NALCO's Net Profit At Rs 119 Crore On Lower Fuel, Material Costs

The state-owned National Aluminum company (NALCO) has reported a better financial performance for the third quarter of the current fiscal with a total income up by 17% to Rs 1693 crore. Net profit has also grown by 132% to Rs 119 crore. The EBITDA margins have improved by 600 basis points to 10.79%.

The company, which reported a net profit of Rs 5 crore in the September quarter of the current fiscal, seems to have overcome the issues such as high fuel costs in the December quarter. It has, however, continued with a dismal performance in its Aluminum business where at the PBIT level it has again reported loss.

NALCO has put a varied performance in its three business segments. The revenues in Chemicals business have moved up by 16% while that in the Aluminum business are up 13%. Its electricity business has managed to grow by 5% during the quarter. The growth rates in all the three segments are better compared the same in the September quarter where it had reported marginal growth rates in Chemicals and Aluminum, while decline in the Electricity segments.

At the PBIT level Aluminum is still a drag for NALCO where it has reported loss. Margins of Chemicals and Electricity business too have come down heavily. The only breather is that on a sequential basis, the Electricity business has turned profitable.

On the production front, for the first nine months (9MFY13), NALCO's Alumina hydrate production grew marginally to 1.27 million tonnes (MT) from 1.17 MT produced in the first nine months of the last fiscal (9MFY12). Aluminum production during this period, however, declined from 3.09 lakh tonnes in 9MFY12 to 3.05 lakh tonnes in 9MFY13.

At the EBITDA level, its margins are at 10.79% for the quarter. The margins have improved sequentially as well as on a YoY basis. In the Sep 2012 quarter, it had reported a loss at the EBITDA level due to huge rise in power and fuel expenses. During the Dec 2012 quarter, power and fuel expenses (35% of sales) have remained under control. Material costs, which form the second largest cost of the company, declined by 0.37% which has helped NALCO to put better margins in the quarter.

In the non-operating costs, its other income during the quarter has declined form Rs 125 crore to Rs 112 crore. Total taxes paid in absolute terms have increased by 168% to Rs 53 crore. Tax rate too remained at 31% compared to 28% a year earlier. Despite these hurdles it has reported a net profit of Rs 118 crore.

The shares of NALCO jumped by 8% after the results. The shares, however, may cut the gains on profit bookings. The shares of the company have underperformed the broader market in the last one year, indicating the sentiment of the investors about the company. Considering that it is facing hurdles on the environment front and has shown a dismal performance in its core business, it is better to avoid the scrip at the moment.