VEDANTA RIDES ASIAN METALS WAVE
By Toby Shelley
FT
May 16 2007 08:50
Vedanta Resources, the UK-listed metals group, continued to ride the
wave of surging Chinese and Indian demand for metals as it reported
on Wednesday a 166 per cent rise in annual pre-tax profits to £2.48bn
on revenue up 76 per cent at £6.5bn.
Anil Agarwal, chairman, signalled that the current year would bring an
acceleration of Vedanta’s buyout of minority partners, particularly in
the booming aluminium and zinc business, which was Vedanta’s strongest
performer in 2006.
He said: "I believe significant opportunities lie ahead of us in
respect of out buyouts of the minority stakes in Balco, KCM and
HZL. I look forward to reporting progress on these initiatives during
the year."
Mr Agarwal added that Vedanta would exercise its option to acquire
a further 20 per cent of Indian iron ore producer Sesa in July. Late
last month, it took a 51 per cent stake in Sesa for some £500m.
Since September 2003, Vedanta has boosted its share of attributable
profits from joint ventures to 51.5 per cent from 36.7 per
cent. However, short-term operational reasons meant minority interests
in subsidiaries actually rose in 2006 with the greater contribution
of the aluminium and zinc business.
The rise in turnover and profits came from a combination of higher
prices and volumes, and control of operating costs. The aluminium
business, which doubled its contribution to turnover as the new
Korba smelter in India came online and ramped up output faster than
expected. The emphasis now is on raising sales of higher value-added
products.
The copper business accounts for over half of revenue and 30 per
cent of operating profits from operations in India, Zambia and
Australia. Production at Konkola in Zambia fell short of expectations
although Vedanta said measures were in place to remedy this.
Zinc revenues more than doubled along with prices on the London Metal
Exchange, making this segment of the business the biggest contributor
to operating profits, accounting for more than half of the total.
Last August, Vedanta acquired a majority stake in Sterlite Gold,
a Toronto-listed miner with assets in Armenia, previously owned
by Mr Agarwal. However, the entry into gold production has proved
problematic, with production being suspended in the last quarter of
2006 due to a legal spat with the Armenian government.
Vedanta said on at Wednesday it was looking options to quit the
business if there was no progress in talks.
The group said it had completed a $2.2bn investment programme on time
and within budget and was now implementing a further $5.3bn programme.
The final dividend is proposed at 20 cents, taking the full-year
dividend to 35 cents, a rise of 75 per cent.
Analysts said the results were broadly in line with expectations.
In early London trading, Vedanta shares rose 1.46 per cent to £14.14.
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