The Hindu : Business : Hindalco net drops 80 % on weak demand

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Wednesday, Jul 01, 2009
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Business

Hindalco net drops 80 % on weak demand

Special Correspondent

Recommends Rs. 1.35 per share dividend

Lower LME prices and spiralling input costs squeeze margins

MUMBAI: Hindalco Industries reported an almost 80 per cent drop in consolidated profit for the year ended March 31, 2009, on the back of weak demand and dropping commodity prices.

The company, which bought Canadian aluminium manufacturer Novelis in 2007, reported a consolidated net profit of Rs. 485.30 crore against Rs. 2,193.30 crore in the previous year. The directors have recommended a dividend of Rs. 1.35 per share of Re. 1 each (Rs. 1.85 per share).

Net sales rose by 9 per cent to Rs. 65,625.20 crore (Rs. 60,013 crore). The consolidated profit before interest and tax is Rs. 627 crore. The result includes a non-cash unrealised derivative loss of around Rs. 2,381 crore (Rs. 12 crore). These derivatives are used to hedge exposures to aluminium, primarily related to customer fixed-price contracts, other commodities and currency. During the year, aluminium business revenue was Rs. 54,306.40 crore while that of copper was Rs. 10,760 crore.

In Novelis, the actions taken to adjust metal intake, reduce production and decrease fixed costs will deliver an estimated $140 million annualised future savings.

On a standalone basis, the company reported a net profit of Rs. 2,230 crore (Rs. 2,861 crore) on net slaes of Rs. 18,220 crore (Rs. 19,201 crore).

Aluminium business turnover was up 6.4 per cent on the back of highest-ever metal volumes. But lower LME prices and spiralling input costs squeezed margins, coupled with a shrinkage in domestic demand for value added products. In copper, revenues were 12 per cent lower at Rs. 10,624 crore. The steep depreciation of the Indian rupee against the dollar affected the copper business by an estimated Rs. 156.50 crore (Rs. 41 crore). As a result, the gross profit on copper was lower by Rs. 115.50 crore.

The brownfield expansion at Hirakud from 1.43 lakh tonnes to 1.55 lakh tonnes will be completed next month and the special alumina production expansion at Belgaum from 1.38 lakh tonnes to 3.16 lakh tonnes will be completed by end-2011. In greenfield projects, Utkal Alumina in Orissa will produce alumina and the Mahan alumium project for aluminium will see metal roll out from July 2011. The Aditya Aluminium integrated project in Orissa will see metal roll out by October 2011 while the Jharkhand Aluminium plant will produce metal from June 2013.

Hindalco has formulated a scheme of financial restructuring to deal with various costs associated with organic and inorganic growth plans. It has created a separate reserve account, Business Reconstruction Reserve (BRR), by transferring balance standing to the credit of Securities Premium Account for adjusting certain expanses. Accordingly, Rs. 8,647 crore has been transferred to BRR and Rs. 67 crore in standalone accounts and Rs. 4,616 crore in consolidated accounts have been adjusted against the same.

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