Hindalco to keep expansion plans going

MUMBAI: Even as the gloomy demand scenario overshadows the growth plans of Indian conglomerates, all expansion programmes of Hindalco Industries, the flagship company of the Aditya Birla group, are on track and won’t be scaled down. “All our projects are on track and we are not postponing or scaling down any of our plans,” said managing director Debu Bhattacharya. However, metal prices, which have seen historic peaks and lows in the past 18 months, won’t regain previous highs and will follow a more steady pattern as demand from domestic user industries, such as power, continues to be modest, Mr Bhattacharya told ET on Wednesday. The company, however, continues to face problems in Novelis, the Atlanta-based aluminium major Hindalco bought last year, as recession in Europe and America is forcing auto companies to cut down on their metal purchases. Aluminium fell to a five-year low of $1,490 a tonne on the London Metal exchange on Friday, while copper prices for three-month delivery closed at $2,825 a tonne on the bourse. Earlier this year, copper prices witnesses record levels of $8,000 plus. Hindalco may spend about Rs 25,000 crore over the next five years for expanding capacity by as much as three times in aluminium and copper. While its borrowing plans are in place, other measures, such as the recent rights issue and cash injection, have reduced the net debt to equity ratio to 0.8 in FY09 as compared with 1.2 times last year. The company is keeping a close tab on the cash flow, too. “We ensure that cash is the focus not on a monthly basis, but on a daily basis,” said Mr Bhattacharya, underscoring the importance that the Rs 19,201-crore company is ascribing to reining in costs. Cost cutting has been very severe in Hindalco and although Mr Bhattacharya didn’t talk about specifics, it has been reliably learnt that senior executives in the company have voluntarily cut down on most expenses. Indian companies, such as Hindalco, state-owned Nalco and Vedanta-controlled Balco are relatively low-cost aluminium producers and can make profits even at the currently seen low LME prices due to low power costs and better smelting technology. Hindalco is scheduled to commission the Aditya Aluminium project in Orissa by October 2011. The project includes a 1.15 million-tonne alumina refinery and a 350,000-tonne aluminium smelter. Hindalco has acquired land for the project and also obtained environmental clearances for the smelter, the captive power plant and the alumina refinery. The situation is, however, different at Novelis, which is expected to close its rolling mill in Rogerstone in the UK due to weak aluminium demand. The rolling mill is one of the largest in the UK and employs 450 workers. Novelis reported a net loss of $103 million for its second quarter ended September 30, 2008 on rising energy and input costs, falling metal prices and volatile currency movements. --economictimes.indiatimes.com