Hindalco Profit Increases 12% as Costs, Rupee Decline

Hindalco Industries Ltd., India’s second-largest aluminum producer, reported a better-than-expected 12 percent increase in first-quarter profit, aided by a falling rupee and lower raw material costs.

Net income, on a standalone basis and excluding unit Novelis Inc., rose to 4.74 billion rupees ($77 million), or 2.48 rupees a share, in the three months ended June 30 from 4.25 billion rupees, or 2.22 rupees, a year earlier, the Mumbai-based company said today in a stock exchange filing. That beat the 3.26 billion rupee median estimate of 27 analysts in a Bloomberg survey. Sales at Hindalco, which also produces copper and its byproducts, fell 3 percent to 57.4 billion rupees, compared with an estimated 60.2 billion rupees.

Hindalco, which pegs its domestic sales to the dollar-denominated prices of the London Metal Exchange, benefitted as the rupee sank 8.6 percent against the greenback in the last quarter. The company’s sales of aluminum gained 7 percent.

Earnings were hampered by lower prices of aluminum and copper on the London Metal Exchange. Aluminum, the lightweight metal used to make aircraft and beverage cans, averaged 9 percent lower in the period, while copper fell 8 percent.

“Depressed LME in an otherwise inflationary scenario poses a significant challenge,” Hindalco said in the exchange filing. “The focus of the company is now on ramping up of the new projects already on stream.”

Hindalco shares fell 2.8 percent to 91.40 rupees in Mumbai. The stock has fallen 29 percent this year, compared with a 1.2 percent drop in the key S&P BSE Sensex.

Total expenses declined 3.5 percent to 55.4 billion rupees, with raw material costs falling 18 percent to 29.9 billion rupees.

Hindalco is evaluating 160 billion rupees of proposed projects in Jharkhand because of approval delays and an “uncertain investment” climate, Managing Director Debnarayan Bhattacharya told reporters today in Mumbai. Decisions on the projects will be taken in the next four months, he said.

The company’s Atlanta-based unit Novelis, the world’s biggest supplier of aluminum to carmakers, posted a 77 percent drop in net income, excluding tax-affected special items, of $21 million in the quarter ended June 30, compared with $91 million in the year ago period, according to an investor presentation on Aug. 12.

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