Hindalco Industries, the metals and mining arm of the Aditya Birla Group, on Thursday reported an 8% year-on-year increase in standalone profit to Rs 359 crore for the three months ended December 31, despite a substantially sharper rise in revenues and operating profit.
The company saw an 18% rise in turnover to Rs 8,603 crore. Though earnings before interest, tax, depreciation and amortisation rose almost 49% to Rs 923 crore, the percentage growth in net profit was in single digit due to higher depreciation and finance charges.
The Aditya Birla Group’s flagship company’s depreciation and finance charges stood at Rs 663 crore for October-December, in increase of Rs 300 crore over the corresponding period of FY14.
Hindalco’s sales and profitability trailed Street estimates. A Bloomberg consensus of Hindalco’s earnings estimates put out by analysts tracking the company had pegged net sales at Rs 8,654 crore and net profit at Rs 458 crore.
The strong operating performance was attributable to higher volumes and price realisations at its alumium business. Aluminium is one of the only commodities whose international prices have remained firm, while prices of other metals, such as steel, have declined steadily.
Hindalco’s managing director, Debnarayan Bhattacharya, also attributed operational efficiencies, such as lower power consumotion, bauxite usage and freight costs, to the healthy rise in operating profit.
The company’s combined sales of aluminium and alumina went up around 37% over the year earlier, according to Bhattacharya. Most of this incremental production came from Hindalco’s recently commissioned greenfield aluminium making capacities, such as the Mahan and Aditya smelters.
Alumimium prices remained firm, with Hindalco enjoying a premium of around $420 per tonne ($225 in the December 2013 quarter) over the LME (London Metal Exchange) price of $1,968 per tonne in the fiscal’s third quarter (from $1,767 a year earlier).
The results could have been even better, but for the high cost and inadequate supply of coal that the company had to bear, to supply power to its alumium-making facilities. In the absence of enough production by Coal India Ltd and the withdrawal of coal block allocations from companies in accordance with a Supreme Court order, companies like Hindalco have been resorting to import of expensive coal to fuel operations.
“Non-availability of economically sourced coal slowed down the ramp up of newly commissioned capacities,” Bhattacharya said. The Hindalco MD also blamed infrastructure bottlenecks that made it difficult to transport adequate imported coal from the ports to Hindalco’s manufacturing sites.
As a result of these challenges, the greenfield capacities commissioned by Hindalco are only running at a third of their capacity, though the company plans to expedite higher capacity utilisation in the coming quarters.
At Hindalco’s copper business, the company reported a 32% year-on-year rise in earnings before interest and tax, even as net sales of copper rose 18% in the same period, driven by higher volumes and realisation.