Hindalco announces Q1 results

Hindalco Industries Ltd. announced its unaudited financial results for the quarter ended 30 June 2009. Net sales and operating revenues at Rs. 3,899 crore is up 3 per cent over Q4FY09. Compared to Q1FY09, net sales and operating revenue was lower by 16 per cent from Rs. 4,648 crore due to subdued commodity prices. The steep reduction in aluminium and copper LME led to a fall in the overall sales revenue and therefore profitability. This was mitigated by the rupee depreciation against the USD and higher sales volume. The profit before other income, depreciation and Interest is higher at Rs. 758 crore compared to Rs. 314.2 crore in Q4FY09, but is 20 per cent lower than Q1FY09. The company’s performance is commendable relative to peers in aluminium and copper industry segments. Net profit at Rs. 481 crore is higher by Rs. 212 crore over Q4FY09 and is lower than Q1FY09 by 31 per cent. Of the total revenues of Rs. 3899 crore, aluminium business contributed Rs. 1421 crore compared to Rs. 1561crore in Q4FY09 and Rs. 1943 crore in Q1FY09. The unprecedented 50 per cent fall in LME over Q1FY09 levels dented the top line and the bottom-line. This was partially offset from gains from weaker rupee, higher volumes and improved product / geographic mix. These macro economic factors led to 39 per cent drop in the profit before interest and tax for aluminium business from Rs. 750 crore in Q1FY09. The PBIT for aluminium segment was higher at Rs. 455 crore compared Rs. 162 crore in Q4FY09 mainly on back of improved mix and better macro economic conditions. In the copper business, revenues increased by 12 per cent from Rs. 2213 crore in Q4FY09 to Rs. 2480 crore in Q1FY10 mainly on account of higher realisation and better product and geographic mix, but were lower than Q1FY09 sales of Rs. 2706 crore. The profit before interest and tax was higher at Rs. 156 crore from Rs. 51 crore in Q4FY09 and Rs. 74 crore in Q1FY09. AS-30 implementation Arising from the announcement of the Institute of Chartered Accountants of India dated 29 March, 2008 on Accounting for Derivatives, the company has decided for early adoption of Accounting Standard (AS) 30 on Financial Instruments: Recognition and Measurement, in so far as it relates to derivative accounting, from 1 April 2009. Accordingly net loss arising on fair valuation of outstanding derivatives as on 1 April, 2009 has been adjusted against general reserve following transitional provisions. Accounting for all derivatives during this quarter have been done as prescribed under the AS and accordingly, net gain / (loss) Rs. 9 crore, Rs. (184) crore and Rs. 318 crore have been included under net sales, consumption of raw materials and other expenditure, respectively with consequential impact on profit before tax for the quarter ended 30 June, 2009. The figures of the current quarter in respect of above items are, therefore, not comparable with those of the corresponding quarter of the previous year. Strategic initiatives Financing The company has reached an agreement and received lenders consent on revised terms including covenant relaxations relating to the USD 982 million bank loan. The new terms allow the company significant flexibility to plan its future business and pursue its capital expenditure aspirations going forward. Under the new agreement reached banks have agreed to waive requirement to test covenants on consolidated financials. Qualified Institution Placement /GDR issue The Board of Directors of the company at its meeting held on 30 June 2009, inter alia, has approved Qualified Institution Placement to eligible investors up to amount not exceeding US$ 500 Million equivalent to Rs. 2400 crore pursuant to various statutory approvals. In view of the volatility in domestic market and developments in international markets the Board has decided that the company could in addition to offering of shares under the QIP route also has option to issue share under GDR or any other instrument or any combination thereof but in any case, the total amount to be raised will be restricted to USD 500 million. Wheel business The company has decided to close its wheel plant located at Silvassa having a total capacity of 3 lakh wheels per annum. This, being an insignificant part of our operations, will not have any impact on the operations and financials of the company. Necessary steps are being taken to dispose of the assets of the plant. Operational review Aluminium The expansion at Muri and Hirakud has resulted in alumina production going up by 60 per cent at Muri and metal production by 31 per cent at Hirakud. The overall metal production is up 9 per cent. The production of rolled / foil products are lower due to change in product mix towards higher margin products which requires higher rolling hours and lower tonnage. The extrusion production at Alupuram has been impacted by power cut by the state electricity board. The extrusion production is higher than Q4FY09. In comparison to Q4FY09, production has been higher than Q1FY10, except for alumina production. Alumina production in comparison to Q4FY09 is lower on account of planned shutdown at Renukoot alumina plant.