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Vedanta Full-Year Earnings Double, Beating Expectations

Copper and aluminium producer Vedanta said its full-year results more than doubled, helped by higher production and metal prices, exceeding market expectations.

Earnings before interest, tax, depreciation and amortisation jumped to a record $2.703 billion, from $1.102 billion last year, as sales rose 76% to $6.502 billion. The EBITDA margin grew to 41.6% from 29.8%. According to a consensus forecast of nine analysts, EBITDA was expected to rise to $2.660 billion and sales to $6.337 billion. "Global demand for metals continues to be strong on the back of strong consumption from China, India and other emerging markets, supported by increased activity from industrial and infrastructure sectors," said chairman Anil Agarwal. "Economic and industrial growth in India will continue to drive double digit growth in our commodities," he added.

Revenues for the aluminium and zinc businesses more than doubled. Aluminium production rose 67% to 351,000 tonnes helped by output from the new Korba smelter, which produced 208,000 tonnes, and in zinc mined production leading to additional sales of zinc and lead concentrate. Sales from its copper business rose 59% and accounts for 55% of the group's total revenue but only 31% of its EBITDA.

The group anticipates metal production increasing across all its operations in 2008, as a result of full capacity utilisation of the expansion and debottlenecking initiatives, and expects unit costs to decline.

Operating costs for 2007 rose at its copper operation in Zambia, but were stable elsewhere despite industry cost pressures.

Copper cathode output from Zambia fell 13% to 142,000 tonnes and unit costs grew 36%.

"Production at our Konkola operations fell short of our expectations in FY 2007," the company said, adding that it is taking measures to improve plant reliability. It expects to reach production levels equivalent to 200,000 tonnes a year in 2008.

Production of copper cathodes at its Indian operations was 313,000 tonnes, an increase of 14.7% on 2006, mainly due to de-bottlenecking of its Tuticorin smelter.

The diversified mining company - whose principal operations are in India, Australia and Zambia - plans to pay a final dividend of 20 cents, up from 14.3 cents last year, raising its full-year dividend to 35 cents.

The group is implementing a $7.5 billion organic growth programme. The $2.2 billion expansion programme announced at the time of its IPO in December 2003 in aluminium, zinc and copper pipeline is now almost complete, it said. While the 5.3 billion usd next phase of its expansion is underway and on schedule.

Vedanta said it is still in talks with the Indian government to buy the state's 49% stake in Bharat Aluminium Co Ltd (BALCO) and expects to complete the transaction in the next few months. It also plans to exercise its option to acquire the government's 29.5% interest in Hindustan Zinc, which became due for exercise after April 11, and that its efforts to buy out Zambia Copper Investment's 28.4% stake in Konkola Copper Mines are continuing.