Finance costs dent Hindalco net 31%

Updated: Aug 15 2014, 08:01am hrs
Hindalco, the flagship company of Aditya Birla Group, on Thursday announced lower- than-expected earnings for Q1FY15 with net profit falling 31% on account of higher finance costs and lower contribution from other income.

Hindalco's standalone net profit for the June quarter came in at Rs 327 crore compared to the Rs 474 crore it had reported in corresponding quarter of last fiscal.

The company saw a nearly 127% jump in finance costs to Rs 338 crore while contribution from other income nearly halved to Rs 216 crore.

"Finance costs rose due to interest on project loan being charged to revenue, on progressive capitalisation of greenfield projects. Other income was lower compared to Q1FY14 as previous year income included certain one-timers and dividends from subsidiaries," said the company in its earnings release.

The reported net profit missed consensus analysts' expectations by a huge 22.46%.

Net revenues for the quarter however grew 37.5% on the back of higher volumes in both the aluminum and copper businesses and higher relative realisation in the aluminium segment compared to that in same quarter last fiscal. Revenues in the aluminium business, which contributes nearly 40% to topline, rose 37.65% y-o-y, led by a 37% rise in volumes due to a ramp-up in production at the Mahan smelter. Net realisation remained flat despite aluminium LME trading lower by 2% during Q1FY15 due to higher metal premium. In copper, revenue growth was helped by the lower base of last year due to a planned shutdown in corresponding quarter of the previous fiscal.

On the operational front, earnings before interest, taxes, depreciation and amortisation or EBITDA during the quarter rose 56.5% y-o-y to Rs 748 crore with margins improving 114 bps. EBITDA missed analysts estimate of Rs 859 crore as input costs (including inventories and finished costs) and fuel costs rose 40-41% each. According to the managment, ramp-up related costs impacted operating margin.

Looking ahead, the company expects greenfield factories progressing towards realising their potential and the robust performance in copper business to continue.

The stock closed the day at Rs 178.50 apiece on the BSE, down 0.83% from Wednesday's close.