's stake in Vedanta Aluminium also continues to hurt profits as the latter's losses during the quarter doubled to over Rs 150 crore.

The lack of captive raw materials in the vicinity of VAL's plant in Orissa continues to hurt operations.

Published on April 26, 2012

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