BackVedanta profit falls, targets cost cuts
Vedanta profit falls, targets cost cuts
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London: India-focused mining group Vedanta Resources Plc posted a 75% drop in attributable profit after commodity prices slid, hitting its shares, but the London-listed firm said it saw more scope for cost cuts.
Vedanta’s shares were down 0.8% at 1,220 pence by 0845 GMT on Thursday, lagging a 3.2% rise in the UK mining index. The shares have doubled this year and outperformed the mining index by 37%.
“Overall the results were disappointing," said analyst Subramaniam Varada at Credit Suisse, who said earnings per share came in 20% below its forecast.
The weaker than expected performance was mainly due to an increase in minority interests to 76% of net earnings from 56%, he said in a note.
But the company -- which has operations in India, Australia and Zambia -- said it was well placed to thrive amid the downturn with cash and liquid investments of $4.9 billion and net debt of $200 million.
“With strong volume growth, high quality assets and continued progress in cost reduction, we are confident of delivering another year of profitable growth and strong free cash flows," chairman Anil Agarwal said in a statement.
Even though copper prices have rebounded by 57% this year after collapsing by 65% from a peak last July of $8,930 per tonne, chief executive MS Mehta was cautious about the future.
“It is too early to say that we have come out of the meltdown we have seen over the last six months, but having said that, we are very well positioned to take care of the low price cycle," he told a conference call.
Costs declined in the second half of the fiscal year and at the Zambian copper operations they fell by more than half from 293 cents per pound in the first half to 140 cents in March.
“Our desire is to move to 125 cents as we end the current financial year," Mehta said.
Profit Slides
Vedanta posted an attributable profit of $219.4 million for the fiscal year to end-March, down from $879 million in the previous year and less than the average forecast of $294 million given by six analysts surveyed by Reuters Estimates.
Its two most profitable divisions were zinc and iron ore, accounting for 38% and 35% of earnings before interest, tax, depreciation and amortisation (EBITDA).
Vedanta, which also produces copper and aluminium, said overall EBITDA fell 46.5% to $1.61 billion, higher than the forecast of $1.55 billion, while revenue declined 20% to $6.58 billion.
Despite the weaker bottom line, Vedanta proposed a final dividend of 25 cents a share, the same as the previous year, bringing the total dividend to 41.5 cents.
Vedanta said its growth projects were on track, which will boost copper output to 1 million tonnes a year from 446,000 tonnes and aluminium to 2.5 million tonnes from 462,000 tonnes.
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