Vedanta's net profit fell 46% for the fiscal year 2011-12

London-listed Vedanta Resources, which controls stake in India’s copper to aluminium-maker Sterlite Industries, on Thursday said its consolidated net profit fell 46% to $387 million for the fiscal year 2011-12 as it took a $400-million mark-to-market hit on the volatile rupee, paid highest interest on loan taken to purchase oil refiner Cairn India and had to cut down aluminium production at its Orissa plant due to power shortages.

“The outlook for natural resources remains robust,” chairman Anil Agarwal told analysts after announcing the results in London. “Vedanta, with a low-cost structure and an Indian asset base, is well-positioned to serve the country.”

Operating profit or earnings before interest, tax, depreciation and amortisation (Ebitda) rose 13% to $4 billion with oil and gas contributing 18%, making up the drop in iron ore. Iron ore contributed only 18% to the Ebitda this year as it stopped iron ore mining in Karnataka following a Supreme Court order. Vedanta was trading at 975 pence per share, down 5% from the previous day’s close in afternoon trading on the London Stock Exchange on Thursday.

The company’s yearly revenue grew 23% to $14 billion from $11.43 billion in the same period last year. Vedanta’s net debt as of March 31 stands at $10.1 billion.

The group, which reported a net profit of $715 million last year, said it expects to complete the merger of its subsidiaries Sesa Goa — an iron ore miner — and Sterlite Industries, a zinc to aluminium metal producer, by August.

“Extraordinary meetings for shareholders in the subsidiaries will be held in June,” MS Mehta, Vedanta’s chief executive, told analysts. “This will be first step in the streamlining plan — a merger of Sesa Goa and Sterlite Industries into Sesa Sterlite forming the eventual umbrella unit for Indian operations.”

Vedanta is also keen to buy out the Indian government’s minority stake in its subsidiaries Hindustan Zinc and Bharat Aluminium (Balco). Mehta said the company is engaged in talks with the government, but refused to give a deadline.

“We maintain our view that the restructuring would be of transformational significance for Vedanta shareholders, removing considerable debt burden and improving cash flow,” analysts of London-based brokerage Liberium said in a note. “However, a number of hurdles remain and, therefore, the road to deal closure may not be entirely straightforward.”

Vedanta, the largest aluminium producer in India, expects a double-digit growth in demand in India. Mining majors around the world have been cautious about outlook for financial year 2012-13. BHP Billiton told investors on Wednesday that it expects commodity markets to cool down. The company also backed away from a major spending plan, putting its capital expenditure plans on hold.

Vedanta too is nearing the completion of its own $18 billion spending programme. The company’s chief executive Mehta said that it has reached an inflection point with its spending programme.

“We are very comfortable, having completed a large part of our journey,” he told analysts. “We have always maintained structurally low costs in most of the sectors where we are present.”