Hindalco eyes value-added products for margin boost

Suresh P Iyengar Mumbai | Updated on January 15, 2018

Wants to cut debt; to ramp up can body plant capacity by March

Hindalco Industries, an Aditya Birla Group company, plans to focus on value added products to increase its profit margins and reduce debt.

Despite challenging environment, the company’s prepaid long term debt stands at about ₹690 crore, and plans to repay another ₹200 crore during the quarter.

The company is fast ramping up capacity utilisation to produce can body stock at the recently commissioned Hirakud plant which involved relocation of equipment from a closed facility of Novelis, its wholly-owned subsidiary.

Satish Pai, Managing Director, Hindalco Industries, said the can body plant is operating at 60 per cent capacity utilisation and will be ramped up to optimal capacity of 1.35 lakh tonnes by March next year as the process of getting approval from various user industry is close to completion.

“We will increase the copper value added product sale to 90 per cent from the current 50 per cent once the copper wire rod plant at Dahej in Gujarat goes on stream by March 2018,” he said.

Over the next month, the company will be negotiating the treatment and refining charges (TcRc) of copper for the next year.

Hindalco expects the TcRc margins to remain stable at the current level of 26 cents per pound as the supply of copper concentrate is expected to increase.

“The industry expects LME copper prices to remain on the higher side with strong Chinese demand and this may induce miners to produce more copper concentrate,” said Pai.

Despite talks of slowdown, he said the demand for aluminium in China was strong backed by an economic stimulus to the automobile and construction sectors.

On the demonetisation impact on aluminium and copper industry, Pai said there were issues on availability of trucks but things are getting normalised.

It would also have an impact on metal scrap industry but not on primary metal companies, he added.

The company has managed to bring down the finance cost by five per cent to ₹594 crore (₹627 crore) with the prepayment of high cost debt.

It plans to raise ₹5,000 crore through issuance of equity-linked instruments in this financial year to further reduce debt.

Earnings before interest, tax, depreciation and amortisation increased to 39 per cent to ₹1,493 crore (₹1,351 crore) in the September quarter, despite metal prices remaining flat on the LME.

Published on November 16, 2016

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