Vedanta Scraps Dividend on `Challenging' Commodities Market

  • Producer's dividend payment to be reviewed in May, board says
  • First-half Ebitda declines 39% as prices of metals drop

Vedanta Resources Plc, India’s biggest aluminum and copper producer, will pay no interim dividend after revenue declined because of a rout in commodity prices.

Earnings before interest, taxes, depreciation and amortization fell 39 percent to $1.29 billion in the six months through September from a year earlier, the London-based company, controlled by billionaire Anil Agarwal, said in a statement Wednesday. Sales dropped 12 percent to $5.7 billion.

"The outlook will be challenging in the short to medium term, but I continue to be optimistic about the future of the sector," Tom Albanese, chief executive officer of Vedanta, said on a conference call. “The China growth story, albeit on a slow pace, is still intact, and there is still a demand for commodities. We are adapting ourselves to this new normal."

Like all miners and metals producers, Vedanta is adjusting to a slump in prices amid weakening demand from top consumer China. The country’s slowest economic growth in more than two decades has led to oversupplies of metals and sent copper prices to near the lowest in six years. Vedanta shares have fallen 11 percent in London in 2015 while the Bloomberg World Mining Index has dropped 25 percent.

Dividend Review

Vedanta’s board will review dividend payments in May when it delivers its full-year results, it said. The company’s interim dividend was 23 cents a share last year.

“We have witnessed continued volatility in commodity markets, creating challenging conditions for all resource companies,” Agarwal, Vedanta’s chairman, said in the statement. “As a result of this market uncertainty, the board has decided not to pay an interim dividend.”

The company reduced debt by $900 million to $7.5 billion in the six-month period. It also cut its full-year 2016 capital spending guidance to $700 million after reducing it by half to $1 billion at the start of the year.

"Vedanta remains in a challenging situation given high levels of gearing and low commodity prices," JPMorgan Chase & Co. analysts including Roger Bell, said in a report. "However, these results should provide some comfort that the company retains flexibility to control its own destiny, with the outlook for refinancing in 2016 appearing more positive."

Vendanta fell 0.5 percent to 509.50 pence at the close in London, after earlier dropping as much as 5.1 percent.

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