Hindalco profit up 26% to Rs 434 cr on higher prices

MUMBAI: India’s largest aluminum producer Hindalco Industries posted a 26% increase in standalone net profit due to higher realisations from aluminum during the second quarter. The company’s net profit jumped to Rs434 crore in the July-September quarter as against Rs344 crore a year earlier.

Revenue rose 19% to Rs5,860 crore on higher domestic demand for two of its main products — copper and aluminum — in sectors such as auto, construction and power. Increasing base metal prices on the London Metals Exchange （LME） also added to the company’s sales growth. These factors helped the company overcome a disruption in production at a copper smelter and a rise in the prices of its inputs.

“The numbers were in line with market expectations and despite declining volume growth in aluminum, the company has managed to value growth through price hikes,” said Sonam Udasi, head of research, IDBI Capital . Revenue of its copper division increased by 21% at Rs3,951 crore, while sales of aluminum division rose 16% to Rs1,911 crore. Other income was up 43% to Rs82.1 crore.

The company’s earnings do not include the financial performance of its North American subsidiary Novelis. “In the short term, given that over 50% of consolidated EBITA comes from Novelis , Hindalco is insulated with LME price movement to large extent,” wrote Jagdishwar Toppo, analyst, Enam Securities , in a report. “In addition, we expect the company to benefit from low cost domestic operation as it gets its greenfield expansions on stream along with stronger aluminum prices.”

The company expects to commission its 359,000 tons-a-year Mahan aluminum smelter in the central Indian state of Madhya Pradesh mid-next year. However, energy prices have risen 16% since past two months on the back of production cuts in China due to government’s energy conservation initiatives. Yet, analysts believe that Novelis’ earnings will be sustainable going forward driven by increasing shipments, its conversation cost business model and its cost cutting measures.

The company, earlier this week, had said operations at its Dahej copper smelter in the western state of Gujarat have been halted due to the breakdown of a cooling tower. Repairs are likely to be completed in two weeks. The company’s stock went up by 0.56% at Rs231.70 on Tuesday.