Hindalco Full-Year Profit Falls on Costs, Derivative Losses (2)

May 30 (Bloomberg) -- Hindalco Industries Ltd., India’s largest aluminum maker, posted a worse-than-expected 37 percent drop in full-year group profit because of losses incurred on hedging contracts and higher input costs.

Net income, including that of unit Novelis Inc., fell to 24.6 billion rupees ($546 million), or 12.83 rupees a share, in the year ended March 31 from 39.3 billion rupees, or 22.16 rupees, a year ago, Hindalco said today in a statement. The average profit estimate of 27 analysts Bloomberg surveyed was 30.5 billion rupees. Sales at the Mumbai-based company, which also produces copper, rose 19 percent to 718 billion rupees.

The price of coal, used to produce electricity and accounting for almost 40 percent of aluminum costs, rose 37 percent to an average $107 a metric ton in the last fiscal year, according to market researcher McCloskey Group Ltd. Hindalco also incurred losses after metal prices fell below the price committed in forward contracts.

Raw material costs surged 24 percent to 474 billion rupees, compared with 381 billion rupees the previous year. The loss on hedges was 2.9 billion rupees, compared with a gain of 27.4 billion rupees the year earlier.

Hindalco shares fell as 2.3 percent to 193.05 rupees in Mumbai trading. The shares have fallen 22 percent this year, compared to an 11 percent drop in the key Sensitive Index of the Bombay Stock Exchange.

Rising Prices

The average price of aluminum, a lightweight metal used in aircraft, cars and power plants, gained 15 percent to $2,530 a ton on London Metal Exchange last quarter. The price rose 1 percent to $2,588 a ton on May 27.

The price will be maintained and global aluminum demand is expected to increase as much 10 percent in the year ending March 31, Managing Director Debu Bhattacharya said today at a media conference in Mumbai. The company plans to make products that fetch higher profits, he said.

Hindalco, which has a capital expenditure plan of 100 billion rupees for this fiscal year, aims to raise 80 billion rupees for expansion, Bhattacharya said. The fundraising will start in the year ending March 31, he said.

The company restarted the Mount Gordon copper mine in Australia last month, Bhattacharya said. Aditya Birla Minerals Ltd., the Australian unit of Hindalco, had halted work at the mine because of damage from heavy rains.

The average price of copper rose 33 percent on the London Metal Exchange last year.

Unit Aditya Birla, which is considering acquisition options, is looking for copper mines in Latin America, Bhattacharya said. He did not elaborate.