Hindalco’s March Quarter Margins Under Pressure

Hindalco, Asia’s largest non-ferrous metal aluminum producing company, has announced its results for the March 2012 quarter. The net sales of the company grew by 12 per cent on a YoY basis to Rs 7,647.07 crore. This was mainly due to the increase in sales of copper and because of the de-stocking of aluminum during this period. Aluminum production during the quarter fell by 1.6 per cent on a QoQ basis to 1,44,000 tonnes. However, the volume of copper production grew by 8.3 per cent on a QoQ basis to 95,000 tonnes due to availability of better grades of concentrate ore

The margins of the company remained under pressure due to high power & fuel cost which jumped up by 26 per cent on a YoY basis to Rs 744 crore. In a statement released by the company, it has been mentioned that the metal prices during the quarter remained stagnant which resulted in flat realisation during the quarter. 

The net profit of the company declined by 9.65 per cent on a YoY basis to Rs 639 crore. The decline in net profit was due to lower provisioning for taxation in Q4FY11 on account of lower tax rate and tax write-back. Of the total quarterly revenues, 32 per cent came from the aluminum business and the balance 68 per cent from the copper division. 

The company, in its quarterly update, stated that the outlook for the sector remains challenging due to volatile commodity prices and spiralling energy costs. We believe that the company has done well in the March quarter but the cost pressure will keep the margins in check.