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Hindalco beats Street, outlook subdued

Hindalco beats Street, outlook subdued
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First Published: Tue, Aug 03 2010. 10 52 PM IST
Updated: Tue, Aug 03 2010. 10 52 PM IST
Mumbai: India’s biggest aluminium producer Hindalco Industries Ltd beat Street estimates to post an 11% jump in profit to Rs534 crore for the June quarter, up from Rs481 crore a year ago.
A Bloomberg poll of 19 analysts estimated an average profit of Rs494 crore.
Higher global aluminium prices and local demand helped bring in revenue of Rs5,178 crore, 33% more than the Rs3,897 crore in the year-ago period. Alumina production grew 9% to 341,000 tonnes from 311,000 tonnes.
The company, however, said “outlook on the coming quarters would be impacted by a subdued financial market sentiment, uncertain commodity and financial markets and lower production at Hirakud”, the company’s unit in Orissa hit by rains and lightning in July.
“Prices have improved but the outlook is uncertain. Growth in China is not expected to last,” managing director D. Bhattacharya said.
He added that a 41% rise in aluminium prices at the London Metal Exchange (LME) and demand in India from sectors such as electrical and electronics, building and construction, consumer durables and automobiles had boosted sales in the June quarter.
“Global consumption has increased 7% in the first half of 2010, which, though lower than a 17% in the second half of 2009, is higher than the 3-5% growth we normally see,” he said.
Tarang Bhanushali, research analyst at India Infoline Ltd, said the profit numbers were “way above” his expectation of Rs412 crore. “But profits are dependent on raw materials. Higher costs of raw material are just passed on, resulting in higher realizations. So though the net sales were higher than last year, if you see quarter-over-quarter, realizations have come off about 5%.”
Hindalco also announced that it has finalized a 12-year loan of Rs4,906 crore for Utkal Alumina International Ltd in Orissa that will have an annual capacity of 1.5 million tonnes (mt). IDBI Bank Ltd, SBI Capital Markets and Royal Bank of Scotland NV are the lead arrangers for the loan.
Hindalco is also building three 359 kilotonnes per annum (ktpa) aluminium smelter plants: the Mahan aluminium project in Madhya Pradesh, the Aditya aluminium project in Orissa and the Jharkhand aluminium project. It is also planning a 1.5-mt-a-year plant in Orissa.
Sunirmal Talukdar, Hindalco group executive president and chief financial officer, said the firm will invest Rs25,000 crore for the projects, of which 70% will be debt. The company can invest around half the cost in equity if needed, he added.
Hindalco has Rs7,300 crore debt, besides a $982 million (Rs4,500 crore) foreign line of credit, and around $1 billion cash, Talukdar said.
However, Pawan Burde, senior analyst at Centrum Broking Pvt. Ltd, warned about a fall in prices ahead.
“Already margins have fallen about 300 basis points year on year from 19% to 16.1%. Prices have started to fall globally as inventory is built up in Europe and China,” he said, adding that prices have fallen 10-12% in the past two months on LME, which may impact the firm this quarter. One basis point is one-hundredth of a percentage point.
Bloomberg contributed to this story.
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First Published: Tue, Aug 03 2010. 10 52 PM IST