Vedanta core profit up 6.3 percent on higher output

LONDON (Reuters) - India-focused metals group Vedanta Resources posted a 6.3 percent rise in first-quarter core earnings on Tuesday as higher output in most of its metals outweighed weaker zinc prices and higher costs. Vedanta said earnings before interest, tax, depreciation and amortisation (EBITDA) increased to $739 million (371 million pounds) on revenue which grew 9.2 percent to $2.02 billion. Vedanta shares, which have shed 7.5 percent so far this year and have underperformed the UK mining index by 5 percent, rose 2.3 percent to 1,895 pence by 9:09 a.m.. The UK mining index was 2.1 percent firmer. "It was a solid quarter," analysts at brokerage Cazenove said in a research note. "We see Vedanta set fair for another solid year of double-digit organic growth in FY09, which remains its defining feature compared to its peers." Michael Rawlinson at Liberum Capital said first-quarter EBITDA was running 18 percent below the level needed to meet consensus forecasts of $3.57 billion for the full year, but this should be achievable as output increases and the price of iron ore and aluminium remains high. The group said refined zinc production in the three months to the end of June jumped 38 percent to 128,000 tonnes due to the opening of its new Hydro II smelter at Chanderiya, which began operating in December and is now near full capacity. PROFIT GENERATORS Zinc has been Vedanta's most important metal, accounting for around half of operating profit in its last financial year to end March, but following the takeover of an iron ore group last year the two metals are equal profit generators. Zinc's share of first-quarter EBITDA was 32 percent compared with iron ore at 29 percent. The rise in zinc output was offset by a 42 percent year-on-year fall in average zinc prices to $2,115 per tonne. The company -- which has operations in India, Australia and Zambia -- referred to rising costs, but did not give details. Vedanta said its new iron ore unit boosted output by 57 percent to 4.6 million tonnes. It warned that a new 15 percent export duty only had a marginal impact in the first quarter but will be felt more in the future. "We expect the impact to be significant in the coming quarters," it said. Vedanta said aluminium output rose 2.1 percent to 99,000 tonnes and its new $2.1 billion Jharsuguda smelter was ramping up production. The first phase of the smelter will produce 250,000 tonnes per year. Copper cathode output in India fell 16 percent to 68,000 tonnes due to a planned maintenance shutdown, but the unit was a bright spot in terms of costs. "Operating costs in our Tuticorin smelter showed significant improvement despite high energy costs, primarily due to higher by-product realisation and better copper recovery." Cathode production in Zambia fell 7.7 percent to 36,000 tonnes, where operating costs remained under pressure due to higher labour costs and energy prices.