Non-ferrous metal major Hindalco reported that its standalone sales for the quarter ended December 2011 grew by 11.3 per cent to Rs 6,590 crore. Net profits were impacted by high raw material costs and slipped by two per cent to Rs 451 crore. Investors were not enthused by the performance with the stock slipping 1.3 per cent.
The company's sales grew on account of higher sales volumes and realisations. A 13 per cent weaker rupee (against the dollar) offset declines in international prices of metals and held up Hindalco's realisations. The company sells both copper and aluminium at prices based on dollar-denominated London Metal Exchange prices. The two metals saw prices average 11 and 12.5 per cent lower in this quarter, compared to the same period a year ago. The company posted a 7-10 per cent increase in the sales of products such as copper cathodes, alumina and aluminium products. Value-added copper product sales rose by 42 per cent.
Profits, however, were hurt by the sharp rise in the prices of thermal coal. The spot price of imported thermal coal averaged close to 25 per cent higher through the quarter ended December 2011, compared with the same quarter a year ago. Raw material costs as a percentage of net sales rose from 64.3 per cent to 66.7 per cent. The company's operating margins were impacted by 1.7 percentage points and stood at 10.8 per cent.
Coal price increases were especially painful for Hindalco's energy-intensive aluminium operations. Operating profits in the segment dipped by 33 per cent to Rs 310 crore. However, a strong performance by the copper segment helped boost profits. The company managed to post a 50 per cent increase in operating profits (Rs 216 crore) from the segment.
A combination of higher refining charges and realisations on by-products such as gold, sulphuric acid and silver helped the company in this segment. The company's other income grew by 50 per cent to Rs 90 crore. This helped the company counter the spike in interest expenses which also grew by 53 per cent to 79.3 crore on account of increased cap-ex spending.
While Hindalco does not provide consolidated numbers, the company's international operations dwarf domestic operations in size. Novelis had posted its quarterly results on Wednesday. Despite posting a reported nine per cent drop in sales volumes on account of weak global markets, the company's improved product mix did limit the decline in sales to 4 per cent. The company sold over 680,000 kilotonnes of aluminium products for $2.46 billion.
The company's operating profit adjusted for unrealised losses on currency hedging contracts and other one-time charges declined by 10.5 per cent to $213 million. The especially weak environment in a key markets such as Europe and Asia also hurt adjusted-operating profit margins which slipped by half a percentage point to 8.6 per cent. Net losses during the quarter stood at $12 million compared to losses $46 million during the same quarter a year ago.