Higher output boosts Vedanta’s earnings

Higher output boosts Vedanta’s earnings
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First Published: Tue, Jul 29 2008. 11 12 PM IST
Updated: Tue, Jul 29 2008. 11 12 PM IST
London: India-focused metals group Vedanta Resources Plc. posted a 6.3% rise in first quarter core earnings on Tuesday as higher output in most of its metals outweighed weaker zinc prices and higher costs.
Vedanta said earnings before interest, tax, depreciation and amortization (Ebitda) rose to $739 million (Rs3,143 crore) on revenue which grew 9.2% to $2.02 billion.
“It was a solid quarter,” analysts at brokerage Cazenove said in a research note. “We see Vedanta set for another solid year of double-digit organic growth in FY09, which remains its defining feature compared to its peers.”
Michael Rawlinson at Liberum Capital said first-quarter Ebitda was running 18% below the level needed to meet consensus forecasts of $3.57 billion for the full year, but this should be achievable as output increases and the price of iron ore and aluminium remains high.
The group said refined zinc production in the three months to 30 June jumped 38% to 128,000 tonnes because of the opening of its new Hydro II smelter at Chanderiya, which began operating in December and is now near full capacity.
Zinc has been Vedanta’s most important metal, accounting for around half of operating profit in its last financial year to March-end, but following the takeover of an iron ore group last year, the two metals are equal profit generators.
Zinc’s share of first-quarter Ebitda was 32% compared with iron ore at 29%. The rise in zinc output was offset by a 42% year-on-year fall in average zinc prices to $2,115 per tonne.
The company--which has operations in India, Australia and Zambia—said its new iron ore unit boosted output by 57% to 4.6 million tonnes. It warned that a new 15% export duty only had a marginal impact in the first quarter but will be felt more in the future. “We expect the impact to be significant in the coming quarters,” it said.
Vedanta said aluminium output rose 2.1% to 99,000 tonnes and its new $2.1 billion Jharsuguda smelter was ramping up production.
The first phase of the smelter will produce 250,000 tonnes per year.
Copper cathode output in India fell 16% to 68,000 tonnes due to a planned maintenance shutdown, but the unit was a bright spot in terms of costs.
“Operating costs in our Tuticorin smelter showed significant improvement despite high energy costs, primarily due to higher by-product realization and better copper recovery,” the company said.
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First Published: Tue, Jul 29 2008. 11 12 PM IST
More Topics: Vedanta | Earnings | Zinc | Copper | Production |