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Shares of Vedanta Resources dropped sharply in London on Thursday, as the miner reported a steep drop in underlying attributable profits for the first half of the current fiscal year.
Underlying attributable profits fell 34.4 per cent to $186.3 million in the six months up until the end of September, below expectations. This was despite a 43 per cent increase in revenues, which it said reflected higher volumes, and commodity prices. Its shares were trading down over 5 per cent in early afternoon trading, well below the FTSE 100.
Rupee to blame
The company attributed the decline in profits to Vedanta Aluminium, and Sterlite Energy Limited, as well as the decline of the rupee, which resulted in mark-to-market foreign exchange losses.
Aluminium EBITDA fell to $91 million from $156 million, a 41.9 per cent drop, while iron ore declined to $307 million from $432.7 million, a 29 per cent drop.
The company attributed the fall in iron ore sales (down 13.7 per cent) to the non extension of the mining contract in Orissa in November 2010, and the Supreme Court's temporary ban on operations across all mines in Karnataka's major iron ore producing districts.
“We remain committed to and had taken multiple steps to upgrade the infrastructure and enhance mining capacity to attain 36 mt capacity,” said the company. “However in the current uncertain environment, we foresee delays in obtaining the approvals.”
In aluminium, the unit cost of production rose sharply — to $2,282 a tonne during the period, against $1,860 in the same period in 2010, due to higher alumina and coal prices, and higher power consumption at its Jharsuguda smelter. In the energy division, power tariffs fell as a result of lower demand and higher costs.
The overall rise in EBITDA was helped by Zinc International, which it acquired from Anglo American, adding around $200 million to EBITDA, while higher commodity prices added a further $400 million.
During the period, the company completed the acquisition of iron ore assets in Liberia, from which it expects to make the first shipment in 2014.
“Despite the global economic uncertainty, we believe the long-run outlook for commodities remains favourable,” said Vedanta Resources Chairman, Mr Anil Agarwal.
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