Cost pressure to weigh on Hindalco

Cost pressures will continue to weigh on Hindalco Industries Ltd’s financial performance particularly in the backdrop of weak London Metal Exchange prices of aluminium and copper, a top official of the metals major said on Tuesday.

Cost pressure to weigh on Hindalco

Hindalco Industries Ltd today reported a 29% decline in its September quarter net profit at Rs 359 crore mainly because of a sharp fall in prices leading to lower realisation per tonne.

Revenue from operations also declined year-on-year to Rs 6,164 crore compared with Rs 6,272 crore in the July-September quarter of the previous year. But turnover was better than the June quarter.

Earnings before interest tax depreciation and amortisation were also lower at Rs 515 crore compared with Rs 660 crore in the year-ago period but much higher sequentially compared with June’s quarter EBITDA at Rs 463 crore.

The sequential improvement was attributed to higher volumes and better realisations. Also, the successful ramp-up of its copper smelter after its shutdown in the first quarter helped.

Finance costs during the quarter were lower at Rs 28 crore compared with Rs 68 crore in the year-ago period. This is because the company repaid an expensive loan bringing down interest costs. Shares of Hindalco declined by 1.8% to Rs 112.40 on the National Stock Exchange today.

Aluminium

World aluminium consumption has been declining in the current year because of the overall global economic scenario.

“Uncertainties persist as China’s slowdown and U.S. fiscal cliff remain concerns,” said B. Bhattacharya, managing director of the company.

According to him, LME for aluminium is under pressure after having shed $750 per tonne to take the metal’s price down to $1,975 in October.

“About 30% of the world capacity is making losses at these prices. While the western world has cut production China kept production going,” he said.

For the fourth consecutive year world aluminium stocks are at their highest, at above 90 days of inventory, he said.

Revenue from aluminium business declined to Rs 2,105 crore compared with Rs 2,213 crore in the year-ago period. The performance was impacted by operational disturbances in both the smelters of the company.

Profits from aluminium business declined sharply to Rs 170 crore from Rs 429 crore in the year-ago period.

Copper

Improved copper business helped the company to offset the declines in aluminium business.

Copper revenue for the September quarter was Rs 4,066 crore nearly unchanged from the year-ago period.

Profits from this business stood at Rs 209 crore compared with Rs 148 crore in the year-ago period.

Overall scenario

The company’s aluminium operations are expected to stabilise by the fourth quarter of the current financial year, Bhattacharya said.

According to him the projects are on track with Utkal Alumina and Mahan Aluminium projects to be commissioned by March-April next year. The Aditya Alkuminium project is likely to be commissioned by the middle of 2013, he said.

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