A crane lifts a load of copper plates out of a treatment tank at a copper mine, operated by a unit of Vedanta Resources Plc. (Photographer: Waldo Swiegers/Bloomberg)

Vedanta Bets On Metals Rally To Drive A Strong Fourth Quarter

Vedanta Ltd.’s profit declined in the quarter ended December, missing analyst estimates. But the company is betting on the rally in metal prices to drive a strong fourth quarter.

Net profit of India’s largest mining company declined 3.7 percent year-on-year to Rs 2,053 crore in the quarter ended December, said the company in an exchange filing today. The bottom line missed the Rs 2,498 crore estimate of 13 analysts tracked by Bloomberg. Revenue rose 19 percent to Rs 24,361 crore as compared to the same quarter, surpassing the Bloomberg consensus estimate.

The billionaire Anil Agarwal-led company expects a strong fourth quarter on the back of the continued strength in the commodity market, Vedanta’s commodity mix and exposure to Indian growth, Chief Executive Officer Kuldip Kaura said in the press release accompanying the earnings filing.

Industrial metals have rallied in the past year as global growth gathers pace amid supply constraints and a weaker dollar. Prices continued to gain in the third quarter, after touching multi-month highs in the July-September period. Iron ore rallied the most on the London Metal Exchange, gaining 22 percent in the three months, followed by Copper at 11.8 percent, aluminium at 7.9 percent and zinc at 5 percent.

Brent oil, the benchmark for half the world’s crude including India, was up 16.2 percent in the third quarter, while the Bloomberg Commodity Index appreciated 4.4 percent.

In the medium term, the company aims to raise zinc and lead production capacity to 2 million metric tons a year, with about 1.5 million tons in India and around 600,000 tons at its Zinc International unit, Vedanta said in an investor presentation. It also plans to double its copper capacity to 800,000 tons in India in two years.

Vedanta is also looking to enter the Indian steel market as several stressed assets in the sector face insolvency proceedings under the Insolvency and Bankruptcy Code. The company has bid for debt-laden Electrosteel Steels Ltd. at a “very good price,” Agarwal told BloombergQuint at the World Economic Forum last week.

The company’s balance sheet will support expansions, Kaura said. Cash and liquid investments stood at Rs 38,923 crore, according to its press release. while gross debt declined by Rs. 11,450 crore since March 31, 2017.

Vedanta’s earnings before interest, tax, depreciation and amortisation rose 15 percent to Rs 6,763 crore while the margin contracted to 27.8 percent from 30 percent. The operational performance was in line with estimates.

Ahead of the earnings announcement, the stock fell 0.12 percent on the Bombay Stock Exchange. It has gained nearly 5 percent in the third quarter.