Billionaire Agarwal's Vedanta shines as metals rally hots up

[MUMBAI] Billionaire Anil Agarwal's Vedanta Ltd, which posted a 47 per cent jump in second-quarter profit, said it expects an even better second half as metals climb to multi-year highs and volumes increase.

Net income rose to 20.9 billion rupees (S$440.3 million) in the three months through September, from 14.2 billion rupees a year earlier, the unit of London-listed Vedanta Resources Plc said Thursday. The profit trailed an estimate of 22.4 billion rupees from 13 analysts polled by Bloomberg. Revenue was up 36 per cent to 215.9 billion rupees.

"We expect the second half of this fiscal year to be more robust with the continuing production ramp-up," Chief Executive Officer Kuldip Kaura said in a statement. The company expects aluminum prices to be supported by capacity cuts in China.

Aluminum, zinc and copper have all posted gains of more than 25 per cent this year, and metals are the best performers in the Bloomberg Commodity Index, as global growth gathers pace, supply shortages bite, and China cracks down on bloated capacity and pollution. Brent oil, the benchmark for half the world's crude including India, is up 7 per cent in 2017.

Vedanta remains the top pick in the metals space as it is best placed to benefit from robust zinc and aluminum prices due to capacity ramp-ups, Amit Dixit, an analyst at Edelweiss Financial Services Ltd, said in a report Tuesday. Its free cash generation potential of 147 billion rupees through to fiscal year 2018-2019 will help with deleveraging, Mr Dixit said.

Hindustan Zinc Ltd, the arm of Vedanta that produces the galvanizing metal, reported last week a 34 per cent jump in net profit to 25.5 billion rupees in the quarter from a year earlier, even as it flagged rising cost pressures.  Total costs at Vedanta rose 24 per cent to 187.3 billion rupees in the second quarter from a year earlier, the company said. Net debt was 155.9 billion rupees as of Sept 30 and cash and cash equivalents were 402.1 billion rupees.

The stock was little changed at 341.20 rupees in Mumbai on Friday. Shares have advanced almost 60 per cent this year.

BLOOMBERG