Vedanta earnings hit by mining bans

The company said its attributable profit of Rs 850 cr for the year was up 163%, as against Rs 323 cr in FY12

The fall in commodity prices and the mining bans in Karnataka and Goa have weighed heavily on London-listed Vedanta Resources Plc.

The company reported earnings before interest, taxes, depreciation and amortisation (Ebitda) of Rs 26,500 crore in the financial year ended March, 49 per cent of which came from Cairn India (the oil and gas exploration and production arm). The mining bans are estimated to have cost it Rs 2,700 crore in profits for the year.

The company said its attributable profit of Rs 850 crore for the year was up 163 per cent, as against Rs 323 crore in FY12. Its revenue went up seven per cent, to Rs 81,000 crore. The Ebitda margin was 32.6 per cent, as against 28.7 per cent in 2011-12.

Vedanta said, "During the year, we had a record in mined zinc and lead metal production, as well as strong increases in lead and silver volumes in Zinc India. Aluminium smelters operated above rated capacity and power sales volume improved significantly, although we were impacted by power transmission constraints. These were mainly due to regional power distribution capacity constraints and legalised supply and demand imbalances. Copper cathode production at KCM and Sterlite India also increased." However, lower commodity prices played spoilsport and the company could manage to increase its revenues by a mere seven per cent and net profit declined a little over six per cent. It said, "The prices of many commodities declined during the financial year, as global economic growth slowed and concerns surrounding the economic outlook increased."

Average aluminium prices declined 15 per cent. Zinc, lead and copper prices were also lower by seven per cent each, over the year.

The company said it continued to focus on selective acquisitions to further its growth strategy. It said, "We seek large proven, assets with the potential for growth and/or cost improvement, where we can leverage our skills and experience. These could include new geographies and commodities that meet our investment criteria."

Vedanta now owns a controlling stake in Cairn India, from where came 49 per cent of Vedanta's Rs 26,400 crore Ebitda. The company said the diversification helped it improve the profitability, despite the adverse commodity prices in copper, aluminium, zinc, lead and silver.

With Sesa Goa, its Indian iron ore mining arm, performing badly because of the mining bans in Karnataka and Goa, the company has shifted focus to its iron ore asset buy in Liberia, West Africa. Vedanta said, "West Africa is an emerging hub for iron ore. The region has approximately 34 billion tonnes of reserves and resources, with the potential to become a 100-million tonnes per annum iron ore exporting region."

Although the Supreme Court has allowed opening of category A and B mines in Karnataka, Sesa Goa is still in the process of taking necessary approvals from the environment ministry to restart its mines.

The company said average debt in the year ended March 31 was Rs 90,700 crore, as against Rs 74,000 crore in 2011-12. Net debt came down 14.4 per cent in the year, to Rs 46,400 crore and the net gearing (total debt, net of cash and equivalents) was 31.4 per cent.