Hindalco Q1 net down 67%, lower realisation hits aluminium biz

Lower metal realisation, high finance and depreciation costs have hit the aluminium maker Hindalco's bottomline as it reported a 67 per cent drop in the standalone net profit at INR 107.19 crore for the quarter ended June 30.

The flagship firm of the Aditya Birla Group had clocked a net profit of INR 327.50 crore in the year-ago period. Standalone revenue of the company was up 7 per cent to INR 8,575.27 crore in April-June quarter of this fiscal from INR 7,996.14 crore in the same quarter of 2014-15.

"The revenue was up mainly on the back of higher volume despite lower commodity prices. The company reported strong operational performance in Q1FY16, but external environment has worsened significantly," Hindalco Managing Director D Bhattacharya told reporters here.

The realisations have declined as both LME prices and premium slipped by over 5 per cent in Q1FY16 compared with same period last year, Bhattacharya said, adding that the higher volumes have offset the impact of lower LME and premium. "Depreciation and finance costs stood higher, given the additional capitalisation at its two greenfield smelter complexes," he said.

In the June quarter, Hindalco's depreciation costs shot up to INR 332 crore as against INR 187 crore in the year-ago period, finance costs rose to INR 602 crore from INR 338 crore during the same period. The company's total expenses also rose by 8 per cent to INR 8,029.92 crore from INR 7,434.79 crore in the reported quarter.

The company's aluminium business contributed INR 3,966 crore to the revenue in Q1FY16 as against INR 3,011 crore in Q1FY15 supported by higher volumes. The segment results of aluminium business fell from INR 320 crore to INR 254 crore despite higher volumes mainly because of lower realisation and the provision for renewable energy obligation.

On the outlook Bhattacharya said, "The decelerating Chinese economy is a key source of concern. The Yuan devaluation will have a marginal impact. However, adverse metal realisation may pose a significant turbulence in the near-term." Going forward, the operational performance is expected to be robust with the ramp-up of new facilities.

The company's subsidiary Novelis also registered 2 per cent decline in revenues on account of lower LME and lower regional premium. The stronger US dollar causing headwinds in Europe and negative metal price lag expected in Q2FY16, Bhattacharya added.