4 May 2007

Hindalco records highest ever sales and profits
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• Record annual revenues at Rs.18,313.0 crore
• EBIDTA at Rs.4,385.1 crore soars by 54 per cent
• Net profit at Rs.2,564.3 crore up by 55 per cent
• Q4 revenues reflect 30 per cent YoY growth; net profit rises by 15 per cent

Hindalco Industries Ltd, the flagship company of the Aditya Birla Group has reported a sterling performance for the quarter ending 31 March 2007. Net sales at Rs.4748.9 crore is up by 30 per cent over Q4 of FY06 (Rs.3657.4 crore). Profit before tax rose by 20 per cent and profit after tax increased by 15 per cent vis-à-vis Q4 of FY06.

Driven by strong aluminium prices on the LME and an improved product mix on account of higher sales volume of value added products, aluminium business revenues extended from Rs.1,726.3 crore to Rs.2,042.4 crore, an increase of 18 per cent. Despite strong inflationary pressures, profit before interest and tax mounted from Rs. 713.1 crore to Rs.790.2 crore, up 10.8 per cent.

Copper business revenues stepped up from Rs.1931.7 crore to Rs. 2711.2 crore, a rise of 40 per cent. Profit before interest and tax at Rs.136.5 crore witnessed a growth of 13.6 per cent over the corresponding quarter of the previous year.

FY 2007 performance
The FY 2007 results have been extremely impressive. Higher capacity utilisation, increased realisation and strengthening of operational efficiencies resulted in both revenues and profits surpassing their previous levels. Consolidated revenues at Rs.18,313.0 crore reflected a growth of 61 per cent. The EBIDTA crossed the USD 1 billion mark for the first time ever at Rs.4,385.1 crore. Net profits grew sharply by 55 per cent to Rs.2564.3 crore.

Aluminium business revenues stretched from Rs.6042.3 crore to Rs.7344.4 crore an increase of 21.5 per cent. Despite strong inflationary pressures, profit before interest and tax rose from Rs.2128.1 crore to Rs.2929.2 crore up 37.6 per cent.

Copper business revenues doubled to Rs.10,977.6 crore from Rs.5354.2 crore. Profit before interest and tax surged to Rs.517.1 crore vis-a-vis Rs.19.3 crore in FY 06.

Dividend
The company has paid an interim dividend of 170 per cent for FY 07. Together with the corporate dividend tax of Rs.24.9 crore, the total payout on this score was Rs.202.2 crore. The board at its meeting held on date, has decided not to recommend any further dividend and to treat the interim dividend as the final dividend.

A major strategic initiative
The company has entered into a definitive agreement with Novelis Inc. on 10 February 2007 for acquiring all outstanding common shares at the rate of USD 44.93 per share in cash for a total consideration of approximately USD 3.5 billion.

For this purpose the company has secured firm commitments of USD 3.1 billion bridge loan of 18 months against the corporate guarantee of the company and the balance of USD 450 million will be financed by the company by way of infusing equity / preferred stock / other securities in its wholly owned subsidiaries. The acquisition will be effected through one or more of its wholly owned subsidiaries.

The acquisition marks a synergistic extension to the company's upstream business by way of expanding the company's business activities to multiple downstream business, by optimisation of the operating assets of Novelis located in different geographical markets catering to a larger consumer base.

The acquisition is subject to various customary approvals including shareholders and Canadian court approval.

Operational review

Aluminium
Both alumina and aluminium continued to operate at high utilisation levels, above their rated capacities. With the stabilisation of the prebaked smelter potline at Hirakud, metal production has risen by 7 per cent to 114,334 mt. The production of value-added products i.e. rolled and extrusions ascended due to better performance from the rolling plants and the extrusion press set up in FY 06.

Of the total sales volume, the share of value added products was 52 per cent. Despite lower alumina price in the international market, the company has been able to maintain a good realisation, largely because of its focus on speciality business as well as a prudent mix of forward contracts and spot sales.

Copper
The production of copper cathodes went up by 22 per cent to 81,460 t in comparison to Q4 of the previous year. Production of value-added product CC rods grew 27 per cent to 30,076 t. Sulphuric acid output was up by 8 per cent to 240,860 t. In view of the overall economics, copper II operations remained suspended in the fourth quarter of FY 2007 with copper concentrate in international markets becoming more expensive due to a shortage. The company expects this situation to be transient.

Expansion projects

Muri
The brownfield expansion of the alumina refinery from 110 ktpa to 450 ktpa is expected to be commissioned in the third quarter of the next fiscal.

Hirakud
The commissioning of phase I of the expanded smelting capacity from 65 ktpa to 100 ktpa has been completed with all 150 pots energised. Phase II of the project which will raise smelting capacity to 143 ktpa, is on track. The conversion of pot line 3 commenced in November 2006 in a phased manner. The first lot of 64 pots have been completed, ahead of schedule. The second 100 mw power plant was commissioned in December 2006 in line with the schedule and the third 100 mw plant is slated to go on stream by December 2007.

Belgaum
The allotment of the lease for bauxite mines for expanding the alumina refinery capacity at Belgaum, Karnataka from 350 ktpa to 650 ktpa, is awaited.

Utkal
Work on the 1,500 ktpa alumina project is in progress. The pile foundation for the precipitation area is progressing well and will be completed by May 2007. The layout of the non-plant buildings has been finalised. The detailed engineering for mines has started and is expected to be over by March 2009. The second phase of rehabilitation and resettlement process is on track.

Aditya Alumina
This greenfield integrated project of 1,500 ktpa alumina, 325 ktpa of aluminium smelting and a captive power plant of 750 mw is on track. The proposed smelter has been accorded an SEZ status. The rehabilitation and resettlement plan for both the smelters and CPP sites have been submitted for statutory approval. The work on the railway siding and energised grid connectivity is underway. The plant commissioning is expected by September 2011.

Mahan
This project envisages setting up of a 325 ktpa smelter and 750 mw captive power plant supported by captive coal mine. The coal block was allotted in April 2006 in a JV with Essar. The production of coal is likely to start from April 2009. The Government of Madhya Pradesh has sanctioned an allocation of 1213 hectares of land and accorded a SEZ status. Its commissioning is expected by November 2012.

Lathehar
For this project entailing the setting up a 325 ktpa aluminium smelter with 750 mw captive power plant, supported by five million tpa captive coal mine in Jharkhand, the allotment of coal block has reached its final stages. Land acquisition is in progress. An application has also been filed for environmental clearance, water, construction power and other necessary infrastructure.

Industry outlook

Aluminium
Global aluminium consumption is estimated to have grown by 7.2 per cent during CY06. The key contributor to this growth has been the Asian region powered mainly by China which is estimated to have grown by 20.6 per cent. Going forward the demand is expected to be strong especially from China and India.

Rapidly increasing semi-fabrication capacity in China is adding to the primary metal demand. The semi-fabrication production in China has grown by 25.5 per cent in CY06. The Chinese consumption growth is driven mainly by higher investment in infrastructure as well as growth in the automobile industries. The Chinese aluminium consumption is anticipated to grow by a phenomenal 20.8 per cent during CY07. The rest of Asia is also expected to witness good demand during 2007.

Copper
The smelter production recorded a strong growth in CY2006, despite the tight concentrates market and low Tc/Rcs. Expansions to underlying capacity continued to lift output, and high concentrate stocks enabled smelters to cover the shortfall in new mine production. Yet another output surge in CY2008 is expected as new capacity is to go on stream. This will be the peak year for production growth. However, despite a strong growth in capacity, with mine output continuing to fall short of smelter requirement, actual output will be constrained by concentrate availability.
Refined output increased by an estimated 6.4 per cent last year as there was underlying growth in capacity, particularly in China. A robust growth is forecast for CY2008 with capacity increases.

Company outlook
The company has been continuously improving its performance. It is leveraging its fundamental strengths to deliver shareholder value and this is an ongoing priority. LME will drive the performance of aluminium business whereas it is a pass through for copper business. Going forward the biggest challenge would be to maintain high levels of performance once the aluminium price at the LME starts moving down.

For more information, contact:
Dr. Pragnya Ram,
Group Executive President,
Corporate Communications,
Aditya Birla Management Corporation Private Limited
Tel: 91-22-6652 5000 / 2499 5000
Fax: 91-22-6652 5741/ 42
Email: pragnya.ram@adityabirla.com