Nalco posts second straight quarterly loss, its steepest since inception

Softening international alumina prices and spike in costs of critical inputs led National Aluminium Company (Nalco) to post a loss before taxes of Rs 53.22 crore for the quarter ended December 31, 2019 as against a profit before tax of Rs 470.05 crore the state-run producer registered in the comparable period of FY19.

Nalco's net loss (after taxes) stood at Rs 33.96 crore in Q3 of FY20, the company's steepest since it started commercial operations. In the same period of FY19, the Navratna company had recorded Rs 301.76 crore net profit, riding on buoyant alumina prices. Alumina prices in FY19 had peaked to multi-year highs of over $600 per tonne in the aftermath of the US treasury levying sanctions on U C Rusal, the second largest aluminium maker outside of China. The curbs triggered paucity of alumina, spooking supplies. Nalco had achieved its highest ever realization of $700 per tonne, leveraging firm alumina prices.

Historically, alumina exports have propelled Nalco's profitability. Each year, the aluminium maker ships around one million tonne alumina overseas.

Nalco's officials were not immediately available for comments on the company's performance.

For the April-December period though, the company still managed to clock profit before tax (PBT) of Rs 47.33 crore and Rs 35.47 crore in net profit. Nalco's total income in this period tanked by 68 per cent to Rs 2,136.57 crore from Rs 6,702.15 crore in the comparable period of FY19. In last fiscal, Nalco's net profit surged 29 per cent to Rs 1,732 crore, making the company the most profitable in a decade.

Nalco despite being an integrated player was negatively impacted from fragile alumina prices. The navratna company posted a rare quarterly loss of Rs 28 crore in Q2 of FY20 as tepid realizations from alumina exports and higher power costs crimped margins.

With alumina prices diving, Nalco is now mulling to reboot its strategy to sell the entire surplus alumina in spot markets. The CPSE may now revert to its older practice of sealing long-term contracts with key buyers to insulate against vacillating alumina prices on the spot markets.

Nalco is also implementing an all-weather business model to make the company immune to the vagaries of cyclical metals sector business. It is planning to foray into merchant mining of bauxite. Also, it aims to tap the waste-to-wealth model. The new business model promises to enhance Nalco's net profit by Rs 935 crore after two years.