Hindalco profit falls 48.5% to Rs248.15 crore

The Aditya Birla Group’s flagship company Hindalco Industries Ltd reported a stand-alone net profit of Rs.248.15 crore for the fourth quarter of 2013-14, down 48.52% from a year ago, owing to rising costs even though sales of aluminium were at a record high, the company said on Thursday.

“The earnings before interest, tax, depreciation and amortization (Ebitda) are up driven by better operational results not only in copper which is very apparent, but also in aluminium,” said Debu Bhattacharya, managing director at Hindalco Industries and vice-chairman at overseas subsidiary Novelis Inc.

“A significant jump in depreciation and interest, however, has dampened the net income,” Bhattacharya said at a press conference.

The company, which has set up two new aluminium plants and one new alumina refinery, saw depreciation rise 41% and finance costs rise 36% in the fourth quarter of 2013-14.

The higher sales volume of metals produced pushed up revenue—stand-alone revenue for the March quarter was at Rs.8,435.06 crore, up 20.61% from the same period a year ago.

A Bloomberg poll of analysts saw Hindalco’s net profit at Rs.350.9 crore on revenue of Rs.7,488.8 crore for the quarter.

The company said its net profit was also hit by a one-time payment on account of two state taxes, which hit net profit by Rs.396 crore.

Energy costs also bogged down the company and the cost of procuring coal rose 10% in fiscal 2013-14, as the company expanded its aluminium and alumina capacity. Looking ahead, chances are that coal prices could rise further, said a top company official.

The company has a stake in Mahan Coal Ltd in a joint venture with Essar Power Ltd, but the opposition from activists has indicated there could be delays in starting the coal mine.

An analyst said that minus the exceptional item, Hindalco’s figures are better than expected.

“The numbers are better than expected mainly by positive surprise in aluminium performance. It appears that higher physical premiums have helped them,” said Giriraj Daga, an analyst at Nirmal Bang Equities Pvt. Ltd. “The interest and depreciation costs increase was also on expected lines.” he said.

However, Daga said the pressure of depreciation and interest cost would remain would eat into their net profit for at least another two years.

The company said all of its greenfield projects—Mahan Aluminium in Madhya Pradesh, Aditya Aluminium and Utkal Alumina International Ltd in Odisha—have become operational. The company is focused on raising the capacity utilization at all the three plants.

“FY14 has been a historic year for the company. Six new facilities came on stream,” Bhattacharya said, referring to the three new plants as well as expansion at existing plants.

Bhattacharya said the prices of aluminium on the London Metal Exchange, which provide a pricing reference to all aluminium producers, may have bottomed out, which could help the company. The strengthening rupee, however, could offset the price gains, he said.

For the full fiscal 2013-14, the company produced 613,000 tonnes of aluminium, higher than 542,000 tonnes produced a year ago, and 329,000 tonnes of copper cathodes, up from 315,000 tonnes a year ago.

The ramp up in capacity at the new plants would mean the company could see an annual production of over 1 million tonnes of aluminium, Bhattacharya said.

The company’s net debt stood at Rs.19,000 crore at the end of 31 March.

Shares of Hindalco closed on BSE at Rs.149.25, up 1.43% from the previous day, while the Sensex closed at 24,234.15 points, down 1.31% from the previous day. The BSE metals index closed at 12,239.58 points, down 0.87% from the previous day.

“I am negative on the stock, I have a target price of Rs.100 as of now... the stock may move up slightly by Rs.10-15, but I would still retain a sell,” Daga said.

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