The global downturn continued to hit metal companies hard. Vedanta Resources Plc on Friday said its first quarter core earnings more than halved after a sharp in metal prices. Hindalco Industries Ltd, an Aditya Birla Group company, also reported a 31% dip in its net profit in the first quarter ended June 2009 on weak commodity prices. The steep fall in aluminium and copper prices on the London Metal Exchange trimmed sales revenue and profits of Hindalco.
Vedanta, an Anil Agarwal-promoted company, said its first-quarter profit slumped 52% as earnings before interest, depreciation, tax and amortisation (Ebidta) fell to $354.7 million in the three months ended June 30, from $739 million a year earlier. Higher inventory levels at the LME for most base metals kept prices under pressure.
Vedanta?s revenues for Q1 FY2010 also dropped to $1.358 billion as compared to $2.02 billion in the same period last year.
Experts believe base metal prices wouldn?t move up significantly from the current levels as demand from the end user industries like automobiles, construction and packaging has remained weak.
The average base metal price during the first quarter of FY10 for aluminium was $1,493 per tonne. For copper and zinc, the prices stood at Rs $4,681 and $1,479 per tonne, respectively.
The fall in earnings and revenues of Vedanta came despite a rise in production. The company?s aluminium production in Q1 was up 26.2% to 125,000 tonnes. Its Indian copper cathode and zinc output were up 14.7% and 8.6%, respectively.
The LME-listed company, which targets to be among the world?s top five metal producers, has also chalked out huge investment plans to achieve its target. Vedanta subsidiary Sterlite Industries had earlier this month raised $1.5 billion through ADS to fund its capex plans. Parent company Vedanta had last month launched a $1.25 billion convertible bond issue, to finance takeovers, expansion and boost ownership of subsidiaries.
Vedanta, which currently has cash reserves of about $ 6-7 billion is moving ahead to produce 1 million tonne each of copper and zinc-lead, 2.5 million tonnes of aluminium and 25 million tonnes of iron ore. And if the contested Asarco deal goes through, the group would be the third largest copper producer in the world.
London-listed Vedanta produces aluminium, copper, zinc, lead, iron ore and commercial energy. It has operations in India, Zambia and Australia. It employs 29,000 globally.
Vedanta’s Indian operations include metals and mining company Sterlite Industries, zinc producer HZL, aluminium companies Malco, Balco and Vedanta Aluminium and iron ore miner Sesa Goa.