Mining group Vedanta Resources Plc (VED.L) said profit for the first-half declined from a year ago, as increased contribution from higher volumes in aluminium, zinc and iron ore businesses were more than offset by lower commodity prices and by-product realisations across all operations. The company, which is operationally focused on India, said global economic conditions are showing early signs of improvement and it has seen some recovery in metals prices. The London listed company's shares are currently trading down 4% on the LSE.
For the first-half period, Vedanta's profit before taxation was US$604.6 million compared with US$1.14 billion in the prior- year period.
Profit attributable to shareholders plunged to US$188.2 million from US$350.0 million in the first half of fiscal 2009. The company's profit for the period from continuing operations was US$501.2 million or 61.4 US cents per share versus US$876.4 million or 111.4 US cents per share last year.
Revenues for the six-month period slumped to US$2.98 billion from US$3.97 billion in the year-ago period. Vedanta has six production segments: Aluminium, Copper-India/Australia, Copper-Zambia, Zinc, Iron Ore, and Power.
In the aluminium segment, revenues for the period were US$254.8 million versus US$594.2 million a year earlier. Aluminium production in the first half was 245 thousand tonnes, up 18.9% from the same period last year. The company attributed the increase to the production of 109 thousand tonnes from the new Jharsuguda aluminium smelter. Average LME cash settlement prices for aluminium was US$1,652 per tonne, down 42.3% from US$2,865 last year.
In the copper-India/Australia segment, revenues generated dropped to US$1.21 billion from US$1.57 billion in the previous year. In the first-half period, the production of cathodes at copper-India division was 169 thousand tonnes, an increase of 13.4% from the prior year, reflecting a 26 day bi-annual maintenance shutdown during the first half last year.
During the first six months of 2010, production of mined metal at the company's Australian mine was 12 thousand tonnes, flat with the previous year. Vedanta said production during the period was negatively impacted by a mud rush in the mine due to heavy rainfall at the end of August 2009.
In the copper-Zambia segment, revenues were US$429.9 million as compared with US$514.3 million in the first half of 2009. The company produced 78 thousand tonnes of copper cathode, which was nearly 6.9% higher than the prior-year period, reflecting a 10% increase in production from tail leaching plant of 25 thousand metric tonnes for first half of 2010 and better production from the new Nchanga smelter.
Average LME cash settlement prices for copper in the first half declined 34.6% to US$5,276 per tonne from US$8,064 last year.
In the zinc division, revenues generated declined to US$659.9 million from US$777.3 million in the comparable period prior year. Zinc refined metal production in period was 280 thousand tonnes, up 12.5% from last year, benefited by improved operational efficiencies. Refined lead production was 31 thousand tonnes compared to 32 thousand tonnes in corresponding period prior year. Average LME cash settlement prices for zinc were down 16.5% to US$1,621 per tonne.
During the period, silver produced by Vedanta was 2.63 million troy ounces, a 48.5% increase from 1.77 million troy ounces last year.
In the iron ore segment, revenues for the period were US$316.2 million versus US$503.3 million in the 2009-year period. Saleable iron ore produced by the company during the period was more than 8.20 million tonnes, reflecting de-bottlenecking of mining operations and logistics.
In the power segment, revenues generated surged to US$119.1 million from US$14.5 million a year earlier. In the first half of 2010, Vedanta sold 981 million units of power, compared to 141 million units in the previous year, at an average realisation of 4.9 rupees per unit, or 10 US cents per unit.
Chairman Anil Agarwal said, "Expansionary capital expenditure in the period was US$1.79 billion in what we anticipate will be the peak year for the current organic growth programme. To support our growth initiatives, we successfully raised US$3.35 billion during the 2010 financial year to date by issuing equity and convertible bonds."
"We have seen some recovery in metals prices and the fundamentals remain highly attractive. We expect that the economic and industrial growth in India will help underpin the demand for our products," Agarwal said.
In a separate press release, Vedanta declared an interim dividend of 17.5 US cents per ordinary share, payable, in US dollars, on January 7, 2010 to the shareholders on the register on December 11, 2009.
Among peers, UK-based mining group Rio Tinto Plc (RTP,RIO.L) on August 8, 2009 reported a sharp decline in its first-half profit, hurt by price declines in almost all of its commodities, restructuring costs and unfavorable currency movements. Rio Tinto's first-half attributable profit was US$2.45 billion compared to US$6.95 billion last year. On a per share basis, earnings fell to 155.7 US cents from 440.6 US cents a year earlier. Consolidated sales revenue declined to US$18.85 billion from US$27.19 billion in the first half of previous year.
In Thursday's regular trading session, VED shares are currently trading on the London Stock Exchange at 2,198 pence per share down 92.00 pence or 4.02% on a volume of 805,741 shares. In the past 52-week period, the shares have been trading in a range of 358.75 pence to 2,420 pence.
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