Hindalco Industries Limited releases its Quarter 2 results

Hindalco Industries Ltd., the flagship company of the Aditya Birla Group, today announced its unaudited financial results for the quarter ended 30 September 2007.

Mumbai, Oct 31 : Hindalco Industries Ltd., the flagship company of the Aditya Birla Group, today announced its unaudited financial results for the quarter ended 30 September 2007.

Net sales and operating revenues have grown by 7 per cent to Rs.4,959.7 crores as compared to Rs. 4,634.2 crores in the corresponding period in FY07. Despite the strengthening of the rupee, which resulted in the lowering of aluminium prices, net profit for the quarter at Rs. 642.8 crores is up by 8 per cent, vis-�-vis Rs. 597.6 crores in the corresponding period of previous year.

Of the total revenue of Rs. 4,959.7 crores, aluminium business contributed Rs. 1,785 crores on the back of production growth of 8 percent. Margins were maintained due to increased Value added products, better sales mix and higher sales volume. The value added products in volume terms increased by 11 percent and 15 per cent in Rolled products and Extrusion products respectively.

The profit before interest and tax for aluminium business was lower at Rs. 662 crores from Rs. 671 crores in the corresponding quarter in the earlier year mainly on account of the sharp appreciation of the Rupee against USD and the impact of custom duty cut on imports. The rupee has appreciated 11percent from Rs. 46.21/USD in Q2 FY 07 to Rs. 41.15/USD in the current quarter. On the positive side, the aluminium business benefited from higher LME prices, greater efficiencies, enhanced volumes through better capacity utilization and reduced input costs due to better procurement management.

In the copper business, revenue stood at Rs.3178.3 crores from Rs. 2782.5 crores in Q2FY07driven by higher sales volumes and realization resulting from an enriched product mix. The profit before interest and tax grew marginally at Rs. 126.1 crores from Rs. 123.3 crores in the corresponding quarter last year despite the fall in TcRc due to better by-product realization and improvement in operational efficiency.

The improvement in the market mix resulting from increased duty paid sales was setoff by the reduction in the duty differential. The grid power usage was lower on account of improved captive power availability and a significant improvement in energy consumption.

Strategic Initiatives

The Company has acquired the shareholding of Alcan Inc consisting of 78,564,384 shares of Rs 10/- each in Utkal Alumina international Ltd. (Utkal). Consequently, Utkal is now a wholly owned subsidiary of the Company.

Operational review

Aluminium

All the aluminium plants operated at consistently high capacity utilisation. The full advantage of Phase I of Hirakud expansion helped in increasing metal production by 8percent. The downstream assets purchased in the last two years were fully utilized, in addition to improved production from other plants. Production of value added products (VAP) grew by 7 per cent. Rolled products and Extrusions production extended by 18 per cent and 13 per cent respectively. Alumina production is less than last year primarily due to the hooking of existing alumina refinery with expanded facility at Muri.

Copper

In copper cathodes and CC rods production increased by 11 percent and 32 percent respectively on YoY basis on the back of the ramp up of the copper-III smelter and consistent production from smelter-I. The operations at copper smelter -II continue to remain suspended as cost of production is not economically feasible.

Expansion projects

Muri

The expansion of the Muri Alumina refinery from 110,000 tpa to 450,000 tpa is slated for commissioning in the third quarter of the current fiscal.

Hirakud

Phase II of the expansion of the smelting capacity from 100,000 tpa to 143,000 tpa is well on track. The power generation capacity from 267.5MW to 367.5MW will go on stream by December 2007.

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 awaited.

Aditya Aluminium

Aditya Aluminium, the integrated aluminium project, encompassing 1-1.5 million tpa alumina refinery, 260,000-325,000 tpa aluminium smelter and 750 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 refinery. Joint venture agreement with Mahanadi Coal Limited and Neyveli Lignite Corporation Ltd. has been inked for coal requirements. The water drawal agreement is also finalized. The Smelter is expected to be commissioned by March, 2011 and the refinery by May, 2011.

Mahan

The Mahan Aluminum project with a smelter capacity of 325 ktpa and CPP of 750 MW is on schedule. The land acquisition for the project is underway. The Company has been allotted a coal block in a JV with Essar Power 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. Project is expected to roll on by October, 2011.

Latehar

For the Latehar project with a smelter capacity of 325 ktpa and CPP of 750 MW, Tubed Coal mine has been allocated jointly with Tata Power. Preliminary Environmental clearances have been obtained. Land acquisition is in progress. The expected date of commissioning is March 2012.

Utkal

Work on Utkal Alumna's 1.5 MTPA Alumina Refinery is underway. The Company has acquired the land for the plant and facilities. The second phase of the rehabilitation and resettlement process is in progress. Mining activities will start by March 2009. The commissioning of the Plant is expected by March 2010.

Hindalco Almex Aerospace Limited

This project for manufacture of high strength aluminium alloys for applications in the aerospace, sporting goods and surface transport industries is on target. It is slated for commissioning in fourth quarter in the current fiscal.

Industry outlook

Aluminium

Global primary aluminium consumption has witnessed a strong demand growth of 8.8 percent.

US production levels remained flat, the construction market continues to disappoint and demand from the transportation markets remain weak. The demand from Western Europe has been relatively stronger, while that from Japan continued to be unexciting. China remains the strongest driver of the demand as the metal grew at 34percent, in this period, with transportation, construction and foil sectors remaining firm on the back of strong industrial activity.

Copper

The year-to-date has witnessed good demand for copper. The world refined copper consumption growth is forecast at 4.3percent for 2007, driven by China, the Gulf and Europe. The exchange stock continues to remain below normal levels and a weak US exchange rate will support current copper prices throughout 2007. The first half of 2008 may see an improvement in exchange stocks and market moving towards a balance.

The tightness in the concentrate market is the result of rapid expansion in the smelting capacity - mostly in China and India. Smelters have been buying on aggressive spot terms thereby placing miners in an advantageous position in their negotiations for fixing long-term benchmark TCRC for 2008 which is expected to be lower than 2007. Smelters with large spot exposure are not likely to meet their entire requirements and consequently production cutbacks cannot be ruled out. Increasingly smelters are scouting for participation in mine development to secure long-term concentrate contracts. New major mining projects under implementation are expected to come on-stream during 2010/11. This would change the market balance.

Company outlook

Higher Volumes from asset sweating of existing plants and from the Brownfield Expansion along with the continued focus on maximizing free cash flow will be the major driver for the growth of the company in the coming quarters. A stronger Rupee and soft alumina prices will put the profit margins under pressure. However, with the benefits of Brownfield expansions and various cost optimization initiatives in both Aluminium and in Copper Businesses are expected to sustain satisfactory performance, going forward.

ANI