Hindalco Q2 PAT down 78% at Rs 79 cr

Company poses strong operational performance despite higher coal costs

Hindalco Industries, the flagship company of the Aditya Birla Group, reported a lower-than-expected standalone net profit of Rs 79 crore in the September 2014 quarter, 78 per cent lower than Rs 357 crore in the year ago period, even as the company's net sales rose significantly.

The profit decline was largely due to exceptional items totaling Rs 431 crore. Adjusted for these, profit would have been in line with analysts' estimates.

Standalone revenues from operations stood at Rs 8,554 crore in the period under review, up 36 per cent from the same period last year, led by strong performance of its aluminium as well as copper businesses.

Bloomberg had estimated the company's net profit at Rs 393 crore and net sales at Rs 8,307 crore.

“The copper TC-RC (treatment charges-refining charges) have been firm this quarter, and given the macroeconomic situation we expect them (TC/RC) to move upward in coming quarters,” Hindalco’s chief financial officer, Praveen Maheshwari, told Business Standard without quantifying the rise seen in TC/RC charges.

Of the total revenue, the copper segment churned out Rs 5,247 crore (up 32 per cent year on year) in the quarter gone by, while aluminium contributed Rs 3,315 crore (up 41.5 per cent). While the aluminium segment's profit was up 104 per cent at Rs 339 crore, that of the copper segment was up 73 per cent to Rs 414 crore.

“At the operational level, the company has performed well,” said an analyst with a local brokerage. Hindalco reported an PBITDA of Rs 1,120 crore in the period under review, up 37 per cent year on year, despite a sharp surge in the cost of coal.

The one-time exceptional loss was a combination of positive as well as negative factors.

Negatives such provision of additional levy on coal according to the Supreme Court order stood at Rs 563 crore along with provision for diminution in investment value at Rs 258 crore, while the positives were foreign exchange gain on return of capital at Rs 361 crore and write-back of provision at Rs 29 crore, the company said in its release.

Other than the exceptional loss, higher finance costs also hit the company's bottom line, it more than doubled to Rs 385 crore in the September quarter as greenfield projects are going on stream.

Regarding the cost of coal after the Supreme Court's order to cancel coal mines, Maheshwari said the company would continue to meet its current requirement from imports as well as local auctions and would also bid for mines.

“Global coal prices have softened and prices of e-auctioned coal is high due to lower availability. So we are trying to use the best combination. We plan to keep the sourcing ratio at 50:50,” Maheshwari added.

In the quarter gone by, smelting operations at Aditya Aluminium were affected by a prolonged power outage in early July due to grid failure and torrential rain. In August, rain held up smelting operation at Hirakud. Maheshwari said, "We have completely restored operations in both Hirakud as well as Aditya Aluminium."

The company's ramp-ups are also on track, with Utkal alumina refinery at 75-80 per cent, Mahan smelter 50-60 per cent and Aditya Aluminium smelter is in initial stages.

“Premiums in aluminium have gone up like never before and we do not see any reason for these premiums to come down. Also the demand-supply deficit for aluminium is up in the global market ex-China and so we see firmness in aluminium prices in coming quarters,” Maheshwari said.