Bullish copper drives Sterlite profit up 43%

BS 200 SCORECARD

Sterlite Industries, the country's largest copper producer, reported a 43 per cent rise in its net profit to Rs 150 crore in the third quarter ended December 2006 because of higher prices of the metal.

Net income in the three months ended December 31, 2006, rose to Rs 214 crore from Rs 150 crore a year earlier, the company said in a statement to the Bombay Stock Exchange. Sales rose 48 per cent to Rs 3,220 crore in the third quarter.

Prices of copper in London averaged $7,226.2 a tonne on the London Metal Exchange (LME) in the quarter ended December 2006, 80 per cent higher from a year earlier.

Earnings growth may slow in the three months ending March 31, 2007, because of a slump in copper prices, analysts said. Sterlite's profit had expanded 69 per cent in the second quarter and surged more than five times in the first.

"The decline in copper prices will affect profit growth, but an increase in production may help moderate the impact,'' said

Chirag Shah, an analyst with the Mumbai-based SSKI Securities. He has an "outperform" rating on the shares, which more than doubled last year. Sterlite's smelting capacity will increase by 100,000 tonne to 400,000 tonne in the financial year ending March 2007.

Copper prices have declined 18 per cent in London since December 1 amid concern that a slowdown in the US housing market and falling imports by China will reduce demand for the industrial metal. Prices have slumped over 30 per cent from all-time highs touched in May 2006.

Economic expansion in the US, the world's second-largest copper user, slowed in the third quarter to a 2 per cent annual rate from 2.6 per cent in the second quarter after home building fell the most in 15 years.