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Minority dividends soak up Vedanta cash

Minority dividends soak up Vedanta cash

Like many of its peers, Vedanta Resources (VED) returned to a reported profit in the year to March thanks in large part to higher commodity prices. A step up in zinc, lead and silver prices were especially helpful, contributing $478m (£368m) to operating profit, while depreciation and amortisation charges halved compared with 2016's horror show.

However, for a company "committed to a consistent strategy and delevering the balance sheet", headline numbers weren't uniformly positive. By March, net debt had crept up by $1.2bn to $8.5bn due to a massive $1.4bn dividend paid to non-controlling interests. And although $1.4bn in gross borrowings has been retired since the period end, free cash flows look a little tight.

There was no mention of Anglo American (AAL), in which chairman Anil Agarwal acquired a 13 per cent stake in a high-profile deal in March. However, Mr Agarwal has hinted in interviews that he may use his holding to agitate for Anglo to invest in India's diamond and fertilizer industries. Given the state of Vedanta's balance sheet, persuading peers to cough up for capital-intensive projects may be the easier course of action.

According to Bloomberg consensus figures, analysts expect adjusted pre-tax profit of $2.5bn and EPS of $1.44 in the year to March 2018, against $1.54bn and 58.4¢ in 2017.

VEDANTA RESOURCES (VED)
ORD PRICE:629pMARKET VALUE:£1.7bn
TOUCH:628-629p12-MONTH HIGH:1,112pLOW: 361p
DIVIDEND YIELD:6.7%PE RATIO:nil
NET ASSET VALUE:2,226¢NET DEBT:141%

Year to 31 MarTurnover ($bn)Pre-tax profit ($bn)Earnings per share (¢)Dividend per share (¢)
201314.601.7059.058
201412.901.10-72.061
201512.88-5.64-65563
201610.74-4.98-66630
201711.521.38-8.255
% change+7--+83

Ex-div: 20 Jul

Payment: 23 Aug

£1=$1.30

IC VIEW

Vedanta Resources, with its complex interweaving network of Vedanta companies, has always struck as a bit of a debt-laden conundrum. Outgoing chief Tom Albanese stressed that a ramp up of zinc and silver operations should accelerate the deleveraging, but the company's capital structure makes it a high-risk bet. Hold.

Last IC View: Hold, 802p, 11 Nov 2016

visible-status-Standard story-url-Vedanta_FY_240517.xml

By Alex Newman,
24 May 2017

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