Vedanta profits slip as margins squeezed

Vedanta Resources, the FTSE 100 Indian metals and mining group controlled by Anil Agarwal, saw its profits slip in spite of an increase in revenues as pricing pressures on industrial metals squeezed margins.

The company, which in December completed its $8.67bn purchase of a majority stake in oil producer Cairn India, generated earnings before interest, tax depreciation and amortisation of $848m in its third quarter to December, down from $890m in the same period the previous year.

That amount included a $131m contribution from Cairn India, in which Vedanta now holds a 58.5 per cent stake. Without this addition ebitda for the quarter would have fallen by about a fifth.

Increased production volumes across many of its businesses helped push up quarterly revenues by 11 per cent from $3.1bn to $3.4bn, as improved contributions from its zinc, iron ore and energy interests more than compensated for falling revenues from copper and aluminium.

Gains in zinc, lead and silver production were aided by investment in new smelters and refineries though lower lead prices saw gross profits fall from $332m to $265m at Vedanta’s zinc division in India. Higher export duties imposed on Vedanta’s iron ore operations by the Indian government also weighed on profits.

Elsewhere higher energy costs and lower prices commanded by output from Vedanta’s copper operations in Zambia saw the profits generated by the African business fall from $143m to $68m for the quarter.

Vedanta’s aluminium business was the hardest hit of its divisions, as mark-to-market losses on borrowings prompted by the depreciation of the India Rupee, along with lower prices commanded by the metal, prompted a collapse in its quarterly profits from $76.3m to just $3.6m.

Vedanta’s ebitda for the nine-month period rose by 14 per cent from $2.24bn to $2.56bn on revenues that increased 30 per cent from $7.65bn to $9.9bn.

Shares in the company, which traded as high as £29.52 in early 2010, rose by 31p to £12.07 on Tuesday.