Vedanta core profits up 13% at $4 b in 2011-12

India-focused mining conglomerate Vedanta Resources Plc has reported a 12.9 per cent growth in its core profits to $4.026 billion for 2011-12, buoyed by earnings from recently acquired Cairn India and higher output in zinc, silver, and power.

Analyst said the core profits/EBITDA (earnings before income, tax, depreciation and amortisation) of the company were in line with the expectations of $4 billion.

The London-listed firm had reported $3.566 billion EBITDA in FY’11.

Cairn India acquisition

“This has been a transformational year for the group, in which we completed the Cairn India acquisition, announced the consolidation of the group, and delivered a strong production growth,” Vedanta Chairman, Mr Anil Agarwal, said in a statement.

“With our growth projects largely completed, (we) are well placed to continue this strong growth,” he said.

Core profits at $713 million from Cairn, which was acquired in December last year, accounted for most of the increase in group EBITDA of Vedanta. Zinc, silver and power businesses were other contributors in the company’s group EBITDA.

Iron ore biz

However, iron ore business of Vedanta, operated by subsidiary firm Sesa Goa, was a drag on the company’s core profits as it reported a 38.6 per cent drop in EBITDA to $721.4 million, mainly due to 26.6 per cent drop in production.

Iron ore production fell because of a Supreme Court-imposed mining ban in Karnataka and logistical bottlenecks in Goa, the company said.

Net profit, revenue

The company’s revenue rose 22.6 per cent to $14 billion in the last fiscal vis-a-vis $11.427 billion of 2010-11, it said.

However, net profit attributable to the shareholders of the company dropped by over 92 per cent to $59.8 million in FY’12 from $770.8 million in the previous fiscal.

The drop in net profit was largely due to increased depreciation and amortisation costs and interest expenses related to funding of its acquisition of majority stake in Cairn India.

Vedanta’s depreciation of assets rose over 67 per cent to $927.3 million, whereas amortisation costs were up 53 per cent to $481.1 million. Interest expenses rose 307.7 per cent to $420.3 million.

By December, the company is expecting to complete group restructuring exercise, which seeks to bring all businesses, except Konkola Copper Mines in Zambia, under the fold of a new entity, Sesa Sterlite, it said.

The new entity will be created through the merger of Sterlite Industries and some other subsidiaries including Vedanta Aluminium and Madras Aluminium into Sesa Goa.

The company also announced a full-year dividend of 55 cent per share for the last fiscal, five per cent more than it paid in the previous fiscal.

“The outlook for natural resources remains robust, industrialisation and urbanisation in China and India and other emerging economies continues to drive demand and Vedanta is well-positioned to serve these markets,” Mr Agarwal said.

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