Hindalco Q1 pretax drops; agrees to Indian Aluminium Co merger

MUMBAI - India based Hindalco Industries Ltd said first-quarter pretax profit dropped to 8.10 bln rupees from 8.13 bln rupees last year, hit by a 10 pct fall in pretax profit of its aluminium business. Hindalco, Asia's biggest aluminium producer, attributed the fall in pretax profit of its aluminium business -- at 7.12 bln rupees -- to a sharp fall in alumina realisation, impact of customs duty cut on imports and a sharp appreciation of the rupee against the US dollar. The company said that higher volumes from its brownfield expansion and continued focus on maximising free cash flow will be the major driver for growth in the coming quarters. The company said it expects a stronger rupee combined with low TcRc (treatment and refining charges) for copper concentrates to put pressure on its profit margins going forward. "However, the benefits of brownfield expansions and cost optimisation initiatives undertaken by both Aluminium and Copper businesses are expected to deliver impressive results, going forward," the company said in a release. Hindalco also approved the merger of Indian Aluminium Co Ltd (INDAL) into the company, by issuing one preference share of 2 rupees each against one share of same value of INDAL. Hindalco's net profit rose marginally to 6.03 bln rupees from 6.01 bln rupees last year on net sales that rose to 46.78 bln rupees from 42.74 bln rupees last year. Of the total sales, aluminium business contributed 17.54 bln rupees in the first quarter. Hindalco also reported its highest ever aluminium production in the quarter to June 30. It said aluminium metal sales volume rose by 7.6 pct along with higher proportion of value added products. Hindalco said it is expected domestic aluminium consumption to grow in the range of 8-9 pct in fiscal year 2008, propelled by government focus on infrastructure and growing importance of India as a global manufacturing hub for automobiles. The company added that it is expects alumina prices will not come down too sharply, from the present levels, as sharp fall in alumina prices will likely make high cost refineries in China and other places non viable. India's strong economic growth and key priority for the power sector which is major consumer of copper will support high demand and price in the near term, the company said.