30 June 2009

Hindalco announces consolidated and standalone audited financial results for the year ended 31 March 2009
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Hindalco Industries Ltd., the flagship company of the Aditya Birla Group, today announced its consolidated and standalone audited financial results for the year ended 31 March 2009. Hindalco’s performance has been adversely affected by the global economic environment.

Standalone results
Net sales and revenues at Rs. 18,219 crore in FY 09 are lower as compared to Rs. 19,201.03 crore in FY 08. The steep reduction in copper LME led to a fall in the overall sales revenue; though the rupee depreciation against the USD partially mitigated the impact. Higher input costs and an unfavorable market mix (more sale of primary metal and increased exports) impaired profitability. EBIDTA is lower as compared to FY 09, even after factoring the benefit derived from higher metal production consequent to the Hirakud brownfield expansion, profit improvement measures and higher other income.

To reduce the strain on its profitability the company has initiated aggressive cost control measures and tighter working capital management besides re-aligning its capital expenditure across the businesses.

The turnover in the aluminium business grew by 6.4 per cent to Rs. 7,603.84 crore vis-à-vis Rs. 7,144.94 crore in the corresponding period in the previous year on the back of the highest ever metal volumes. However the lower LME and spiraling input costs squeezed the margin, coupled with the shrinkage in the domestic demand for value added products which have better margins. This in turn reduced the gains from a weaker rupee.

In the copper business, revenues stood at Rs. 10,624.5 crore lower by 12 per cent vis-à-vis Rs. 12,065 crore in FY08 as a result of the 21 per cent lower LME. The profit before interest and tax also fell by 25 per cent to Rs. 379.14 crore from Rs. 503.36 crore in the last year, mainly due to 37 per cent fall in TcRc and planned annual shut down.

The steep depreciation of the Indian Rupee against the US Dollar affected the copper business by an estimated Rs. 156.5 crore, as a result of restatement of net foreign currency exposures as on 31 March 2009. For the previous year, this amount was Rs. 41crore. Consequently, the PBIT of copper business is lower than the previous year by Rs.115.45 crore on this account.

Profit before tax at Rs. 2,690.32 crore in FY 2009 vs. Rs. 3,025.61 crore, 10.4 per cent fall, reflects superior performance of the company as compared to industry performance in the backdrop of economic downturn.

The adjustment for earlier year (net) under tax expenses reflects the write back of provision for tax resulting from a change in estimation of tax liability in progress in tax assessments.

Operational review

Aluminium
Consequent to the Brownfield expansion at Hirakud, metal production of the company was up by 10 per cent. It has crossed the half million mark. With the higher production at Muri from the Brownfield expansion, alumina production has increased to 12.37 lakh ton. The demand shrinkage in domestic and global markets resulted in lower production of downstream products.

Copper
With the bi-annual shutdown in smelter-III, output declined. Copper cathodes production is lower by 8 per cent. The value added product, CC rod’s production increased by 4 per cent over FY 08. The operations at copper smelter–II continue to be suspended.

Brownfield expansion projects

Hirakud
The Phase II of the expansion of smelting capacity from 100,000 tpa to 143,000 tpa was completed on time. Its expansion to 155 ktpa is at an advanced stage and will 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. The smelter expansion from 155 ktpa to 206.6 ktpa has also begun and will be commissioned in FY 12. It will use advanced pot technology of 235 KA with pre-baked anodes and will need an additional 100 MW power plant.

Belgaum
The specials alumina production from Belgaum will be ramped up to 316 ktpa from 138 ktpa. On completion, this project will catapult Hindalco to one of the largest specials producer in the world. A cogen power plant (steam and power production) and a railway siding facility etc are also being taken up as a part of the project; it will reduce the cost of production substantially. This is expected to be completed by end 2011.

Greenfield projects

Utkal Alumina is an alumina refinery coming up in Raygada, Orissa. The project consists of a 1.5 million tpa refinery, with a 90 MW cogen plant and a 2 million tpa bauxite mining facility. The construction of the refinery is currently in full swing. All the land required for the project has been acquired. Around 70 per cent of the project cost has already been committed. The mechanical completion of the plant is expected by January 2011 and the first alumina is slated for production around July 2011.

The Mahan Aluminium project coming up in Bargwan, MP, will have a smelter capacity of 359,000 tpa and a captive 900 MW power plant (6 x 150 MW). The land acquisition for the project will be completed in Q2 FY 10. All the major clearances have been obtained. Major orders have been placed for both the smelter and the power plant. BHEL has been given the order for the boiler – turbine – generator packages for the power plant. Orders for cranes, cathode blocks, rectifiers and substation for the smelter have also been placed. Nearly 40 per cent of the total project cost has been committed so far. The first metal from the smelter would roll out by July 2011.

Aditya Aluminium, is an integrated aluminium project coming up in Orissa, with a 1.5 million tpa alumina refinery, 359,000 tpa aluminium smelter, and 900 MW captive power plant. A large portion of the land required for the project has been acquired. Forest clearance for the rest of the land is under progress. Key clearances have been obtained. As is in the case of Mahan, a number of major orders have been placed for the smelter and power plant. The first metal from the smelter is slated for October 2011. The refinery should be mechanically completed by June 2013.

Jharkhand Aluminium is an aluminum smelter coming up in Sonahatu, Jharkhand, with a capacity of 359,000 tpa . A 900 MW captive power plant will also be a part of the project. The plant will be located in Sonahatu which is 20 kilometers from Muri and 55 kilometers from Ranchi. The land acquisition process has already started. The government of Jharkhand has given the water allocation clearance for 55 mcm of water from the Subernrekha basin. The tubed coal mine has been allotted jointly with Tata Power. The first metal from the smelter is expected by June 2013.

Consolidated results
The consolidated revenue for the year is at Rs. 65,625 crore and PBIT at Rs. 627 crore.

The result includes a non-cash unrealised derivative loss of around Rs. 2,381 crore (USD 519 million) which was only Rs. 12 crore (USD 3 million) last year. These derivatives are used to hedge exposures to aluminum, primarily related to customer fixed-price contracts, other commodities and currency. The magnitude of the mark-to-market loss on the company’s derivative portfolio primarily reflects the dramatic downward movement in the LME price of aluminum.

Aluminium business revenue is Rs. 54,306.42 crore and PBIT at Rs. (425.31) crore, while the copper stood at Rs.10,760.26 crore with a PBIT of Rs. 374.11 crore.

Novelis
The liquidity position of Novelis has remained stable despite challenging market conditions. The company’s actions taken to adjust metal intake, reduce production and decrease fixed costs will deliver an estimated $140 million annualised future savings.

The comparative shipments for the twelve months ended 31 March 2009, and for the combined twelve months ended 31 March 2008 are as indicated: Twelve months ended

The integration activities are proceeding smoothly. The acquisition is expected to significantly enhance shareholder value In the near future.

Business Reconstruction Reserve
The company has formulated a scheme of financial restructuring to deal with various costs associated with its organic and inorganic growth plan. The recent economic downturn particularly in the commodity space is also expected to result in impairment / diminution in value of certain assets/ investments. Accordingly, as per a Scheme of Arrangement under sections 391 to 394 of the Companies Act 1956 ("the Scheme") between the company and its equity shareholders approved by the High Court of judicature of Bombay, a separate reserve account titled as Business Reconstruction Reserve ("BRR") has been created by transferring balance standing to the credit of Securities Premium Account of the company for adjustment of certain expenses as prescribed therein. Accordingly, Rs. 8,647 crore has been transferred to BRR and Rs. 67 crore in standalone accounts and Rs. 4616 crore in consolidated accounts have been adjusted against the same as per the Scheme during the year.

Dividend
The directors have recommended a dividend of Rs. 1.35 per share. ( Rs. 1.85 per share). This will be paid in line with the applicable regulations. The total outgo including the tax on dividend would be Rs. 268.60 crore (Rs. 265.5 crore)

Industry outlook
Aluminium
Global primary consumption showed a 3 per cent increase in H1 FY 09 vis-à-vis H1 FY 08 but due to the recession and slowdown, year FY 09 finally ended on a negative growth rate of 7 per cent as compared to FY 08. China which has been a strong driver with double digit growth in the last decade also suffered a negative growth. The production was maintained at FY 08 levels, creating a demand-supply gap which:

Led to rise of LME inventory to 3.5 million tons i.e. more than 3 times the April 2008 levels
Slide in LME prices from $3000 /t in June 2008 to $1254/t in February 2009
Announcement of more than 5.5 million tons cutbacks of high costs smelters in North America, Europe, South America and China
The demand seems to have hit the bottom and revival of the industry is expected by end of Q1 FY 10.

Copper
With the global economy on the road to recovery, driven by the expected increase in Chinese demand by 10 per cent, the lack of secondary material and delay in mining projects, the copper prices would be between $3000-6000 per MT.

The benchmark TCRC for CY 2009 witnessed an increase of 66 per cent over CY 2008. However, the gain on TCRC was largely offset due to reduced by product credits, mainly on account of sharp decline in sulfuric acid prices.

Overall, the copper concentrate market is expected to remain in deficit during CY 10 due to an increase in smelting capacity in China and lack of addition of major mining projects. This would put pressure on spot TCRC.

Further the demand growth in the Indian copper consumption would be robust particularly in the power cables, transformers and other related segments and also due to the thrust on energy efficiency and infrastructure development.

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.

Aggressive cost control measures, stretched operational efficiency, enhanced asset productivity and containment of input cost along with effective working capital management to maximize free cash flow, will continue to be the major growth drivers.

With the intense focus on operational efficiency and synergy between businesses, the company intends to grow in current and new markets in terms of geography and product portfolio.

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