25 January 2010

Hindalco announces Q3 FY 2009-2010 results
Click here to view the results

Aluminium rolled production	34%
Copper production	22%
Aluminium production	5%

Profits significantly impacted by adverse by-product credit in copper business.

Hindalco Industries Ltd, an Aditya Birla Group company, today announced its unaudited financial results for the third quarter ended December 31, 2009. With a 5% higher aluminium metal production, a 34% increase in the rolled aluminium production and a 22% higher Copper production, compared to Q3 FY09, the quarter has been amongst the best ever.

Q3 FY10 results
Net sales at Rs.5315 crore were up 29% on higher metal volumes and better copper realisation. The capacity increases through the brownfield expansion have resulted in higher production as well as lower costs. However EBIDTA is lower by 4% at Rs.748 crore mainly on account of lower by-product credit in the Copper Business of Rs.100 crore and higher coal cost of Rs.50 crore. The net profit has fallen due to lower other income at Rs.50 crore vis-à-vis Rs.150 crore in Q3FY09. This is on account of lower treasury corpus post repayment of the bridge loan taken for acquisition of the Novelis. The net profit for the quarter stood at Rs.427 crore.

On a sequential basis, sales are up by 8% over Q2FY10 and EBITDA is up by 23% mainly on back of higher volumes, better efficiencies and improving commodity prices offset partially by impact of stronger rupee in both businesses and lower TcRc in copper business.

Nine months results
For the nine months ended 31 December 2009, net sales at Rs.14,132 crore were lower by 2% despite higher metal volumes due to subdued commodity prices. Net profit is also lower by 36% at Rs.1252 crore. Rs.1700 crore were lost only on account of lower realisation of aluminium and by-product credits in copper. When viewed against this backdrop, the performance is commendable. The other income was lower by Rs.360 crore on account of low treasury corpus post repayment of bridge loan taken for Novelis acquisition.

Business segment results
Of the total revenues of Rs.5,315 crore, aluminium business contributed Rs.1,885 crore with EBIT of Rs.438 crore. The benefits of higher volume, improved geographic / product mix and higher LME were partially offset by impact of stronger rupee and increase in coal prices. The purchase cost of coal has increased steeply, impacting the margin. These macro economic factors led to 17% drop in the profit before interest and tax for aluminium business from Rs.530 crore in Q3FY09.

In the copper business, revenues increased by 60% from Rs.2,139 crore in Q3FY09 to Rs.3,432 crore in the current quarter, mainly on account of higher copper LME. Copper being a custom smelting operation with offset hedging program is relatively insulated from the vagaries of volatile commodity prices. The benefits of the marked improvement in operational efficiencies including energy efficiency were partially offset by lower by-product credit due to lower sulphuric acid realisation and fertiliser subsidy. These factors led to an EBIT of Rs.159 crore, which is 38% higher over Q3FY09.

Strategic initiatives
The company has issued 213,147,391 equity shares of Re 1 each at a premium of Rs.129.90 per share through Qualified Institutional Placement. The total proceeds of Rs.2,790 crore thus received have been utilised towards defraying issue related expenses of Rs.43 crore, apart from Rs.45 crore spent for various ongoing projects. The balance amount has been invested temporarily in mutual funds.

The company intends to use the net proceeds of this issue to part-finance the equity contribution in the greenfield and brownfield aluminium projects. Around Rs.3600 crore has already been spent on these projects.

Operational review
Aluminium
The expansion at Muri and Hirakud has resulted in a 50% rise in alumina production at Muri and metal production by 12% at Hirakud. Metal production is up 5%. The wire rod production is also higher by 25%.

The downstream production rose by 34% and 39% each in case of flat rolled products and extrusion products respectively.

Copper
The copper cathodes production is up by 22%.

Brownfield expansion projects
Hirakud: The smelter expansion from 143ktpa to 155 ktpa has been completed on time. Work on the smelter expansion from 155ktpa to 213ktpa is now underway, part of this (155 to 161 KTPA) will be completed by July 2010. The rest will be commissioned in FY12. Site activities like boundary wall, area grading etc. are progressing well.

A project is underway for transfer of all key equipments for flat rolled products, from the Novelis plant at Rogerstone, UK to Hirakud. This will enable us to produce can body stock for local and export market. The project is slated for completion in Q2 FY12. Project activities including dismantling and refurbishment of equipments have started.

Belgaum: Special alumina production from Belgaum will be ramped up to 316 ktpa from 138 ktpa. To reduce cost of production substantially, a 18 MW co-gen power plant and a railway siding facility will also be taken up as a part of the project.

Mouda: A captive power plant of 20MW is proposed at the existing Mouda plant at Nagpur to reduce the cost of energy used by the company’s plants in Maharashtra. The environment study is completed and the detailed project report is ready. Work on pre project activities and statutory clearances are going on.

Greenfield projects
Utkal Alumina project: Construction of 1.5 Mio TPA alumina refinery at Rayagada, Orissa is in full swing. Engineering for refinery and CPP is nearing completion. Contractors are working at site for civil, fabrication and erection and have mobilised manpower at site. Orders for all the long delivery equipments placed and around 75 per cent of the project cost has already been committed. Major equipment like boilers, evaporators, turbines begun arriving at site and erection has started in some areas. Production of alumina is expected to start around July 2011.

Mahan Aluminium project: It is an aluminium smelter of capacity 3.59 lakh TPA and a captive 900 MW power plant coming up in Bargwan, MP.

All the major approvals are in place and site activities are progressing well. Major contractors have been mobilised at site. Work on site grading, boundary wall, boiler and TG foundation is progressing on full swing. Orders for major long delivery equipments have been placed for both the smelter and the power plant. Around 67% of the total project cost has been committed. The first metal from the smelter would roll out by July 2011.

Aditya Aluminium project: The integrated aluminium project is coming up in Orissa, with a 1.5 million TPA alumina refinery, 359,000 TPA aluminium smelter, and 900 MW captive power plant.

All the major approvals are in place. Major orders have been placed for both the smelter and the power plant. Around 53% of the total project cost for smelter and power plant has been committed. The first metal from the smelter is slated for October 2011. The refinery would be mechanically completed by June 2013.

Jharkhand Aluminium project: It is an aluminium smelter coming up in Sonahatu, Jharkhand, with a capacity of 3.59 lakh TPA and 900 MW captive power plant. The land acquisition process has commenced. Activities for getting the environmental clearance have also started. The company has made a presentation to the MOEF expert committee. The tubed coal mine has been allotted jointly with Tata Power. The first metal from the smelter is expected by June 2013.

Industry outlook
Aluminium
Global aluminium demand increased 13% in Q3 FY10 over the comparable period in the previous year. This can be attributed to the sharp rise in Chinese demand and the low base effect, even as the non-Chinese consumption continued to contract over the year-ago level. Non-Chinese consumption was, however, 6% higher in Q3 FY10 over Q2 FY10. Across most economies, aluminium demand is improving from the severe crash seen during the downturn. 

India has continued to grow very well and the Q3 growth was one of the highest in the world. At the end of December, LME stocks were 4.6 million tons staying at around the same level as they have in the last few months.

Demand in India continues to be strong especially in the electrical and transportation sectors.  In the last quarter, building and construction demand has also picked up.

Copper
The price of copper on London Metals Exchange (LME) continues to be strong on account of the global economic recovery and improved consumption outlook, as also the positive investor sentiment for commodities. Copper price has increased despite the rising trend in exchange stocks. While the outlook on copper demand continues to improve, the high level of stocks poses risk to a sustained rise in prices, especially from the currently high level. Most projections from research organisations suggest refined copper market to be in surplus in 2010, though of a much lower magnitude than in 2009.

Outlook on copper consuming sectors in India continues to be positive – riding on the growth of infrastructure industries including power, accelerating trend in the automobile industry, and pick-up in the realty sector activity. However, scrap availability has been a limiting factor for the pace of growth of refined copper market, particularly at high and volatile LME.

Globally, copper mining capacity growth has not been able to catch up with the growth in smelting capacity – resulting in a deficit scenario in the concentrates market. Consequently, smelters had to accept nearly 38% lower TCRC (treatment charges and refining charges) in the negotiations for annual benchmark TCRC for 2010. Spot market for copper concentrates also continues to remain tight. Until new mining capacities come on stream by end of the year, no appreciable change is expected in the spot concentrates market.

Company outlook
Improving commodity prices and domestic / global demand indicate signs of improvement. However the high exchange and producer aluminium inventories, lower spot copper TcRc and stronger rupee, together with escalating cost of purchased coal, are the downside risks. Low cost brownfield expansions will continue to yield higher production at lower cost. With advantage of being amongst the lowest cost producer and with enhanced asset productivity along with improved share of value added products, the outlook of the company remains cautiously optimistic in short term.

Statements in this “Press Release” describing the company’s objectives, projections, estimates, expectations or predictions may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the company’s operations include global and Indian demand supply conditions, finished goods prices, feed stock availability and prices, cyclical demand and pricing in the company’s principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the company conducts business and other factors such as litigation and labour negotiations. The company assume no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development, information or events, or otherwise.

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