Macro Tsimmis

intelligently hedged investment

Sterlite Industries India Ltd. (SLT) update #3

Posted by intelledgement on Sun, 27 Apr 08

Our Indian buildout play, miner/metals refiner Sterlite Industries (STL), reported their 2008 fiscal year results yesterday (their FY ends 31 March), and it was nothing to write home about. Revenue was $6.17B, up 1% from 2007 and profits were flat at $1.1B…although earnings per share were down from $2.03 to $1.65 due to dilution. Despite record annual production of metals, results were muted by the appreciation of the rupee against the dollar, which cut into overall revenues. (Note: all dollar figures cited herein are converted from the original crore at the 31 Mar 08 exchange rate.)

Aside from the lack of growth in revenues and profits, it was a good year. Costs were lower across all environments, which helped to offset the exchange rate headwinds. Copper refining operations produced record output (339,000 tons) with a record 98% recovery rate. Aluminum production also set a new all-time record in 4Q08 (92,000 tons). The Hindustan Zinc Ltd. (HZL) subsidiary also produced record outputs of zinc (426,000 tons) and lead (58,000 tons), thanks to smooth commissioning of the new Chanderiya II smelter—which occurred a world record 20 months after groundbreaking; the new smelter achieved its rated capacity in the first quarter of operations. HZL was also successful on the exploration front, upping their contained zinc-lead reserves by a net 3.4 million tons despite the record production numbers.

Looking ahead, HZL will be come the largest integrated zinc-lead producer on the planet (output capacity in excess of one million tons) by 2010 if the expansion projects announced this year are completed on time. And work is progressing on the first Jharsuguda power plant (of four planned 600 megawatt plants in the phase 1 project), with the expectation it will be commissioned in March 2009.

And even though revenues were up only 1% year-over-year, since the $217MM the company pulled in in FY1998—a decade ago—the compounded annual growth rate of revenues still clocks in at 40%.

In short, life is good and getting better for Sterlite Industries.


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