Hindalco net profit rises eightfold on writebacks

Hindalco, the flagship company of the Aditya Birla Group, on Friday reported an eightfold rise in consolidated net profit at Rs 3,925.5 crore in the last fiscal, compared with  Rs 484 crore in fiscal 2009.

Net sales dropped by 8% to Rs 60,722 crore for the reporting fiscal as against Rs 65,963 for the fiscal 2009. The company said the net sales dropped mainly due to lower aluminium prices.

“There was softness in the company’s end-markets in the first half of the year, especially Novelis,” it said. According to the London Metal Exchange (LME) data, the average prices of aluminium, the mainstay product of Hindalco, dropped by 39% in the first half of the last fiscal and recovered 41% in the second half.

On June 3, aluminium prices on the LME were quoted at $1,950 per tonne for immediate buy.

The company said its profit before depreciation, interest and taxes stood at record Rs 10,069 crore for fiscal 2010 as against Rs 3,661 crore for fiscal 2009.

It said, “This profit include $578 million of unrealised gains consisting of $504 million reversal of previously recognised losses upon settlement of derivatives and $74 million of unrealised gains relating to mark-to-market adjustments on metal and currency derivatives at Novelis.”

Of the net sales of Rs 60,722 crore, aluminium contributed Rs 48,091 crore, a drop of 11% over the previous fiscal. The copper business contributed Rs 12,575 crore, a rise of 13%. The Ebit for the copper business soared three times to Rs 1,003 crore.

Hindalco said, “Aluminium business revenue fell on the back of lower LME prices and lower demand in the first half of the year.”

However, it managed to turn around its earnings before interest and tax (Ebit) to Rs 5,998 crore for the fiscal 2010 as against a loss of Rs 425 crore for the fiscal 2009.

As for its India plans, Hindalco has scaled up its Hirakud smelter and power expansion project to 360 KTPA from the earlier planned 213 KTPA. The captive power plant for the project too will be raised to 967.5 mw as against the proposed 467.5 mtpa.

As per the earlier plan, the Hirakud expansion was supposed to be complete by the last quarter of fiscal 2012.

Novelis is also debottlenecking and increasing its capacity in its South American and Asian plants. The subsidiary has increased its capital expenditure plans by 148%, or $150 million, for the fiscal 2011 as against last fiscal.

“A significant amount is aimed at expanding its rolling operations in Brazil,” Hindalco said, adding, “this investment will increase capacity by over 50% and better support the increasing demand for flat-rolled products in the regions. The expansion is expected to be completed by late 2012.”