CHINESE DEMAND BOLSTERS VEDANTA
By Toby Shelley and Rebecca Bream
FT
May 17 2007 03:00
Vedanta Resources, the metals group, has continued to ride the wave
of surgingChinese and Indian demand for commodities as annual pre-tax
profits jumped sharply to 2.48bn.
Revenues at India-based Vedanta, which produces aluminium, zinc and
copper, rose 76 per cent to 6.5bn in the year to March 31.
Anil Agarwal, founder and chairman, said that this year would bring
an acceleration in the buy-out of Vedanta’s minority partners,
particularly in the booming 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 doubled its contribution to turnover as the Korba smelter
in India came online.
The copper business accounts for more than 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.
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.
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 move has proved problematic due to a legal
spat with the Armenian government.
Vedanta proposed a final dividend of 20 cents, taking the full-year
total to 35 cents, a rise of 75 per cent.
The shares closed up 28p at 14.23.
FT Comment
*Vedanta shares have risen more than 15 per cent this year as the
company has made progress with its expansion projects and has started
to move into new markets, such as iron ore and coal. In spite of the
recent rise in the stock, there is likely to be further upside in
Vedanta shares as the market fully recognises the group’s growth
potential. Compared with bigger rivals such as BHP Billiton and
Rio Tinto, which trade on forward p/e ratios of more than 9 times,
Vedanta trades on a forward p/e of 7 times.