Aluminium output to pick up by 12%

Despite domestic aluminium majors Hindalco and Nalco registering profits, cumulative production of the metal grew by a modest eight per cent while production was expected to pick up by 12 per cent this year, the Centre for Monitoring Indian Economy (CMIE) said today.

In its industry review for november 2005, CMIE said aluminium and aluminium products sector recorded a lacklustre performance during the quarter ended september 2005. Aggregate sales of the sector grew by 8.7 per cent, while growth in expenses was much higher at 16.6 per cent resulting in the operating profits nose diving by 9.8 per cent.

"High other income and extraordinary income enabled PAT to record modest growth of 5.5 per cent, yet profit margins were lower than the level a year ago," the CMIE said.

The aluminium business of Hindalco fared well in the quarter ended september this year. Sales of the segment posted a healthy growth of 9.6 per cent which the company attributed to growth in higher volumes, an enriched product mix and better realisations.

The segment earned a profit before interest and tax (PBIT) of Rs 434.5 crore which is 19 per cent higher than that of the quarter ended September 2004, it said.

On the other hand, net sales of Nalco grew by 7.2 per cent while PBDIT declined by 10.2 per cent. However, PAT shot up by 2.7 per cent on the back of significantly lower interest and depreciation costs.

The company too fared well in the quarter ended September this year. It sales segment recorded a healthy growth of 17.4 per cent and its profits grew by 4.6 per cent. However, profit margins of this segment slided down to 21.3 per cent from 23.9 per cent a year ago, the cmie said.

Aluminium production remained volatile last month. After shooting up by 15 per cent in the preceding month, production grew by a meagre three per cent in September to 76,929 tonne.

However, cumulative production of the metal grew by 8.2 per cent to 4,55,657 tonne between April to September 2005.

"Aluminium demand is expected to remain upbeat during the current fiscal. We expect the production to grow by 12 per cent during 2005-06," the CMIE said.

The production of downstream products remained upbeat during the current quarter. Production of aluminium rods shot up by 29.4 per cent, on top of an increase of 43.5 per cent in August last year. Extrusions recorded even higher growth of 50.7 per cent.

Vedanta resources plc too has unfurled a plan to set up a smelter worth Rs 7,000 crore which would be a greenfield project to be funded through a debt-equity ration of 40:60.

According to the international alumunium institute, the global output of alumunium increased by 4.9 per cent to 19.4 lakh tonne. Growth was driven by higher output in Asia and North America. Aluminium production in these regions recorded growth of 16.6 per cent and 11.2 per cent respectively.

A sharp correction across the broader market and excessively bearish sentiment over metal stocks saw aluminium scrips fare badly on the bourses in October last. During the month CMIE aluminium and aluminium products index declined by 16.2 per cent and fared worse than the overall market, the CMIE said.