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Mr Debu Bhattacharya, Managing Director, Hindalco, at a news conference announcing the company's results in Mumbai on Thursday. - Shashi Ashiwal

Mumbai , Oct. 23

HINDALCO Industries Ltd on Thursday reported a 17.7 per cent rise in net profit for the quarter ended September 30 (Q2) to Rs 227.7 crore, against the previous corresponding Rs 193.4 crore.

The second quarter net sales were up 22.3 per cent at Rs 1,474.8 crore (Rs 1,205.9 crore for the year ago period), while other income touched Rs 87.9 crore (Rs 59.4 crore). For the first half, Hindalco's net profit rose by 7.8 per cent to Rs 420.7 crore (Rs 390.1 crore) on a 9.4 per cent gain in net sales to Rs 2,630.3 crore (Rs 2,403.8 crore).

Other income in Q2 was high mainly due to better treasury returns and profit on sale of Indo-Gulf shares. Interest was more at Rs 42.2 crore (Rs 30.6 crore) given last year's higher interest capitalisation. However, Hindalco has repaid Rs 300 crore of high cost loans.

Aluminium sales went up 22 per cent at 77,332 tonnes. But Indal's 14,000 tonne-smelter at Alupuram in Kerala — the oldest in the country — was de-energised due to high power costs in August. Copper cathode manufacture was 48,940 tonnes.

Copper contributed 53 per cent of Q2 revenues, aluminium, 47 per cent. LME prices for aluminium ruled higher, but its benefit was capped by the appreciating rupee and competitive pressures. In terms of EBITD, copper's share was 34 per cent and aluminium's, 66 per cent. While copper finished products inventory is almost nil, profitability suffered due to low TCRC, higher DEPP premium, rupee appreciation and a dip in domestic consumption that forced export at lower margins. Copper turnover remained high due to improved LME prices.

According to Mr Debu Bhattacharya, Managing Director, Hindalco, capacity expansion at Indal's Hirakud smelter is under study. Increase to Renukoot's capacity by either organic or inorganic means is being looked into. Targeted capacities are yet to be finalised. This fiscal, Hindalco's aluminium production is pegged at 325,000 tonnes, that of copper at 225,000 tonnes. Sixty per cent of copper production may be exported, it being a function of the domestic market as well.

Hindalco is among the top five least cost aluminium producers worldwide, In copper, it is in the first quartile and aspires to be in top 10 for which capacity expansion is under examination.

``With a better than expected monsoon, the domestic economy is gathering pace. Globally, the second half of the fiscal has seen the emergence of improving trends which are expected to be sustained. In particular, the ongoing strengthening of the US economy is expected drive global recovery. The economic fundamentals, which are critical to growth of metal consumption, are falling into place. In the world context, metal consumption remains strongly underpinned by China, the outlook for Japan is improving and Asia also provides support,'' Hindalco said in its outlook.

In the domestic market, aluminium is set to grow well this fiscal courtesy initiatives such as the Electricity Act 2003 and robustness in consuming sectors like automobiles, building and construction. In copper however, domestic demand continues to be negative though global demand is slated to grow by 3.5 per cent. The company is enthused by the 7.2 per cent growth rate assigned for Asia and the demand-supply gap of 2.2 million tonnes in the region. Further LME stocks are ``pretty low'' and TCRC rates have begun picking up.

The latter trend now requires Hindalco to expedite efforts to bring in concentrate from its Australian mines, as captive concentrate supply is best justified when wedded to low TCRC rates. TCRC could gain by January with a major copper mine in Chile restarting operations.

China, as in copper, is the global demand driver in aluminium.

By 2004, global demand and supply in aluminium is projected to match. LME price for aluminium at $1500 plus at present, is thought to be unsustainable, Stability is forecast at $1425-1450. Alumina, which usually tracks aluminium prices, improved its Q2 realisations at Indal. But alumina prices may correct in tune with aluminium trends, officials said.

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