Vedanta earnings plummet 98% on lower metal prices, writedowns

JOHANNESBURG (miningweekly.com) – Despite achieving record production volumes of zinc and aluminium, lower London Metals Exchange (LME) prices have led to a "challenging" third quarter for LSE-listed base-metals producer, Vedanta Resources. Reporting on the company's performance in the third quarter ended December 31, Vedanta said the quarter had been challenging owing to the global economic slowdown. Earnings before interest, depreciation and amortisation plunged 98,5% in the third-quarter to $10,1-million, from $671,5-million a year earlier, which was attributed to inventory writedowns, negative provision pricing adjustments and currency translation losses. Revenues had declined by 31% to $1,31-billion, compared with $1,89-billion the year before, as a result of lower LME prices. Earlier this week, the producer said copper prices on the LME had fallen by 46% year-on-year. Copper cathode production at the company's Tuticorin smelter, in India, had been "stable" at 76 000 t in the quarter, compared with the production volumes of the previous year. Revenues from the copper operations in India and Australia were down 21% to $528,9-million for the quarter, compared with $669,4-million the year before, owing to the drop in LME copper prices. The company had reported on Monday that copper cathode production at its operations in Zambia, the Konkola Copper Mines, had declined by 52% to 25 000 t, compared with the 38 000 t the year before. Revenues from the copper operations in Zambia had declined by 47% to $121,9-million for the quarter, compared with $232,1-million the previous year. Meanwhile, Vedanta had boosted its aluminium production by 23% year-on-year to 122 000 t in the third quarter, owing to the ramp up and commissioning of the first phase of its new 500 000 t/y Jharsuguda smelter, in India. This was part of the producer's $7,8-billion investment programme to increase its aluminium smelting capacity to about 2,6-million tons a year by 2012. The smelter would also include an associated 1 215-MW captive power plant. However, Vedanta said the revenues for its aluminium division were down 30% to £183,2-million for the quarter, compared with $261,9-million the year before, as a result of a 25% year-on-year decline in LME aluminium prices. The company was working on reducing its cost of production at all its operations and was confident it would see further reductions going forward. Further, the aluminium division, Vedanta Aluminium, had started commissioning a 1,4-million tons a year greenfield alumina refinery project, along with a 90-MW captive power plant, in Lanjigarh, in India. The producer reported that the first stream of the refinery was fully operational, having achieved production of 165 000 t in the quarter. A dry run and testing of the equipment for the second stream of the project was under way. In addition, the commissioning of the Jharsuguda II aluminium project was on schedule to start in March 2010. The associated captive power plant would be commissioned in October 2010. OTHER METALS Revenues at Vedanta's zinc operations had also come under pressure in the quarter, dropping nearly 55% to $191,9-million, compared with the $424-5-million the previous year. LME zinc prices had declined by 55%, while LME lead prices had dropped by 62% year-on-year. Nevertheless, zinc metal production had increased 27% to 171 000 t, compared with the year before, while refined zinc production was up 46% to 152 000 t. Similar to its other operations, Vedanta's iron-ore division had seen a 7,5% drop in revenues to $227,4-million, compared with the $303,5-million earned the year before, owing to the decline of iron-ore prices. Iron-ore production had, however, also increased to 3,98-million tons in the quarter, compared with the three-million tons the year before.