Vedanta hit by $6.6bn impairment on oil and gas assets

Vedanta Resources has been hit by $6.6bn of impairment charges in its oil and gas business after sharp price falls last year.

The Indian resources conglomerate, which acquired its Cairn India oil business in 2011, took a $5.8bn non-cash charge on its Indian fields. It also impaired the value of a Sri Lankan exploratory block by $788m.

The charges equate to $4.5bn net of tax and were among $6.7bn of special items that Vedanta revealed as it said underlying operating profits fell 24 per cent to $1.7bn. Revenues were flat at $12.9bn.

Vedanta had already acknowledged an impairment of more than $3bn at its main Indian subsidiary because of the revaluation of the Cairn stake. The charge at the UK-listed group level is much larger because of different accounting rules.

The Indian group, where Tom Albanese, the former Rio Tinto chief executive, took over as chief executive last year, also impaired its struggling Konkola Copper Mines business in Zambia by $52m.

The turnround at KCM "continues to present challenges", said Mr Albanese.

Mr Albanese said Vedanta's priorities for this year included making its aluminium business more efficient. After investing $8bn Vedanta said the business achieved record production levels last year but is still only operating at 38 per cent capacity, with Vedanta having long battled to secure a local source of bauxite ore for its refineries and smelters.

Vedanta also wanted to restart iron ore mining in the province of Goa following a local ban, Mr Albanese said.

Mr Albanese also said he would continue to try to simplify Vedanta's complex structure. "I acknowledge shareholder feedback that we need to simplify Vedanta's group structure and we intend to put greater focus on this in the coming year to make Vedanta easier to understand and more attractive to invest in," he said.

Vedanta's earnings before interest, tax, depreciation and amortisation fell 17 per cent from $4.5bn to $3.7bn, as underlying operating profits fell by more than 70 per cent in its oil and gas operations and in its copper business. Operating profits at its zinc operations, its largest contributor, rose 2 per cent.

The group net loss widened from $989m to $3.8bn while the net loss attributable to Vedanta shareholders increased from $196m to $1.8bn. Stripping out the impairments and other special items net income fell 31 per cent to $751m.

Vedanta increased its full-year dividend by 3 per cent. Its London-listed shares fell 2.4 per cent to 644.5p.

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