Vedanta Reports Loss as Cairn Writedown Eclipses Metal Rebound

  • Cairn posts biggest quarterly loss on one-time impairment
  • Metal prices rebounding on China demand recovery optimism

Vedanta Ltd., India’s biggest producer of aluminum and copper, posted a quarterly loss as a writedown by it’s oil-producing unit to account for the slump in crude offset gains from a rebound in metal prices.

Net loss totaled 111.8 billion rupees ($1.68 billion) in the three months ended March 31, compared with 192.3 billion rupees a year earlier, the unit of London-listed Vedanta Resources Plc said in a statement on Thursday. Net income before exceptional charges was 9.55 billion rupees, more than the average 5.63 billion rupees estimated by six analysts. While sales declined 10.7 percent to 158.3 billion rupees in the quarter, it topped analysts’ estimates of 154.8 billion rupees.

The worst oil crash in a generation saw Cairn India Ltd., Vedanta’s crude oil unit, post its biggest quarterly loss in the three months ended March 31. That offset gains from a rebound in metal prices, spurred by speculation that raw-materials consumption in China will turn around after years of concern over worsening economic growth.

Cairn India, which produces about a quarter of the country’s domestic crude output, reported an impairment charge of 116.7 billion rupees in the fourth quarter to write down the value of oil and gas assets and higher government tax on oil. The explorer posted a record loss of 109.5 billion rupees in the quarter, it said on April 22. The average price of Brent crude, the global benchmark, slumped to the lowest in almost 12 years in the period.

Copper, Iron Ore

Vedanta also wrote down 14.9 billion rupees at its exploratory assets in West Africa because of falling iron ore prices and geopolitical uncertainty, while making a one-time provisioning of 4.6 billion rupees at its Copper Mines of Tasmania and Bellary iron ore assets, the company said.

Vedanta’s total costs fell 3 percent to 140.7 billion rupees in the quarter, while finance costs rose about 17 percent to 15.4 billion rupees, the company said. Net debt stood at 252.9 billion rupees at the end of March, while cash and liquid investments totaled 526.7 billion rupees, it said. The shares slid 4.8 percent to 99.80 rupees by 3:30 p.m. close in Mumbai, the biggest drop in three weeks.

Three-month zinc prices on the London Metal Exchange have jumped 17 percent this year, while copper climbed 4 percent. Aluminum has gained 9.4 percent this year, recovering from a slump of 19 percent in 2015 while an index of six metals on LME gained 6.7 percent. The rebound in metal prices helped Hindustan Zinc Ltd., in which Vedanta owns 64.9 percent stake, report a 7.7 percent increase in net income to 21.5 billion rupees in the fourth quarter, it said on April 21.

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