30 January 2009
Hindalco posts outstanding Q3 FY 2008-2009 results in a turbulent economic environment
Click here to view the results

• PBIT at Rs.768.6 crore – maintained
• Net profit at Rs. 544.8 crore – marginally higher
• Drastic drop in LME - aluminium (25 per cent) and copper (46 per cent)
• Net sales and revenues at Rs. 4,117 crore

Hindalco Industries Ltd., the flagship company of the Aditya Birla Group, today announced its unaudited financial results for the quarter ended 31 December 2008.

Net sales and revenues at Rs. 4,117 crore in third quarter of FY 09 are lower as compared to Rs. 4,539 crore for the corresponding period in FY 08. The steep reduction in aluminium and copper LME led to fall in the overall sales revenue; this was mitigated by the rupee depreciation against the USD. Despite lower sales realisations and higher export sales due to lower domestic demand, the net profit at Rs. 545 crore is marginally higher than Rs. 543 crore in the corresponding year’s comparable quarter. Higher metal production consequent to the Hirakud brownfield expansion, profit improvement measures and higher other income have been the drivers.

The revenue in aluminium business rose by 14 per cent to Rs. 1,980 crore vis-à-vis Rs. 1,736 crore in the corresponding period in the previous year on the back of the highest ever metal volumes. However the unprecedented 25 per cent fall in LME and spiraling input cost squeezed the margin, despite gains from weaker rupee. The shrinkage in domestic demand for downstream products resulted in an adverse product mix.

In the copper business, revenues stood at Rs. 2,139 crore lower by 24 per cent vis-à-vis Rs. 2,806 crore in Q3FY08 as a result of the 46 per cent lower LME. The profit before interest and tax rose by 23 per cent to Rs. 116 crore from Rs. 94 crore in the corresponding quarter last year despite a 33 per cent fall in TcRc, mainly due to better by-product realisation, operational efficiencies and forex translation impact.

Strategic initiatives
A joint venture company viz. Hydromine Global Minerals GMBH Limited has been incorporated in British Virgin Island for the purpose of development and operation of one or more bauxite mines in the Minim Martap and Ngaoundal regions of the Adamaoua province of the republic of Cameroon (Africa). Hindalco and Dubai aluminium holds 45 per cent equity each and the balance 10 per cent is with Hydomine, USA.

Operational review
Aluminium
With the expansion at Muri and Hirakud, alumina production has risen by 48 per cent at Muri and metal production by 37 per cent at Hirakud. Overall metal production was up by 11 per cent. Demand shrinkage in domestic and global markets led to lower production of downstream products.

Copper
On the back of bi-annual shutdown in smelter-III, output declined. Copper cathodes production fell by 7 per cent, while the CC rod production increased by 15.3 per cent over the corresponding quarter in FY08.

Expansion projects
Muri
The expansion of the Muri alumina refinery from 110,000 tpa to 450,000 tpa is mechanically complete. Production is being ramped up 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 expected to reach its full capacity in second half of 2009.

Hirakud
Phase II of the expansion of the smelting capacity from 100,000 tpa to 143,000 tpa was completed on time. Work on expansion to 155 ktpa is in progress and is expected to be completed by August 2009. The power generation capacity has been raised from 267.5 mw to 367.5 mw. All the 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 Project
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. A major portion of the total land required for the project has been acquired. Environmental clearances have been obtained for the smelter, the captive power plant (CPP) and the alumina refinery. The water drawl agreement has also been executed. The construction power is already in place. The construction of transmission lines and upgradation of substations to draw power is in progress. The first metal from the smelter is proposed to be produced by October 2011. The refinery is proposed to be mechanically completed by January 2013. The technology contracts for the smelter and alumina have been executed with Aluminium Pechiney and Alcan respectively. Consultants have been appointed for detailed engineering for the smelter and CPP. Major proprietary equipments have been ordered for the smelter.

Mahan project
The Mahan aluminium project with a smelter capacity of 359 ktpa and CPP of 900 mw is on track. 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 allocated the necessary water source. The production of coal is expected to start in 2010. The technology contract for the smelter has already been executed with Aluminium Pechiney. The first metal from the smelter is expected by July 2011. Basic engineering packages have been received on schedule. Detailed engineering activities for the smelter and CPP are in progress. Major proprietary equipments ordered for smelter.

Jharkhand project
The proposed smelter capacity of the Jharkhand aluminium project is 359 ktpa and a CPP of 900 mw. The plant location has been shifted from Latehar to Sonahatu block which is 20 kilometers from Muri and 55 kilometers from Ranchi. Land has already been earmarked. Topographic and socioeconomic surveys are underway. The government of Jharkhand has given the water allocation clearance for 55 mcm of water from Subernarekha basin. Tubed coal mine has been allotted jointly with Tata Power. The technology contract for the smelter has already been executed with Aluminium Pechiney. CSR activities are being ramped up. The approximate date for the first metal from the smelter is expected by June 2012.

Utkal
The construction of Utkal alumina refinery with a proposed 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). Major packages have been ordered and the balance is being ordered. The detailed engineering for the main plant area is nearing completion. The civil work for alumina refinery and captive power plant is in progress. Bauxite mining activities are expected to start by mid 2010. The mechanical completion of the plant is expected by January 2011 and the first alumina is expected to be produced around July 2011.

Hindalco Almex Aerospace Limited
This joint venture company for the manufacture of high-strength aluminium alloys for applications in the aerospace, sporting goods and surface transport industries has been commissioned in November 2008 and production has started.

Industry outlook
Aluminium
China, USA and Europe led the global de-growth of 9 per cent, in Q3 FY09 as compared to Q3 FY08, in aluminium consumption. The demand in these countries is expected to decline further in Q4 FY09.

The transport sector remained the largest consumer for aluminium products in 2008. With the downturn expected in transport, building and construction sectors, producers have announced production cutbacks up to 5.05 million tons per annum. Despite announced cutbacks LME stocks continue to climb further impacting aluminium prices, which is yet to spot the bottom.

Copper
Weak demand and increase in exchange stocks have pulled down copper prices. Mine production would be adversely affected due to the likely closure of a few high costs mines, delay in upcoming projects and slow down in investment in new mines.

Increased availability of copper concentrate due to lower capacity utilisation at smelters has led to a hike in benchmark TCRC for 2009 by 66 per cent as compared to the previous year. Current spot market is above benchmark TCRC. However, disposal of sulphuric acid, a byproduct, remains a key concern for smelters.

Global refined copper consumption during 2008 grew by about 0.6 per cent. The forecast is that the demand would either remain flat or decline during 2009 until the economic environment improves. Over all concentrate market is expected to be steady or slightly surplus during CY 2009.

Company outlook
The business continues to be impacted by the overall slow down in the global economy and the unprecedented fall in commodity prices. The short-term outlook seems negative. However the long term market fundamentals remain strong.

The company has been taking proactive measures in areas of input cost management, efficiencies and other possible areas to tide over and emerge stronger from the global crisis. The ramp up of brownfield expansions, enhanced asset productivity and containment of input cost along with effective working capital management to maximise free cash flow continues to be the major growth drivers.

For more information, contact:
Dr. Pragnya Ram,
Group Executive President,
Corporate Communications,
Aditya Birla Management Corporation Private Limited
Tel: 91-22-6652 5000 / 2499 5000
Fax: 91-22-6652 5741/ 42
Email: pragnya.ram@adityabirla.com