The pronounced strengthening of the Indian Rupee vis-à-vis the US dollar adversely impacted both domestic and export realisations in quarter-on-quarter and year-on-year periods. LME was very volatile and started strengthening towards the end of the year; however the average cash LME for the year was marginally lower than previous year. Significant higher production from our brownfield expansions of both copper and aluminium businesses drove increasing sales volumes in quarter-on-quarter in all four quarters of FY08.

Of the total revenues of Rs. 5010 crore, the aluminium business contributed Rs. 1856 crore. Aluminum metal sales volume rose by 7 per cent along with higher proportion of value-added products.

The profit before interest and tax for aluminium business was at Rs. 545 crore as against Rs. 790 crore in the corresponding quarter in the previous year.

The copper business revenues stood at Rs.3155 crore driven by higher sales volumes and an enriched product mix. The profit before interest and tax was Rs. 171 crore against Rs. 137 crore in the corresponding quarter previous year.

As mentioned earlier, a 42 per cent lower TcRc and lower duty differential severely affected the copper business. Regardless, business managed to maintain margins on the back of a very strong performance in the fourth quarter. Higher volumes, better plant efficiencies across the board, enhanced by-product/market mix were the drivers.

FY 2008 performance
The total revenue for the year at Rs. 19201 crore reflected a growth of 5 per cent over last year. EBITDA at Rs. 3894 crore fell by 11 per cent inspite of higher sales volume, due to lower realisation and higher cost due to inflationary pressures.

Aluminium business revenue was Rs. 7145 crore against Rs. 7344 crore in the previous year, while PBIT dropped by 17 per cent from Rs. 2929 crore to Rs. 2423 crore. Copper revenue grew by 10 per cent from Rs. 10978 crore to Rs.12066 crore, while PBIT saw a marginal drop of 3 per cent from Rs. 517 crore to Rs. 503 crore. Hindalco continues to be the market leader in both aluminium and copper.

Adjustment for earlier year (net) under tax expenses includes write back of provision for tax resulting from change in estimation of tax liability on progress in tax assessments.

Dividend
The board shall consider recommendation of dividend for FY08 at the time of approval of audited accounts.

Expansion projects

Muri
The expansion of the Muri Alumina refinery from 110,000 tpa to 450,000 tpa is under commissioning in a phased manner. The entire steam and power requirement is being met by the new captive power plant. The production from the expanded facility is being ramped up progressively and has reached 180,000 tpa now. It will reach its full capacity during the year.

Hirakud
Phase II of the expansion of the smelting capacity from 100,000 tpa to 143,000 tpa is on track. Its capacity has touched 110,000 tpa in Q4FY08 and will scale upto 143,000 tpa by July 2008. The scaling up of the power generation capacity from 267.5 mw to 367.5 mw is complete and all units have been commissioned.

Belgaum
The allotment of the lease for bauxite mines for expanding the alumina refinery capacity at Belgaum, Karnataka from 350 ktpa to 650 ktpa is still awaited. Aditya Aluminium, the integrated aluminium project, encompassing 1 to 1.5 million tpa alumina refinery, 260,000 to 359,000 tpa aluminium smelter and 750 to 900 MW captive power plant is progressing as planned. The major portion of the total land required for the project has been acquired. Environmental clearances have been obtained for smelter, the captive power plant (CPP) and the alumina refinery. The forest clearance for small areas of land is awaited. The water drawal agreement has also been finalised. Construction power is already in place, the regulatory clearances have been obtained for transmission lines for operation power. The smelter is expected to be commissioned by March 2011 and the refinery by May 2011. The technology contracts for the smelter and alumina have been finalised with Aluminium Pechiney and Alcan respectively.

Mahan Aluminum project with a smelter capacity of 359 ktpa and CPP of 900 mw is on schedule. The land acquisition for the project is underway. The company has been allotted a coal block in a JV with the Essar Group for the coal requirement of the CPP. Preliminary environmental clearances have been obtained. The power connectivity for commencing construction has been approved. The water resource department has provided the necessary facilities as well. The production of coal is likely to start by October 2009. The technology contract for the smelter has already been finalised with Aluminium Pechiney. The smelter is expected to roll on by September 2012.

Latehar
For the Latehar project with a smelter capacity of 359 ktpa and CPP of 900 mw, tubed coal mine has been allotted jointly with Tata Power. Preliminary environmental clearances have been obtained. Land acquisition is in progress. Power for construction activity is sanctioned. The technology contract for smelter has already been finalised with Aluminium Pechiney. The approximate date of commissioning is September 2013.

Utkal
Construction of Utkal Alumina Refinery with a capacity of 1.5 mtpa is currently underway. The company has acquired the land for the plant and other facilities. The basic engineering packages have already been received from Alcan (technology supplier). Most of the major packages have been ordered. Detailed engineering for the main plant area is almost complete. The civil works for alumina refinery and captive power plant is in progress. Bauxite mining activities will start by March 2009. The commissioning of the plant is expected by March 2010.

Hindalco Almex Aerospace Limited
This joint venture company for manufacture of high-strength aluminium alloys for applications in the aerospace, sporting goods and surface transport industries is at an advanced stage of implementation. Key equipment have arrived at the site and are under installation. The project is slated to be completed by July 2008

Industry outlook

Aluminium
Global primary aluminium consumption has witnessed a strong growth of 9.3 per cent from FY07 to FY08. China is the strongest driver of the demand as the metal grew at 30.0 per cent, in this period, but due to winter storms in China the last quarter had disruptions in power supply leading to a drop in production levels. Demand from Latin America is being driven by strong activity in can, transport and construction markets. In Europe, underlying demand in the automotive, aerospace and packaging markets remained firm. Power supply problems in South Africa will reduce the output by 120,000 tons in 2008.

Copper
China is still expected to grow by 11per cent in 2008 while prospects remain good for other countries like India, Brazil and Russia. However the concern is rising inflation. The market is expected in near balance and not significant movement in prices.

As the concentrate market is expected to remain in deficit, Tc/Rc may remain low. However smelters are able to absorb low Tc/Rc due to substantial increase in sulphuric acid prices.

Company outlook
The adverse macro-economic factors will continue to impact the business. The reasonable forecasting of these adverse trend and remedial steps taken in face of the emerging challenges would continue to help contain the adverse impact. Enhanced asset productivity and containment of input cost along with effective working capital management to maximise free cash flow will be the major growth drivers.

Domestic consumption growth for both aluminium and copper augers well for Hindalco, which has embarked on the growth plan through low cost greenfield projects.