BackVedanta CEO sees commodity rout continuing up to two more years
Commodity market weakness has pushed producers to cut investments and defer or cancel projects
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London: Vedanta Resources Plc expects the slump in commodity prices to continue for one or two more years as a supply glut persists.
“The markets have been more affected by the oversupply in the past two or three years than by dropping demand," chief executive officer (CEO) Tom Albanese said on a conference call. It will take time to absorb the excess oil and iron ore, and to a lesser extent copper and other metals, he said.
Commodity market weakness has pushed producers to cut investments and defer or cancel projects. The past year’s 40% tumble in crude prices, in particular, has hurt Vedanta, which reported a wider full-year loss on Thursday because of impairment charges at its Cairn India Ltd oil unit.
Copper and zinc markets will recover sooner than oil and iron ore because of supply constraints, according to Albanese, who ran Rio Tinto Group before taking the helm at Vedanta last year. Some large zinc mines are closing this year, reducing global supply, while water shortages and community opposition have disrupted copper production in Latin America, he said.
Vedanta’s net loss expanded to $1.8 billion in the fiscal year through March from $196 million a year earlier, the London- based company said in a statement. It booked a $4.5 billion impairment charge on its oil and gas business.
Vedanta plans to export about 5.5 million tonnes (mt) of iron ore a year once production of the steel-making material resumes in Goa, Albanese said. A 2012 ban on mining in the Indian state was lifted last year, and Vedanta Resources hopes to resume output in October.
While principally a mine operator, the company gained access to India’s biggest onshore oil field in 2011 after buying a controlling stake in Cairn India for $8.67 billion. That unit said in April it was delaying plans to boost output following the decline in prices.
Vedanta’s net debt totalled $8.5 billion at the end of March, an increase of $500 million from a year earlier, while gross debt was $16.7 billion. Free cash flow was $1 billion after capital spending, Vedanta said.
The company proposed a final dividend of 40 cents a share, increasing the total payout to 63 cents, up 3% from a year earlier. Bloomberg
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