Hindalco’s First Quarter Profit Jumps Five Fold as Costs Decline

  • Company says macroeconomic headwinds still persist globally
  • Indian metal producer to focus on cutting debt over 3 years

Indian billionaire Kumar Mangalam Birla-owned Hindalco Industries Ltd. reported an almost five fold increase in first-quarter profit, aided by lower costs and higher production of aluminum used in everything from beer cans to cars. The company’s shares surged in Mumbai.

Net income rose to 2.94 billion rupees ($44 million) in the three months to June 30, from 611 million rupees a year earlier, the company said Friday in an exchange filing. Sales fell 11 percent to 76 billion rupees, while total costs slid 16 percent to 67 billion rupees.

A slump in commodity prices helped Hindalco lock-in raw material supplies at lower costs even as a global glut in aluminum hurt revenues. Prices of the metal, down more than 40 percent from a 2011 peak, are set to lose another 11 percent-plus over the next four years as China continues to expand supply, according to researcher Harbor Intelligence.

“Macroeconomic headwinds still persist and the uncertain global macro factors pose several challenges,” Hindalco said in the statement. “The high level of imports continue to impact domestic sales volumes.”

The Mumbai-based company said that it has locked in around 25 percent of its annual coal requirement during recent auctions at a reasonable premium to government-notified prices. Aluminum volumes rose 17 percent during the quarter from a year earlier and alumina output climbed 10 percent, partially offsetting the impact of a drop in prices, said the company.

The company’s overseas unit, Novelis Inc., the world’s largest producer of rolled aluminum products, reported a first quarter profit of $24 million compared to a loss of $60 million a year earlier, it said on Aug. 5.

The company is the second-best performer on the NSE Nifty 50 Index this year, rising 72 percent. The shares rose as much as 4.9 percent to 149.25 rupees in Mumbai Friday. The Benchmark S&P BSE Sensex has climbed 7.8 percent this year.

Hindalco will focus on reducing debt over the next three years even as it aims to produce a record 1.25 million tons of aluminum this fiscal year, Managing Director Satish Pai said last month. The company had a total debt of 671 billion rupees as of March 31.

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