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Should You Buy Vedanta Resources plc, African Potash Ltd & Cerillion PLC Today?

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Today I am looking at three headline makers in Friday business.

Fertiliser supplier fades

Potassium digger African Potash (LSE: AFPO) collapsed 43% in Friday business, after furnishing the market with disappointing operational news.

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African Potash advised that the severe drought hitting southern Africa has prompted a deal to supply 20,000 metric tonnes of urea to a COMESA customer to fall through. The client in question is still awaiting confirmation of order from its own customers, African Potash advised.

On top of this, particularly dry conditions in Zimbabwe has seen an agreement inked back in December with Windmill fall through, African Potash said.

In brighter news, African Potash also announced it had signed a participation agreement with Safyr Commodities — which itself has inked conditional sales agreements with leading Zambian fertiliser distributor Nyiombo Investments — for the supply of 50,000 tonnes of urea and NPK.

But investors have naturally given this news short shrift. African Potash is already on shaky ground, the company having seen pre-tax losses swell to $716,000 in July-December, up from $660,000 a year earlier.

Given the scale of unfavourable climate conditions on its revenues outlook, I believe African Potash is a risk too far at the present time.

Software play strides

Cerillion (LSE: CER) has seen its share price jump almost 8% today, after it advised the market that results for the first half of the year “are anticipated to be in line with management expectations.” The software play anticipates reporting that revenues and EBITDA will have advanced 11% (to c.£6.9m) and 21% (to £c.1.1m), respectively, between October and March, when it announces its interim results for the half year in late May.

Cerillion — which provides software for billing, charging and customer relationship management (or CRM) — announced in recent weeks the signing of a $2.4m contract with an existing customer which Cerillion describes as “a multi-service communications provider in the Americas.”

The company provides services for a broad range of customers in established and emerging economies alike, and sales continue to pick up speed. Cerillion currently boasts 75 major clients across 40 countries, and I expect cutting edge products like its Cerillion Skyline package to keep sales spiralling higher.

On the precipice?

I am not so optimistic over the growth outlook of Vedanta Resources (LSE: VED), however. Sure, the share price may have added an extra 33% during the past month as commodity  prices have rallied. But as I have previously cautioned, the fundamental picture for the resources markets remains less than encouraging.

Vedanta Resources continues to hike production across its main markets to offset the impact of lower resources values. Indeed, the business churned out record amounts of copper cathodes, aluminium, electricity and silver during January-March, mirroring similar measures by many of the world’s major commodity producers.

But a drastic slowdown in Chinese economic growth raises serious questions over where exactly all of this excess material will end up.

Given this backdrop, I believe recently-revived commodity prices are in danger of experiencing a severe reversal, putting the share values of chargers like Vedanta Resources in equal peril.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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