Hindalco First-Quarter Profit Rises 21% on Aluminum Prices

(Bloomberg)--Hindalco Industries Ltd. (HNDL), India's largest aluminum maker, said fiscal first-quarter profit gained 21 percent, beating estimates, on higher prices.

Net income climbed to 6.44 billion rupees ($142 million) in the three months ended June 30 from 5.34 billion rupees a year earlier, the company said today in a statement. The median profit estimate of 18 analysts polled by Bloomberg was 6.19 billion rupees. Sales grew 16 percent to 60.3 billion rupees.

Hindalco, controlled by billionaire Kumar Mangalam Birla, benefited from higher prices of aluminum and copper as economic growth in China and India fueled demand for homes, appliances and automobiles. Average aluminum prices during the quarter gained 23 percent from a year earlier on the London Metal Exchange, while copper rose 30 percent.

Hindalco shares declined 4.5 percent to 150.20 rupees at the close of trading in Mumbai. The shares have dropped 39 percent this year, compared with an 18 percent decline in the benchmark Sensitive Index.

Cost of production rose 20 percent during the quarter, as fuel and electricity expenses climbed 25 percent and raw material expenses rose 27 percent, the company said. The debt crisis in parts of Europe and the recent downgrade of the U.S. sovereign rating may lower prices of copper and aluminum, Hindalco said.

'Many Challenges'
"There were many challenges and they will continue to be challenges," Managing Director Debu Bhattacharya said today in Mumbai. "The global challenges are known. There is a big challenge in India and that is the cost of coal."

Average power-station coal prices at Australia's Newcastle port rose 21 percent during the quarter to $120 a ton, according to research group McCloskey Group Ltd. Electricity accounts for almost 40 percent of the cost of making aluminum.

Net income at unit Novelis Inc., which makes aluminum sheets for cars and beverage cans, rose 24 percent to $62 million, helped by a 3 percent increase in shipments of flat- rolled products, it said in a statement on Aug. 9. Net sales increased 23 percent to $3.1 billion.

"As a flat-rolled products producer, Novelis's margins are relatively immune to London Metal Exchange metal price fluctuations," analysts Chandrani De and Parita Ashar at Mumbai-based Ambit Capital Pvt. said in a report on Novelis earnings.

Hindalco is building a 92 billion-rupee ($2 billion) alumina smelter and power project in Madhya Pradesh that is expected to start production in December, Bhattacharya said on May 9.