Hindalco Industries on Tuesday reported a 31% year-on-year increase in net profit for the three months to September to Rs 103.27 crore, driven by higher revenues as the company ramped up production. Higher other income also supported the rise in profits. Net sales of the company were up 4% from a year ago to Rs 8,840 crore as production at its new smelters went up.
Analysts said the results were above expectations as the volumes of the company improved in the quarter. However, lower prices on the LME (London Metal Exchange) are hurting realisations. In the July-September quarter aluminium prices fell 5% to $1566.75 per metric tonne.
According to Bloomberg consensus of 18 brokerages the company was expected to report loss of Rs 96.4 crore on sales of Rs 8,026 crore.
“The Hindalco results are above our expectations as far as volumes are concerned. The operating performance however has been dragged down by lower aluminum prices on the London Metal Exchange,” said Goutam Chakroborty, an analyst at Emkay Global Financial Services.
In July-September, aluminium LME was down 20%, aluminium regional premium was lower by over 70% and copper LME was down 23%.
Chakroborty said that going forward the next couple of quarters will be difficult for the company as aluminum prices continue to remain low on the LME. However, once aluminium prices starts picking up the company is expected to benefit significantly as it has ramped up production.
While volumes improved operating results of the company fell 50% to Rs 307 crore in the quarter.
“Operating results were significantly impacted during the quarter because of severe drop in London Metal Exchange prices, fall in regional aluminium premium and macro economic factors beyond the company’s control. The combined decline on year-on-year basis was around $700 per tonne of Aluminium,” Hindalco said in a release.
In the quarter depreciation and finance cost were higher given the progressive capitalisation of Greenfield projects. Progressive capitalisation of the green field projects carried out by the company pushed up the finance costs to Rs 615 crore in the quarter, up 60% from a year ago.
Revenues for the quarter were higher by 4% over the corresponding quarter of the previous financial year despite a sharp decline in realisations. Revenues rose on the back of the production ramp up at the company’s new factories.
Other income in the quarter which helped the company to report profit was up 87 per cent from a year ago to Rs 418 crore. The other income was up on account of certain non-recurring items amounting to Rs 119 crore and partly due to dividend from subsidiaries, said the company.
In the quarter, aluminium production of Hindalco was up 44% to 269,000 tonne from a year ago as Mahan smelter achieved full ramp up during the quarter though Aditya smelter continued to be under ramp up.
Despite the higher volumes, earnings of aluminium declined to Rs 29 crore in the quarter gone by from
Rs 339 crore in the corresponding period last year due to lower realisations and higher depreciation.
Copper earnings were also lower from a year ago but the fall was not as steep as the one noted in aluminium. In copper, earnings before interest and taxes (EBIT) were down 15 per cent from a year ago to Rs 350 crore.
“Copper earnings took a hit because of removal of certain export incentives and significantly lower copper prices on LME (London Metal Exchange),” said the company.
During the quarter, Aditya aluminium smelter and Utkal alumina refinery project loan was refinanced leading to extension of tenure.
In Aditya, the loan tenure was extended to 10.04 years from 5.83 years with last installment payable in September 2030 as against September 2023.