Everything’s on the up at Vedanta Resources (VED). Interim results for the six months to September 2017 revealed higher production, revenue, earnings, free cash flow, dividends and – somewhat miraculously, given the generally favourable pricing outlook – even net debt. The latter measure now stands at an unconscionable $9bn (£6.8bn), half a billion dollars higher since March thanks to the payment of special dividends by subsidiaries Hindustan Zinc and Vedanta Limited.
Then again, such heavy indebtedness is a function of the conglomerate’s complicated capital structure. And it’s not as though debt markets have been unforgiving – in August, Vedanta issued $1bn in new bonds as part of a $1.8bn refinancing that lowered the average cost of near-term borrowing by 40 basis points.
Regardless, a six-month extension of debt maturities to three years is hardly cause for celebration. That’s especially true considering Vedanta has been reliant on the higher prices brought about by tightening zinc, aluminium, copper and oil markets. As we recently pointed out, zinc miners’ excellent recent run could soon be threatened by the arrival of new supply – including Vedanta’s own – which may explain the group’s decision to break with tradition and forward sell some output in 2018.
Consensus forecasts are for pre-tax profit of $2.2bn and adjusted EPS of 88.6¢ in the 12 months to March 2018, up from $1.4bn and 1.1¢ in 2017.
| VEDANTA RESOURCES (VED) | ||||
| ORD PRICE: | 857p | MARKET VALUE: | £2.3bn | |
| TOUCH: | 854-857p | 12-MONTH HIGH: | 1,112p | LOW: 559p |
| DIVIDEND YIELD: | 5.2% | PE RATIO: | N/A | |
| NET ASSET VALUE: | * | NET DEBT: | 145% | |
| Half-year to 30 Sep | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2016 | 4.87 | 427 | -23.2 | 20 |
| 2017 | 6.77 | 675 | -23.7 | 24 |
| % change | +39 | +58 | - | +20 |
| Ex-div: | 23 Nov | |||
| Payment: | 14 Dec | |||
| £1=$1.31. *Negative shareholder funds (total equity $6.2bn, non-controlling interests $6.83bn) ** 2017 half-year dividend payment available at 18.31p a share on request | ||||
