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

The Economic Times - - Companies - OUR BUREAU

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.

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