The Hindu Business Line : Hindalco Q2 net profit rises 8%

Hindalco Industries reported an 8-per-cent increase in net profit for the second quarter ended September, 2007. Net profit amounted to Rs 642.8 crore, up from Rs 597.6 crore in the same year-ago quarter.

Revenues rose 7 per cent, to Rs 4,960 crore (Rs 4,634 crore).

Although this makes for a modest growth, it was better than expected in view of both the rising rupee which forced the company to lower aluminium prices, and lower copper refining margins, said Mr S. Talukdar, Chief Financial Officer, Hindalco.

The rupee appreciation of 11 per cent from the year-ago quarter had a negative impact of Rs 200 crore on EBITDA. As a result EBITDA was lower at Rs 1,031 crore (Rs 1,097 crore).

The rupee rise, combined with the customs duty cut, affected the company’s aluminium business by making imports cheaper, so that the company had to reduce prices.

Earnings before interest and tax on aluminium fell, to Rs 662 crore, from Rs 671 crore. The company managed to neutralise this effect through increase in volumes and higher sales of value added products.

Earnings before interest and tax from the copper business amounted to Rs 126 crore, which grew only marginally from Rs 123 crore a year ago.

The company’s refining fees from copper fell, as smelting capacities exceeded supply of ore, placing miners in a better position to bargain for lower fees.

But Hindalco maintained the profitability of its copper business by improving operational efficiency and better by-product realisation, said a statement from the company.

Going ahead, the strong rupee and soft alumina prices will continue to put profit margins under pressure, it said.

But asset sweating of existing plants and brownfield expansions, combined with cost optimisation initiatives, are expected to sustain performance, it said.

The company’s shares closed at Rs 196.30 on BSE, gaining by Rs 3.10 or 1.6 per cent on Wednesday.

FUNDS

The company will require $6 billion to $7 billion by 2014 for its various expansion plans, said Mr Debu Bhattacharya, Managing Director. The company will however, immediately raise $3 billion to refinance the bridge loan it had taken for its Novelis acquisition, he said.

The funds could be raised domestically or overseas, and it has not been decided how the funds (whether equity/debt) will be raised, said Mr Talukdar.