London: India-focused miner Vedanta gave a sturdy outlook for commodity markets, bucking the trend among peers, even as aluminium losses, a weak rupee and higher interest payments hit profit.
“The outlook for natural resources remains robust,” chairman Anil Agarwal said on Thursday, adding Vedanta, with a low-cost structure and an Indian asset base, was well-positioned to serve Asia’s third-largest economy.
Vedanta, the largest aluminium producer in India, expects double-digit growth in aluminium demand there.
Other major miners have been cautious in recent weeks, with the world’s largest, BHP Billiton, telling investors on Wednesday it expected markets to cool further as investors lose confidence in the longer-term health of the global economy. BHP also backed away from a major spending plan.
Vedanta chief executive MS Mehta said it had reached an inflection point with its own $18 billion spending programme.
“We are very comfortable, having completed a large part of our journey ... We have always maintained structurally low costs in most of the sectors where we are present,” he told reporters when asked about his confident outlook.
“These two give us a unique positioning.”
Vedanta’s full-year attributable profit fell 46% to $387 million, in line with expectations, as it suffered the impact of a power outages at its aluminium unit, a hit from a volatile rupee on borrowing by Indian units, and higher interest payments as a result of the $8.7 billion Cairn deal.
Spending on Cairn India lifted net debt to $10.1 billion.
Earnings before interest, tax, depreciation and amortisation (EBITDA), however, rose 13% to $4 billion for the year, largely thanks to a $713 million contribution from Cairn that helped offset iron ore woes.
Vedanta last month reported a drop in full-year iron ore output, hit by a ban on mining in the southern Indian state of Karnataka and logistical bottlenecks in nearby Goa that dented a key profit contributor.
Vedanta said the Karnataka ban, to crack down on illegal mining, was being heard by the Supreme Court and expected a resolution soon. The next hearing will be in July.
Shake-up on track
The lower group profit and worries over its structure, to be resolved with an ambitious overhaul already under way, hit its shares, down 3% at 03:00 pm and underperforming a 1.5% drop in the sector.
Vedanta said its restructuring - which will see all but one subsidiary placed under the umbrella of a single unit to cut costs and improve access to cash - was on track and due to be completed this year.
“We maintain our view that the restructuring would be of transformational significance for Vedanta shareholders, removing considerable debt burden and improving cash flow to the Plc,” Liberum analysts said in a note. “However, a number of hurdles remain and, therefore, the road to deal closure may not be entirely straightforward.”
Extraordinary meetings for shareholders in the subsidiaries will be held in June, paving the way for the first step in the streamlining plan -- a merger of Sesa Goa and Sterlite Industries into Sesa Sterlite, the eventual umbrella unit for others.
The restructuring has seen Vedanta offer to buy out India’s minority stakes in its Hindustan Zinc and Bharat Aluminium Co (BALCO) subsidiaries. M.S. Mehta said Vedanta was “engaged” with the government and declined to give a timeline.
