Thursday 10 November 2016 12:52 pm

Vedanta Resources’ share price leaps 15 per cent after the firm says it expects zinc production to rise and declares an interim dividend

FTSE 250-listed metals group Vedanta Resources' share price rocketed more than 15 per cent today after the firm said it expected its zinc production to rise and declared an interim dividend. 

The figures

Revenue at the India-based group dipped 15 per cent to $4.9bn (£3.9bn) in the six months to 30 September, while earnings before interest, tax, depreciation and amortisation (Ebitda) fell four per cent to $1.2bn

These were driven by the ongoing commodities rout, which brought down its full-year results in May, and falling production at Zinc India, though Vedanta added this was in line with its mine plans. 

Read more: Vedanta Resources gets more leeway with debt covenant change

Silver production increased six per cent in the first half at Zinc India, while aluminium had its highest ever half-yearly production. In the second half, zinc production is expected to be "significantly higher". Vedanta booked a 25 per cent fall in revenue in the metal over the first half. 

Vedanta's highest Ebitda margin in two years, at 33 per cent, prompted the group to declare an interim dividend of 20 cents per share, compared with no interim dividend in the first half of last year.

The group's wide-ranging cost optimisation strategy to save $1.3bn, set out in 2015, led to a narrowing in the basic loss per share, which came in at 23.2 cents.

Read more: FTSE 100 miner Vedanta merges Indian branches

Shares in the metals and mining company were trading up 14.3 per cent in early afternoon trading to 893p, though it hit a day-high of 904.5p

[charts-share-price id="668"]

Why it's interesting

In the first half, Vedanta received approval from all sets of shareholders to merge oil and gas exploration company Cairn India with Vedanta Limited.

"This is a significant step towards simplifying the group, and creating long-term shareholder value, in line with our strategic priorities. Vedanta’s exposure to India means we are well- positioned to benefit from world’s fastest growing economy," Anil Agarwal, chairman of Vedanta Resources, said.

A bolstered zinc output and strong aluminium production in the first half would seem to reflect comments Vedanta chief executive Tom Albanese made in April, when he said he believed the worst was already over for metal markets.

Read more: Commodity prices – low point for investors? Wait until 2017

Metals prices have been pummelled by a combination of excess supply and waning demand in recent years. 

Materials such as copper and silver have rallied so far in 2016, while gold and other precious metals have buoyed. 

What Vedanta said

Agarwal added:

Vedanta Resources continues to deliver on all fronts, achieving robust operational and financial performance in the first half of the financial year. We ramped-up production as planned at our aluminium, power and iron ore businesses. 

We continue our relentless focus on cost optimisation, generating strong free cash flow and de-levering our balance sheet.