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Coal drives severe cost inflation across power and aluminum, coal
problem going from bad to worse: STLT reported in-line EBITDA,
but PAT was affected by a variety of FX-related hits. However, the more
relevant takeaway from the results was the severe cost inflation across
segments driven by coal. Losses at associate company VAL mounted
(+129% q/q) as it was forced to buy power from open access as coal
availability decreased due to rains. Costs at power sub increased 4% q/q
on higher coal costs. Most of the focus in the conference call on coal
sourcing for the new power plants at aluminum sub BALCO, where the
company is confident of starting coal production from captive mines
next year, but this is contingent on getting regulatory approvals. With
both coal availability and the cost situation worsening, we believe that
power vs aluminum is not a key question anymore. We believe captive
coal block development at BALCO will be key from here. Equity value
of the investment in VAL has decreased to nil.
Maintaining core operating performance in a tough environment:
While consolidated reported PAT for 2Q of Rs9.98B was below JPMe
(Rs14.8B) and consensus (Rs15.7B) due to increasing VAL losses and
FX impact, operating performance for the quarter was better than
expected. 2Q FY12 consolidated EBITDA at Rs24.8B was above JPMe
of Rs23.6B (but below consensus) in an environment of declining
realizations and rising cost pressure in most segments (BALCO, Power,
VAL) due to coal availability issues in the quarter. Rupee depreciation
led to FX losses of Rs4.66B on FCCB (Rs2B), buyer’s credit (Rs1.9B)
and MTM on forward cover of certain recievables (Rs2B).
Higher dividend payout: In line with the increase in the dividend
payout announced last week for HZL, STLT also announced a higher
dividend payout. The company announced an interim dividend of Rs1 vs
JPMe of Rs1.1 for FY12E. This is a key positive, in our view. Debt
increased by ~Rs32B from the Mar-11 level.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Coal drives severe cost inflation across power and aluminum, coal
problem going from bad to worse: STLT reported in-line EBITDA,
but PAT was affected by a variety of FX-related hits. However, the more
relevant takeaway from the results was the severe cost inflation across
segments driven by coal. Losses at associate company VAL mounted
(+129% q/q) as it was forced to buy power from open access as coal
availability decreased due to rains. Costs at power sub increased 4% q/q
on higher coal costs. Most of the focus in the conference call on coal
sourcing for the new power plants at aluminum sub BALCO, where the
company is confident of starting coal production from captive mines
next year, but this is contingent on getting regulatory approvals. With
both coal availability and the cost situation worsening, we believe that
power vs aluminum is not a key question anymore. We believe captive
coal block development at BALCO will be key from here. Equity value
of the investment in VAL has decreased to nil.
Maintaining core operating performance in a tough environment:
While consolidated reported PAT for 2Q of Rs9.98B was below JPMe
(Rs14.8B) and consensus (Rs15.7B) due to increasing VAL losses and
FX impact, operating performance for the quarter was better than
expected. 2Q FY12 consolidated EBITDA at Rs24.8B was above JPMe
of Rs23.6B (but below consensus) in an environment of declining
realizations and rising cost pressure in most segments (BALCO, Power,
VAL) due to coal availability issues in the quarter. Rupee depreciation
led to FX losses of Rs4.66B on FCCB (Rs2B), buyer’s credit (Rs1.9B)
and MTM on forward cover of certain recievables (Rs2B).
Higher dividend payout: In line with the increase in the dividend
payout announced last week for HZL, STLT also announced a higher
dividend payout. The company announced an interim dividend of Rs1 vs
JPMe of Rs1.1 for FY12E. This is a key positive, in our view. Debt
increased by ~Rs32B from the Mar-11 level.
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