Hindalco Profit Falls 49% on One-time Tax
Co is contesting the .` 324-cr tax imposed by UP and .` 72 cr by MP during the quarter
Hindalco Industries’ net profit for the quarter ended March was .` 248 crore, down 48.5% versus .` 482 crore a year ago, mainly hurt by exceptional government payouts. Analysts were expecting a standalone net profit of .` 348.7 crore, according to a poll conducted by Bloomberg. Net sales of the company, controlled by industrialist KM Birla, rose 21% to .` 8,435 crore, helped by higher volumes. Bloomberg poll had forecasted it at .` 7,488.9 crore. Hindalco paid .` 324 crore as taxes to the government of Uttar Pradesh and .` 72 crore to Madhya Pradesh (MP). It is contesting the levies in the Supreme Court. Earnings before interest, tax, depreciation and amortisation (EBITDA) margin went up 1% to 10% this quarter from last year. The company, which has suffered weak aluminium prices due to global supply glut and weak demand, is optimistic about stronger prices going forward. “Overflow of supply is coming down. World aluminium market is shifting to a deficit scenario,” said MD D Bhattacharya. He added there is a possibility of better aluminium prices on London Metal Exchange.
While Hindalco was expanding capacity, prices of aluminium have been declining. LME aluminium prices slid. It fell 10% in last one year. Lot of the fall in LME prices have been cushioned because of rupee depreciation.
The company’s Mahan Smelter and Utkal Alumina have started ramp up. However, the coal for the smelter is getting sourced from the market, hurting margins.
Hindalco is staring at coal shortage as chances of getting clearances for coal blocks allotted after 2005 have dimmed. It currently has only one captive coal mine, called Talabira I, which may run out of coal in a few years. Even though the company has received stage II environment clearance for its Mahan project in MP in February, sourcing will still take sometime. “We want to push ramp up faster to earn and commensurate EBITDA as depreciation and interest cost increase unabated,” Bhattacharya said.
Uncertainty regarding availability of the captive coal blocks for the company’s new projects is expected to hurt Hindalco in the coming year. While interest and depreciation cost will start getting incurred once new projects are commissioned, earnings from new projects are unlikely to come in the next two years.