Despite posting a significant jump in net debt and lower than expected cash profit of $1.23bn (£0.98bn), the publication of Vedanta Resources ' (VED) half-year results caused shares in the commodities group to soar 12 per cent. That turbocharged bullishness should be seen in the immediate context of surging zinc and copper prices and broad hopes of a Trump-led US construction boom, but a closer look reveals a less than rosy picture.
Although credit rating agencies have upgraded Vedanta's debt this year, borrowings remain eye-wateringly high. Interest payments totalled $699m in the period, which leaves very little wriggle-room for a company with a huge asset base and an operating profit just $20m in advance of that obligation. The latter figure was buffeted by an improved bottom line in most of Vedanta's smaller metals divisions. While prices remained tepid, the heavy impairments booked in the same period last year meant the oil and gas, iron ore and copper segments all swung to a profit. Lower costs - down $536m in the last 18 months and on track to surpass a $1.3bn savings target before 2018 - have been the main contributor.
Canaccord Genuity, which plans to update its forecasts on the recent rally in metal prices, was previously guiding for an adjusted loss per share of 42¢ this year, swinging to positive EPS of 28¢ for the March 2018 year-end.
VEDANTA RESOURCES (VED) | ||||
|---|---|---|---|---|
| ORD PRICE: | 802p | MARKET VALUE: | £2.17bn | |
| TOUCH: | 801.5-802p | 12-MONTH HIGH: | 870p | LOW: 196p |
| DIVIDEND YIELD: | 5.0% | PE RATIO: | na | |
| NET ASSET VALUE: | 2,574¢ | NET DEBT: | 117% | |
| Half-year to 30 Sep | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2015 | 5.70 | 244 | -118 | nil |
| 2016 * | 4.87 | 427 | -23.2 | 20.0 |
| % change | -15 | +75 | - | - |
Ex-div: 17 Nov Payment: 15 Dec £1=$1.25 *The exchange rate to be applied will be £0.804 per US dollar, equating to a dividend of 16.08p | ||||
