Hindalco's net up eight-fold on hedging gains

Hindalco Industries, the flagship company of the Aditya Birla Group, today said its consolidated net profit for the year ended March rose almost eight times, to touch Rs 3,925.5 crore, compared to Rs 483.9 crore for the same period a year earlier.

The higher net profit was on the back of unrealised derivative gains of Rs 2,736.4 crore at Novelis, which it acquired three years ago, against a derivative loss of Rs 2,380.7 crore in the previous year.

However, Hindalco's consolidated net sales (including that of Novelis) fell eight per cent to Rs 60,722 crore in 2009-10, as against Rs 65,963 crore in the previous financial year. While the exclusion of Idea Cellular from the accounts was one factor, a decline in aluminium sales was the other contributor.

The year witnessed a decline of 11 per cent in its aluminium business to Rs 48,091 crore on account of a lower rupee vis-a-vis London Metal Exchange prices, coupled with lower demand in the first half of the year. During the year, shipment of aluminium at Novelis fell by two per cent to 2,708 kilo tonnes.

In the aluminium business, the lower rupee eroded the company’s profit by around Rs 750 crore. And, Rs 100 crore was lost on account of the higher coal cost at Renusagar Power. In its copper business, the company lost Rs 750 crore on lower by-product credit, in terms of sulphuric acid realisation and lower fertiliser subsidy.

The company has increased its capital expenditure plan for Novelis by 148 per cent to $150 million (Rs 725 crore) for the current financial year (2010-2011) as compared to FY10. This is primarily for de-bottlenecking and increasing the capacity in South America and Asia.

In a chat with Business Standard, Hindalco Managing Director Debu Bhattacharya pointed out that, despite softer end-market conditions in most regions during the first half of the year, it is an achievement that the fall in Novelis’ total shipments of aluminum-rolled products has been contained to two per cent. On outlook, the MD said: “Europe and North American markets are coming back, while Asia is doing well and the South American market is doing extremely well. In Europe, the automotive sector is going for lightweight aluminium, which is good for the commodity. If the current level of buoyancy continues, Novelis will do well this year.”