4th Nov 2015 08:10
LONDON (Alliance News) - Vedanta Resources PLC Wednesday said it has decided not to pay an interim dividend for the first half of the financial year due to "market volatility" after it reported a huge drop in profit during the first half of the financial year.
Vedanta shares were down 4.4% to 489.55 pence per share on Wednesday morning.
The diversified metals and minerals miner reported a 62% fall in pretax profit in the six months ended September 30 to USD243.7 million from USD639.6 million a year earlier as revenue fell 12% to USD5.69 billion from USD6.45 billion.
Earnings before interest, tax, depreciation and amortisation in the first half of the financial year dropped 39% to USD1.28 billion from USD2.10 billion, with its Ebitda margin dropping to 23% from 33%. Its operating profit fell 41% to USD577.8 million from USD985.7 million.
Vedanta reported lower depreciation costs of USD558.4 million in the half compared to USD985.7 million a year earlier with amortisation falling to USD149.5 million from USD387.0 million.
As a result of the tougher market conditions and "market volatility", Vedanta decided not to pay an interim dividend. When it released its full year results for the last financial year, it upped its total dividend to 63.0 cents a share from 61.0 cents a share despite reporting its net loss widened by around USD1.60 billion year-on-year.
"During this period we have witnessed continued volatility in commodity markets, creating challenging conditions for all resource companies. As a result of this market uncertainty, the board has decided not to pay an interim dividend and the board will review dividend payments in May 2016 when we deliver our 2016 financial year results," it said.
The 12% fall in revenue was mainly caused by lower oil prices, lower metal prices and "premia across metal businesses," it said.
An increase in production was not enough to offset the falling prices. Oil production was up 1% in the half to 207,538 barrels of oil equivalent per day but average prices fell to USD56 per barrel from an average of USD105.7 per barrel a year ago, causing the division's revenue to fall 46% and its Ebitda by 63%.
"Despite prevailing low oil prices and substantial cut in capital expenditure, the company will maintain Rajasthan production this year at 2015 levels," it said in a statement.
At its Indian zinc operations, production was up 26% in the first half to 472,000 tonnes, but again average prices fell to only USD2,103 per tonne compared to USD2,196 per tonne a year ago. In response, it has managed to brings its unit costs down to USD1,052 per tonne from USD1,097 per tonne, giving it around a USD1,051 per tonne gross margin in the half.
The Indian zinc operations reported a 5% year-on-year rise in revenue and a 6% rise in Ebitda as its Ebitda margin remained flat at 51%.
"We reiterate our guidance for the 2016 financial year; mined metal production is expected to be higher than the 2015 financial year, while integrated refined metal production, including silver, will be significantly higher as the company will process the available mined metal inventory from previous year," it said.
At its other zinc operations, production fell 18% to 133,000 tonnes from 163,000 tonnes but its average price was up 8% year-on-year to USD1,439 per tonne from USD1,331. The division reported a 20% fall in revenue and a 39% fall in Ebitda in the half.
Production of zinc outside of India is expected to be around 220,000 to 230,000 tonnes of zinc.
Its iron ore division reported a 7% rise in production in the half to 320,000 tonnes from 300,000 tonnes with sales remaining broadly flat at 304,000 tonnes. The small division reported a 21% fall in revenue in the half and a 74% fall in Ebitda.
Copper operations in Australia and India rose 16% year-on-year to 193,000 tonnes but average prices dropped 18% whilst refining and treatment charges rose 20%. The division reported an 8% fall in revenue but a 55% rise in Ebitda in the half.
Production from the division is expected to "remain stable" for the full year at around 390,000 tonnes.
Copper production from Zambia saw mined metal production up 5% to 62,000 tonnes from 59,000 tonnes with cathode production up 19% to 90,000 tonnes from 76,000 tonnes. The miner reduced its unit costs by around 18% in the half and the division reported flat revenue and plunged to a loss before interest, tax, depreciation and amortisation from a profit.
Its aluminium division suffered a 12% fall in average prices during the half and were at the lowest levels since the financial crisis hit in 2009, it said. Revenue from the division was down 13% year-on-year whilst Ebitda was down 88%.
The company said it has reduced its gross debt to USD16.50 billion from USD16.70 billion with net debt falling to USD7.50 billion from USD8.40 billion.
Earlier in October, Vedanta said it planned to have net debt below USD8.00 billion by the end of September.
By Joshua Warner; [email protected]; @JoshAlliance
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