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Hindalco, the world’s largest aluminium rolling company, reported a muted set of numbers for the quarter ended September. Revenues and profit stayed flat compared to last year, though volumes were higher.
Revenue was Rs 6,246 crore, marginally up from Rs 6,115 crore in the corresponding quarter last year. Net profit remained flat at Rs 357 crore. One key reason for the disappointing performance was a surge in interest costs. “The finance costs were higher, given higher average borrowing,” explained Praveen Maheshwari, chief financial officer. The finance cost surged to Rs 183 crore in the period, as against Rs 27.9 crore in the corresponding period last year.
Hindalco’s net profit is 10 per cent below consensus estimates. The Street was estimating the company would report one of Rs 399 crore; it reported Rs 357 crore. Higher interest cost due to capitalisation of expansion projects impacted the bottom line. Had it not been for other income, Hindalco would have reported a much lower net profit in the quarter. The company’s other income was Rs 279.8 crore, up from Rs 132.4 crore a year before. It includes a non-recurring income of Rs 61 crore and a dividend of Rs 100 crore from subsidiary companies.
In the period under review, aluminium sales grew 11 per cent over a year, to Rs 2,343 crore. This was mainly because of an increase in volumes and also a depreciated rupee, which partially offset the impact of a declining trend in London Metal Exchange prices. The long spell of subdued LME has adversely affected the global aluminium industry and its margins and production levels significantly, said the company. In copper, higher treatment and refining charges (TcRc) helped the business, supported by depreciation of the rupee. The profit in this business, however, suffered because of a sharp fall in sulphuric acid prices, which tumbled to Rs 1,300 a tonne from Rs 3,300 earlier.
“With improving TcRc, the copper business is expected to have a stable outlook, despite a sharp drop in byproduct realisation,” said the company in its outlook for the business. The earnings before interest, taxes, depreciation and ammortisation (Ebitda) was Rs 540 crore in July-September, up 4.85 per cent from the same period last year. Regarding project status, managing director Debu Bhattacharya said commercial production at the Mahan aluminium smelter and the Utkal alumina refinery is likely before the end of this financial year.
“Trial runs are currently on at Mahan and Utkal,” he said. The Aditya aluminium smelter is in anadvanced stage of completion and is being geared for the first metal tapping, said the company. As on September 30, the gross long-term debt was Rs 21,000 crore, with a debt-equity ratio at 0.35. The treasury balance was at Rs 8,000 crore. “Going ahead, the debt-equity ratio is expected to rise, while the treasury balance is seen declining, as the company’s capital expenditure will move up as projects get executed,” said Maheshwari.
Regarding coal supply for its various projects, Hindalco Industries said the company bought 20% coal from the market, about 50% from linkages with mines and 30% was captive usage. “Greenfield projects are ramping up as planned, however EBITDA streams will take time to scale up with delayed access to captive coal,” said Hindalco Industries.
The company is being investigated by the Central Bureau of Investigation as part of a probe into possible irregularities in the allocation of coal blocks to several firms over the past two decades. Hindalco's shares fell 0.22% on Tuesday to Rs 111.20 per share.
