Hindalco Profit Rises to a Record on Aluminum Prices

Jan. 25 -- Hindalco Industries Ltd., India's biggest producer of non-ferrous metals, posted a record third- quarter net income as rising demand from construction companies and carmakers boosted prices of aluminum.

Profit climbed to 6.44 billion rupees ($145 million), or 6 rupees a share, in the quarter ended Dec. 31, from 3.36 billion rupees, or 3 rupees, a year ago. That exceeded the 6.25 billion rupees median forecast of five analysts surveyed by Bloomberg.

Hindalco and state-run rival National Aluminium Co. gained from aluminum prices that were 33 percent higher on average from the year earlier. Economic growth in China, the world's biggest consumer of the metal, may help absorb the expected increase in global supply, bolstering prices that have declined by a fifth since reaching a record in May.

``It looks as if the China growth story is not over,'' said Jayesh Shroff, a fund manager at SBI Funds Management Ltd. in Mumbai. ``It's clear that there's no slowdown in China. The glut may not be huge as feared.'' The fund had 6.75 million Hindalco shares on Dec. 31, according to Bloomberg data.

`China Demand'

China's economy, also the biggest user of copper, steel and zinc, expanded 10.7 percent in 2006, the fastest in 11 years, the National Bureau of Statistics said in Beijing today. India's $854 billion economy, Asia's fourth biggest, expanded an average 9.1 percent in the first nine months of the year ending March.

``Our earnings were helped by macro-economic factors in India and overseas,'' Managing Director Debu Bhattacharya said by telephone from Mumbai. ``Aluminum demand in China remains the strong driver of prices.''

National Aluminium Ltd., India's second biggest aluminum producer, reported Jan. 22 third-quarter profit rose 46 percent to 5.72 billion rupees ($129 million) as rising demand boosted prices of the lightweight metal.

JPMorgan Chase & Co. expects aluminum prices on the London Metal Exchange to fall 11 percent this year and 17 percent next year as supplies exceed demand, Hong Kong-based analysts Feng Zhang and Emily Zhang wrote in a note dated Jan. 5.

Aluminum for delivery in three months in London climbed 0.7 to $2,824 a ton at 11:58 a.m. local time. The metal has fallen 15 percent from its May 11 peak of $3,330 a ton.

``We expect a surplus in 2007 and a price decline of 12 percent year-on-year in fiscal year 2008,'' Citigroup Inc. said in a Jan. 16 note. Citigroup rated Hindalco shares a ``sell'' in its first coverage of the company.

Shares Rise

Hindalco sells aluminum products mainly in India at prices linked to the London Metal Exchange. The company's shares have fallen 8 percent in the past three months, compared with the 13 percent gain in India's benchmark stock index. Today, the stock advanced 3.8 percent to 175.25 rupees in Mumbai.

The earnings were announced after trading ended at 3:30 p.m. local time on the Bombay Stock Exchange.

Hindalco's copper-refining business posted a 1.6 billion- rupee profit before interest and tax form a loss of 845 million rupees a year earlier on higher output and refining fees, the company said in a statement.

Copper-refining fees may fall in the quarters ahead as mine output lags smelting capacity.

`Under Pressure'

Copper refiners in India and Korea will earn $60 a ton for treatment charges and 6 cents a pound in refining fees to turn copper ore into metal this year. That compares with $95 a ton and 9.5 cents earned in 2006.

``In the coming year, availability of copper concentrate being tight, the treatment and refining charges are likely to be under pressure,'' according to the company's statement.

Hindalco won't immediately restart its 70,000-ton smelter, which the company shut in the last week of November because of declining treatment charges, Bhattacharya said. The company can refine 500,000 tons of copper annually.

``We don't plan to restart the smelter unless it becomes rem