Commodities rout halves profits at Vedanta
Earnings dramatically down in aluminium and oil, while zinc output falls after Irish mine closes
PROFITS at Indian energy group Vedanta Resources have halved in the face of crashing oil and commodity prices.
The diversified company, which mines copper, zinc and iron ore in India, Africa and Australia, as well as holding substantial oil and gas interests, reported that earnings before tax and other adjustments fell 51pc to $493m (£345m) in the three months to December 31.
Indicating how severely the oil price crash is affecting company profits, Vedanta’s oil and gas division reported earnings before interest, taxes, depreciation and amortisation (ebitda) down by 72pc. Prices per barrel fell by nearly half.
Vedanta’s aluminium unit fared worse still, with ebitda down 84pc yearon-year even as production hit record levels. The metal has slumped in price by around 19pc in the past year.
While Vedanta’s Zinc India business remained profitable, output from its international zinc operations fell following the planned closure in December of its Lisheen mine in Ireland after 17 years of operation.
Tom Albanese, the chief executive, said cost cutting – including $100m in savings in the quarter – had helped the company generate a “robust ebitda margin” of 23pc. “We’ve taken a series of pragmatic decisions and these are showing through and delivering additional cash flows,” he said.
Total group revenue for the quarter fell 27pc to $2.4bn. Vedanta said it had made “good progress” on refinancing some of its debt, which stood at $7.9bn at the end of 2015, up from $7.5bn in the previous quarter, although the company insisted this would fall in the coming months.
“We want to create a bit more headroom and our bankers are supportive of reviewing debt covenants,” added DD Jalan, the finance director.
The group’s long-running quest to merge its two main Indian subsidiaries, Vedanta Ltd and Cairn India, should be completed by the second quarter, it confirmed. Vedanta Ltd has held a 59pc stake in Cairn since 2011.
Analysts at Barclays said Vedanta’s update was “in line” but warned that with many divisions generating minimal profits at current spot prices, it was currently relying on its Zinc India division, copper smelting and oil.
Vedanta, which is listed on the FTSE 250, is controlled by its chairman and founder, Indian billionaire Anil Agawal.