Lower base metal prices, higher input costs of aluminum, slower new zinc project ramp up and the closure of copper plant are seen weighing on Vedanta Resources. (Reuters)
Lower base metal prices, higher input costs of aluminum, slower new zinc project ramp up and the closure of copper plant are seen weighing on Vedanta Resources. (Reuters)

S&P revises outlook on Vedanta Resources to negative from positive

  • The negative outlook reflects the likelihood of a lower rating on Vedanta Resources over the next nine months
  • Vedanta Resources' financial ratios will likely stay weaker than levels commensurate with the current rating, says S&P

New Delhi: S&P Global Ratings Friday revised the outlook on Vedanta Resources Ltd to negative from positive on weaker operating performance. "The outlook revision reflects our view that Vedanta Resources' financial ratios will likely stay weaker than levels commensurate with the current rating," it said in a statement.

"The company's operating performance and cash flows lag our estimates, and its debt related to privatisation and growth investments should keep leverage higher than our expectation for the rating," the statement said.

The negative outlook reflects the likelihood of a lower rating on Vedanta Resources over the next nine months, S&P Global Ratings said. "This is because, in the absence of a better operating performance than we expect and an unlikely reduction of elevated debt (related to privatisation, steel business acquisition etc.), the company's cash flow leverage will be higher than the level commensurate with a 'B+' rating," it said.

S&P Global Ratings further said its annual gross Ebitda (earnings before interest, tax, depreciation and amortization) expectation for Vedanta Resources was now about $4 billion over 2019-20 and 2020-21, a drop of about $1.0 billion from its estimate nine months ago.

This is due to a combination of lower base metal prices, higher input costs of aluminium, slower new zinc project ramp up, and the closure of copper smelting.

"Slower worldwide economic growth (especially for China) has lowered our estimate of demand growth in base metals," it said.

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