Hindalco Q3 net down 23% to INR 334 crore

Hindalco Industries' net profit for the third quarter ended December was INR 334 crore, down 23% compared with INR 434 crore a year ago, hurt by weak demand for aluminium and higher taxes. Analysts were expecting a standalone net profit of INR 364 crore, according to a poll conducted by Bloomberg. Net sales of the company, controlled by industrialist Kumar Mangalam Birla, rose 6% to INR 7,273 crore, helped by higher volumes. Bloomberg poll had forecasted it at INR 6,904 crore.

Aluminium revenue jumped 11.5% to INR 2,471 crore from a year-ago quarter, while copper business revenue inched up 3% to INR 4,817 crore. Earnings before interest, taxes, depreciation, and amortisation for alumium business fell 18% to INR 170 crore, while profit in the copper business soared 33% to INR 300 crore. "Aluminium demand is weak. We won't be surprised if this persists," said managing director Debu Bhattacharya. Tax expenses jumped 24% to INR 135 crore from the year-ago quarter.

While Hindalco is expanding capacity, prices of aluminium are declining. Aluminium prices slid to a four-and-a-half-year low in January, hurt by sustained glut of the commodity and weak demand from China and other emerging markets.

Aluminium prices fell 12% during the last one year. They are expected to remain under pressure due to London Metal Exchange's stricter warehousing rules that are going to be implemented in April 2014, potentially increasing the supply further. Lot of the fall in LME prices have been cushioned because of rupee depreciation.

The company's Mahan Smelter and Utkal Alumina have started to ramp up. However the coal for the smelter is getting sourced from the market, depressing margins.