Hindalco Industries, an Aditya Birla Group company, has recorded a 16 per cent increase in net profit (at Rs 503 crore) for the second quarter of this fiscal as against Rs 434 crore logged in the same period last year.

The company booked other income of Rs 176 crore (Rs 82 crore) which includes a dividend of Rs 60 crore received from its wholly-owned subsidiary Dahej Harbour and Infrastructure.

Net sales were up seven per cent, at Rs 6,272 crore.

Cost escalation

The company's financial performance was impacted by cost escalation and constrained bauxite and coal availability during the monsoon. Profit before interest, tax, depreciation and amortisation (PBITDA) was up eight per cent at Rs 845 crore (Rs 780 crore) on higher production volume and realisation in aluminium and better treatment and refining charges (TcRc) and by-product prices in copper business.

Unprecedented flooding at Hirakud in September disrupted coal supplies to Hirakud captive power plant, resulting in slowdown of production in the smelter. Smelter production has now normalised even as spot coal purchases are being made to shore up inventory, said Mr D Bhattacharya, Managing Director, Hindalco.

Overall expenses went up by eight per cent to Rs 5,777 crore (Rs 5,333 crore) with raw material cost rising 20 per cent to Rs 4,419 crore (Rs 3,690 crore). This, despite production being marginally lower compared to last year.

Aluminium revenues were higher by 16 per cent at Rs 2,213 crore (Rs 1,911crore) on higher prices on the London Metal Exchange (LME). Last year, the company's aluminium business suffered due to smelter outage at Hirakud. Aluminium production was marginally lower at 332,383 tonnes (347,071 tonnes).

The global cost curve in aluminium production has shifted significantly upward in 2011 compared to last year. Key input costs have not yet softened notwithstanding the decline in LME. Cost pressures are likely to provide a floor to aluminium LME in case the investor sentiment for commodities worsens further in next few months, he said.

The copper business recorded a revenue of Rs 4,062 crore (Rs 3,951 crore) despite production being lower by 21 per cent at 74,588 tonnes (94,104 tonnes). The volumes were down on account of shutdown of one of the smelters till mid-July.

The price movement of copper on the LME and fluctuation in foreign exchange did not impact earning from copper as it is a custom smelting operation with offset hedging program in place, said Mr Bhattacharya.

Copper concentrate markets have tightened in the recent months with strikes and other supply disruptions in mines. Spot TcRc have softened considerably since their peaking last fiscal. Current temporary tightness in the concentrates market contributed by recent supply side disruptions is likely to influence contract negotiations for the next year despite healthy growth in mining capacity, he said.

The company expects the second half of this fiscal to be difficult with global uncertainties, falling LME prices and persisting cost pressure.

NOVELIS

Novelis' shipments of rolled aluminium products were down two per cent at 7.2 lakh tonnes (7.37 lakh tonnes) due to economic uncertainty in the US and Europe. Cool and wet weather across a number of regions in which Novelis operates resulted in customer de-stocking.

Net income rose to $120 million. The company's cash flow was $237 million and liquidity was at $993 million.Net sales were up 14 per cent at $2.9 billion ($2.5 billion), mainly due to conversion premiums and higher aluminium prices.

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