Posts Tagged ‘EBITDA’

Vedanta Resources raises dividend

May 6, 2011 Comments off

“Vedanta Resources is banking on robust metal consumption in Asia to drive growth in 2011 as it announced a bumper dividend on the back of higher commodity prices in its full-year results. The FTSE 100 listed resources company anticipates ‘continued growth’ in zinc and copper demand from India and China in particular as it announced a final dividend of 32.5 cents per share for the year ending 31 March 2011. That brings the total dividend to 52.5 cents, up 16.7 per cent on the year before.

A year ago Vedanta announced it would boost its operations with the $1.5bn acquisition of Anglo American’s mostly African zinc assets. Vedanta declined to give specifics on the timing of a planned London flotation of its Zambian copper business. The business increased earnings by 190 per cent to $440m last year.”

Source: Financial Times, May 5 2011


  • Vedanta’s fiscal year ends on March 31. EBITDA increased from $2.3bln in 2009-2010 to $3.6bln, mainly driven by increased iron ore and zinc income. The full profit increase was price-driven, with a small volume increase offset by an operational cost increase.
  • Zinc production in India still is the key pillar for Vedanta’s operations, contributing over 1/3 of total EBITDA. The Zinc India operations are controlled via Sterlite Industries, in which Vedanta holds a 55% interest.


  • Vedanta lists 3 strategic priorities: growth; long term value; and sustainability. After completion of the Cairn India acquisition growth will mainly need to come from organic growth while debt is reduced. The company hopes to create long term value by cutting costs and rationalizing the complex group structure.
  • Sustainability has become a hot theme for the company after it was criticised heavily for social and environmental practices. An independent review by Scott Wilson was done at the end of 2010, resulting in a set of recommendations that will be implemented. The recommendations mainly focus on implementing the necessary policies, procedures, and governance structure to ensure compliance.

©2011 | Wilfred Visser |

Xstrata beats expectations thanks to copper price

February 8, 2011 Comments off

Source: Xstrata FY10 Preliminary Results, February 08 2011


  • Copper, which accounts for 61% of group EBITDA, drives the growth of the profit with its record price levels. Total revenue of $30.5bln is above estimates.
  • Earnings Per Share of 1.61 after exceptional items are on the low side of analysts estimates. However, growth prospects, including the acquisition of the majority share in Zanaga iron ore, drive stock price up 1% above natural resources comparables.


  • Production volume is slightly higher than in past year. However, the price adjusted EBITDA for the year is down 27% because of unfavorable exchange rate and inflation. In the coming year the company will have to show it can ramp up production and benefit from the high commodity prices.
  • The 20$ct dividend (return to pre-crisis level) amounts to $586 mln, only a small part of the operational cash generation of the past year. Xstrata plans to approve a $8bln capital projects this year on top of its ambitious expansion program.

©2011 | Wilfred Visser |

Vedanta delivers strong results, but faces operational challenges

November 12, 2010 Comments off

“The company reported revenues of US$4.6 billion and an EBITDA of US$1.3 billion in the first
half of this year due to higher volumes and realisations across all operations as compared with
the corresponding prior period. Operating profit was US$985 million and attributable profit
was US$337 million, a 39.4% share of net income.

US$479 million of free cash flow was generated after investing c. $1.1 billion in growth capex.
Net debt and gearing were $1.6 billion and 11.6% respectively. Gearing is expected to be less
than 40% after completion of the Cairn India acquisition, and is expected to reduce quickly
given the inherent cash generation of the group.”

Source: Vedanta Interim Results Presentation, November 11 2010


  • Vedanta, the major Indian diversified mining company (although run from London), posted record profits, mainly driven by increases of zinc and iron ore prices. EBITDA margin of around 40% is lower than for some international competitors, but reflects the broad base of small mines the company owns in India.
  • The company is well positioned to be the supplier of choice for the rapidly growing Indian industry. The extension of its business into oil & gas and utilities helps the group to be rather self-sufficient, making it less dependent from poor national infrastructure than international competitors trying to enter the country


  • Upon analysis of the increase of EBITDA the results are not as strong as initially expected. The increase is fully explained by increase of commodity prices (see figure below). Volumes only increased a little bit, completely driven by iron ore volumes. In terms of cash costs, royalties and other comparable items the performance in the 1st half of fiscal year 2011 was actually worse than in the 1st half of fiscal year 2010.
  • The EBITDA breakdown is partly explained by the challenges the company is facing to comply with the rapid changes in regulatory environment in India. The company is struggling to get new assets up to speed as litigation for environmental and ethical/legal issues is forcing it into defensive positions. Apart from the iron ore operations, the low productivity in its mines does not seem to improve.

©2010 | Wilfred Visser |

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