31 October 2007

Hindalco announces Q2 FY 2007- 2008 results
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• Revenues: Rs. 4,960 crore
• EBIDTA: Rs. 1,032 crore
• PAT: 643 crore

Hindalco Industries Ltd., the flagship company of the Aditya Birla Group, today announced its unaudited financial results for the quarter ended 30 September 2007.

Net sales and operating revenues have grown by 7 per cent to Rs. 4,959.7 crore as compared to Rs. 4,634.2 crore in the corresponding period in FY07. Despite the strengthening of the Rupee which resulted in the lowering of aluminium prices, net profit for the quarter at Rs. 642.8 crore is up by 8 per cent, vis-à-vis Rs. 597.6 crore in the corresponding period of previous year.

Of the total revenue of Rs. 4,959.7 crore, aluminium business contributed Rs. 1,785 crore on the back of production growth of 8 per cent. Margins were maintained due to increased value-added products, better sales mix and higher sales volume. The value-added products in volume terms increased by 11 per cent and 15 per cent in rolled products and extrusion products respectively.

The profit before interest and tax for aluminium business was lower at Rs. 662 crore from Rs. 671 crore in the corresponding quarter in the earlier year mainly on account of the sharp appreciation of the Rupee against USD and the impact of custom duty cut on imports. The rupee has appreciated 11 per cent from Rs. 46.21 / USD in Q2 FY 07 to Rs. 41.15 / USD in the current quarter. On the positive side, the aluminium business benefited from higher LME prices, greater efficiencies, enhanced volumes through better capacity utilisation and reduced input costs due to better procurement management.

In the copper business, revenue stood at Rs. 3178.3 crore from Rs. 2782.5 crore in Q2FY07 driven by higher sales volumes and realisation resulting from an enriched product mix. The profit before interest and tax grew marginally at Rs. 126.1 crore from Rs. 123.3 crore in the corresponding quarter last year despite the fall in TcRc due to better by-product realisation and improvement in operational efficiency.

The improvement in the market mix resulting from increased duty paid sales was setoff by the reduction in the duty differential. The grid power usage was lower on account of improved captive power availability and a significant improvement in energy consumption.

Strategic initiatives
The company has acquired the shareholding of Alcan Inc consisting of 78,564,384 shares of Rs. 10 each in Utkal Alumina International Ltd. (Utkal). Consequently, Utkal is now a wholly owned subsidiary of the company.

Operational review

Aluminium
All the aluminium plants operated at consistently high capacity utilisation. The full advantage of Phase I of Hirakud expansion helped in increasing metal production by 8 per cent. The downstream assets purchased in the last two years were fully utilised, in addition to improved production from other plants. Production of value-added products (VAP) grew by 7 per cent. Rolled products and extrusions production extended by 18 per cent and 13 per cent respectively. Alumina production is less than last year primarily due to the hooking of existing alumina refinery with expanded facility at Muri.

Copper
In copper cathodes and CC rods production increased by 11 per cent and 32 per cent respectively on YoY basis on the back of the ramp up of the copper-III smelter and consistent production from smelter-I. The operations at copper smelter -II continue to remain suspended as cost of production is not economically feasible.

Expansion projects

Muri
The expansion of the Muri Alumina refinery from 110,000 tpa to 450,000 tpa is slated for commissioning in the third quarter of the current fiscal.

Hirakud
Phase II of the expansion of the smelting capacity from 100,000 tpa to 143,000 tpa is well on track. The power generation capacity from 267.5 mw to 367.5 mw will 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.

Aditya Aluminium
Aditya Aluminium, the integrated aluminium project, encompassing 1 to 1.5 million tpa alumina refinery, 260,000 to 325,000 tpa aluminium smelter and 750 mw captive power plant is progressing as planned. The major portion of the total land required for the project has been acquired. Environmental clearances have been obtained for the smelter, the captive power plant (CPP) and the refinery. Joint venture agreement with Mahanadi Coal Limited and Neyveli Lignite Corporation Ltd. has been inked for coal requirements. The water drawal agreement is also finalised. The smelter is expected to be commissioned by March 2011 and the refinery by May 2011.

Mahan
The Mahan Aluminum project with a smelter capacity of 325 ktpa and a CPP of 750 mw is on schedule. The land acquisition for the project is underway. The company has been allotted a coal block in a JV with Essar Power for the coal requirement of the CPP. Preliminary environmental clearances have been obtained. The power connectivity for commencing construction has been approved. The water resource department has provided necessary facilities as well. Project is expected to roll on by October 2011.

Latehar
For the Latehar project with a smelter capacity of 325 ktpa and CPP of 750 mw, a tubed coal mine has been allocated jointly with Tata Power. Preliminary environmental clearances have been obtained. Land acquisition is in progress. The expected date of commissioning is March 2012.

Utkal
Work on Utkal Alumna's 1.5 mtpa alumina refinery is underway. The company has acquired the land for the plant and facilities. The second phase of the rehabilitation and resettlement process is in progress. Mining activities will start by March 2009. The commissioning of the plant is expected by March 2010.

Hindalco Almex Aerospace Limited
This project for manufacture of high strength aluminium alloys for applications in the aerospace, sporting goods and surface transport industries is on target. It is slated for commissioning in fourth quarter in the current fiscal.

Industry outlook

Aluminium
Global primary aluminium consumption has witnessed a strong demand growth of 8.8 per cent. US production levels remained flat, the construction market continues to disappoint and demand from the transportation markets remain weak. The demand from Western Europe has been relatively stronger, while that from Japan continued to be unexciting. China remains the strongest driver of the demand as the metal grew at 34 per cent in this period, with transportation, construction and foil sectors remaining firm on the back of strong industrial activity.

Copper
The year-to-date has witnessed good demand for copper. The world refined copper consumption growth is forecast at 4.3 per cent for 2007, driven by China, the Gulf and Europe. The exchange stock continues to remain below normal levels and a weak US exchange rate will support current copper prices throughout 2007. The first half of 2008 may see an improvement in exchange stocks and market moving towards a balance.

The tightness in the concentrate market is the result of rapid expansion in the smelting capacity — mostly in China and India. Smelters have been buying on aggressive spot terms thereby placing miners in an advantageous position in their negotiations for fixing long-term benchmark TcRc for 2008 which is expected to be lower than 2007. Smelters with large spot exposures are not likely to meet their entire requirements and consequently production cutbacks cannot be ruled out. Increasingly smelters are scouting for participation in mine development to secure long-term concentrate contracts. New major mining projects under implementation are expected to come on-stream during 2010 to 2011. This would change the market balance.

Company outlook
Higher volumes from asset sweating of existing plants and from the brownfield expansion along with the continued focus on maximising free cash flow will be the major driver for the growth of the company in the coming quarters. A stronger Rupee and soft alumina prices will put the profit margins under pressure. However, with the benefits of brownfield expansions and various cost optimisation initiatives in both aluminium and copper businesses are expected to sustain satisfactory performance, going forward.

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