Hindalco¡¯s Q4 profit declines 36% to INR 159.53 crore

Aditya Birla Group’s flagship company Hindalco Industries Ltd on Thursday reported a 35.7% decline in its stand-alone net profit for the March quarter, thanks to higher power and fuel, and finance costs, and weaker prices in the international markets

. Net profit was at INR.159.53 crore as compared with INR.248.15 crore a year ago. Net sales for the quarter rose 11.1% from a year ago to INR.9,371.55 crore. The Bloomberg poll of 21 analysts had expected the company to post a net profit of INR.284 crore on a net sales of INR.8,304.5 crore.

Power and fuel expenses rose 54.87% year-on-year to INR.1,425.72 crore while finance costs rose 117.3% to INR.466.34 crore.

“Profit is lower given the lower realization, higher depreciation and interest arising out of capitalization of the assets at Mahan Aluminium and Aditya Aluminium projects,” the company said in its statement.

Aluminium sales grew by 14% compared with the third quarter of the year, but earnings before interest and taxes at the aluminium division fell 20% to INR.306 crore due to adverse macroeconomic conditions. Realizations in the aluminium business fell during the quarter.

“There has been a destocking on aluminium from warehouses for various reasons including court orders, a fall in contango and a likelihood of a surplus in 2015,” said D. Bhattacharya, managing director, Hindalco Industries, adding that the aluminium business will go through a “rough patch” even though long-term prospects are bright. At the company’s copper division, sales rose by 5% compared with the previous quarter on higher copper production. Copper realizations rose during the quarter, helping provide a buffer for the company.

The outlook for the copper business is broadly positive on the back of favourable treatment charges and refining charges (TcRc) and robust performance of the smelter, the firm said in its results presentation on Thursday.

“The numbers are pretty much in line, the copper business has done much better. Aluminium business profitability has been impacted as commodity prices globally are falling,” said Chirag Shah, director of equity research and head analyst of building materials, metals and mining at Barclays Capital Plc. Shah added that some of the cost pressures will be offset by the expected ramp-up in capacity at the Mahan and Aditya smelters.

“...with the capacity ramp-up, the cost will stabilize, even though aluminium prices remain under pressure. The copper business is expected to continue to do well,” Shah said.

During 2014-15, volumes across the aluminium business increased by 37% following a capacity ramp-up at the company’s two new aluminium smelters—Mahan and Aditya. The company’s Mahan smelter facility is now operating at 85% utilization and the Aditya smelter facility is operating at close to 50% of its total capacity.

With the ramp-up in capacity, the company looks up to cross one million tonnes in aluminium production in the current fiscal year. The current production stands at 0.8 million tonnes.

“Depending on the demand in the domestic market, we would look at exports,” Bhattacharya said.

The company also won four coal blocks in the recent round of coal auctions although mining leases and land transfer documents for these blocks are yet to be completed. “We expect all the required documentation and transfers to be complete by May/June this year”, the firm said.

“The increase was primarily driven by higher shipments, favourable product mix due to a strategic shift to grow automotive shipments and cost benefits from using a higher percentage of recycled metal inputs,” said the company, adding that these gains were partly offset by the higher costs associated with the start-up and support of new capacity, lower pricing in some Asian markets, as well as unfavourable foreign exchange.

Copyright and Exemption Declaration :¢ÙAll articles, pictures and videos that are marked with "China Aluminum Network" on this website are copyright and belong to China Aluminium Network (www.alu.com.cn). When transshipment, any media, website or individual must list the source from "China Aluminium Network (www.alu.com.cn)". We seek legal actions against anyone that disobey this. ¢ÚArticles that marked as copy from others are for transferring more information to readers, do not represent or endorse their opinions or accuracy and reliability. When other media, website or individuals copy from our website, must keep the source. Anyone that changes the articles' sources will hold the responsibilities for copyright and law problems. We also seek legal actions against anyone that disobey this. ¢ÛIf any articles copied by our website concern the copyright and other problems, please contact us within one week.