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Lower aluminium prices put pressure on Hindalco, Sterlite

Wednesday, Oct 31, 2012

  Hindalco Industries and Sterlite Industries, two leading players operating in the non-ferrous metal segment are witnessing pressure on margins due to lower aluminium prices on London Metal Exchange and also due to lower profit margins on refining of copper.

  Hindalco Industries, Aditya Birla group’s flagship metal arm is likely to post subdued results in July-September quarter due to lower treatment and refining charges of (TcRc) for copper and also due to lower aluminium prices on the London Metal Exchange (LME).

  Sanjay Jain, analyst at Motilal Oswal, said, “Hindalco Industries is expected to report decline in its profits and margins in July-September, as aluminium prices were low on LME in the quarter. This affects the landed cost of imports for the white metal in the Indian market. In July-September, aluminium prices on LME declined by around 15 per cent from a year ago to around $1,900 a tonne.”

  Jain said that he expects Hindalco’s earning before interest, taxes, depreciation and amortisation (Ebitda) to decline around 12 per cent from a year ago to Rs 590 crore. “The company’s net profit is expected to decline by 18.8 per cent from a year ago to Rs 406 crore while net sales are expected to decline by 1.2 per cent from a year ago,” said Jain. He forecasts TcRc margins too are expected to decline by around 10 per cent to around 17 cents per tonne.

  Ravindra Deshpande, an analyst at Elara Capital also said that Hindalco is likely to report Ebitda margin of eight per cent as compared with 14 per cent a year ago. Deshpande said sales are expected to remain flat compared with a year ago while TcRc margin is expected at around 20 cents per tonne.

  Ambit Capital has a ‘sell’ rating on Hindalco, as it is expected to report subdued performance in July-September, due to low demand of aluminium globally.

  Sterlite Industries’ copper business’ Ebitda declined 22 per cent from a year ago to Rs 342 crore in the quarter.

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