Indian aluminium major Hindalco Industries of the Aditya Birla group, is all poised for a challenging time ahead with subsidized aluminium imports, rather dumps, from the overseas markets flooding Indian market and profitability going down for aluminium makers in the country who base their product pricing on benchmark LME prices.
Addressing the Board and shareholders at the annual general meeting on September 14, Hindalco Chairman, Kumar Mangalam Birla said, despite the company’s strong operational performance, the short-term outlook for aluminium business is bleak given the global glut of the metal and its declining prices across markets.
“The sharp increase in imports into India will continue to impact sales,” he said.
Birla, however, was optimistic about India’s growing demand for aluminium. He stressed on government’s thrust on power sector which is expected to work well for the aluminium industry. The enhanced focus on downstream value-added product segment will also likely pay off as these are directly connected to the end user industries.
On Hindalco’s operational efficiency and increasing productivity of the new assets, Birla said they will continue focussing on both, plus, cash conservation and de-leveraging. The aluminium producer has secured around 25 per cent of its current coal requirement in the last coal linkage auctions. This, alongside the company’s existing coal linkage for captive coal mines and Renusagar power plant will provide the necessary coal security required to support aluminium production.
Going further, Birla said, Novelis, Hindalco’s wholly-owned subsidiary, was still ramping up production from its newly commissioned facilities and hence, faced ‘significant head winds.’
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Hindalco Industries reported a standalone net profit of INR294 crore for the first quarter of financial year 2016-2017, ended June 30, 2016 (Q1FY17). The net profit was higher than average analyst expectation. Net sales stood at INR7,597 crore, down 13 per cent from INR 8,575 crore in the corresponding period previous year.
The company’s EBITDA (earnings before interest, depreciation and taxes) margin improved 600 basis points to 17.78 from 11.72 per cent.
Birla attributed the year-long muted financial performance to drop in the regional premiums for the metals produced (aluminium and copper), which unlike in LME cannot be hedged.
However, he said use of aluminium in automobile is slated to increase significantly all across the world and Novelis is well positioned to leverage on this opportunity with the commissioning of all the five new auto lines.
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