Hindalco net up on other income, sales drop

Lower metal prices led to a year-on-year drop in the company's sales

Despite a weak top line, Hindalco Industries posted a net profit of Rs 474 crore in April-June, up from Rs 425 crore in the corresponding period last year, mainly because of rise in the company’s other income. The Aditya Birla Group company’s net sales stood at Rs 5,766 crore in the period under review, down from Rs 5,964 crore last year because of a maintainance shut down at its copper unit in Dahej in Gujarat and also due to lower global metal prices.

Though Hindalco earned better treatment and refining charges in the period under review, its by-product realisation was lower, said the company. Hindalco’s copper division produces by-products such as sulphuric acid, phosphoric acid and di-ammonium phospate.

Lower metal prices also led to a drop in the company’s sales on a year-on-year basis.

In April-June, global aluminium prices declined seven per cent on year and could not be completely cushioned by the depreciating rupee, said the company.

Copper sales were also down because of lower metal prices, it said. Aluminium contributes three-fourths of the company’s net profit and 35 per cent of its net sales, whereas copper contributes a fourth to profit and 65 per cent to revenue. However, a non-recurring income of Rs 103 crore and a dividend of Rs 100 crore from a subsidiary came to the rescue and was responsible for the higher other income in the quarter ended June.

This helped the bottom line move up year-on-year. In April-June 2012, the company had received other income to the tune of Rs 130 crore. Sequentially, however, the net profit has declined from Rs 482 crore in the same period last year, while net sales have dropped from Rs 6,915 crore.

Though the aluminium producer has managed to post year-on-year increase in net profit for April-June, depressed commodity prices pose a significant challenge to the company.  On June 30, Hindalco’s net long-term debt stands at Rs 13,000 crore, while its gross debt is Rs 20,000 crore. Recently, the company refinanced its Utkal alumina refinery loan worth Rs 5,000 crore at a rate 10.15 per cent against 13.2 per cent earlier. This would help the company save Rs 150 crore a year, managing director D Bhattacharya said on Tuesday.

Regarding its project status, Hindalco said it has tapped its first metal at the Mahan aluminium smelter in Madhya Pradesh, while its Utkal alumina refinery in Odisha has gone on stream.

Major equipment at the Hirakud plant have been commissioned, while the Aditya aluminium smelter is in the advanced stage of completion, it said. Despite having a slew of projects slowly coming onboard, Hindalco is re-evaluating its investment strategy with respect to its proposed Aditya alumina refinery and Jharkhand aluminium projects, it said. If an investment has to be made for these two projects, a total amount of Rs 15,000-16,000 crore has to be invested, said Bhattacharya.

“We would take a decision on these two projects in the next three-four months,” he added. On the Mahan coal block, the company has received a stage 1 clearance from the ministry of environment and forests and is expected to get the second stage approval by December, said Bhattacharya.