11 May 2010

Hindalco announces Q4 FY 2009-2010 results
Click here to view the results

		Vs. Q4FY09	Vs. Q3FY10
Revenues	Rs. 5,404 crore	43 per cent	2 per cent
EBITDA	Rs. 835 crore	166 per cent	12 per cent
PAT before Tax Adjustment for earlier years	Rs. 551 crore	367 per cent	29 per cent

Strong Q4 with sharp increase in Sales and EBIDTA

Hindalco Industries Ltd, an Aditya Birla Group company, today announced its unaudited financial results for the fourth quarter ended 31 March 2010. Its performance in the quarter has been significantly better than the comparable quarter in the previous year.

Q4 FY10 results
Net sales at Rs.5,404 crore in Q4FY10 were up 43% over Q4FY09, driven by better mix and realisation. Benefits of timely low-cost brownfield expansions and continuous stretching of productive capacities helped substantially mitigate the adversity of higher coal price in aluminium business and lower by-product credit in copper business. This is reflected in the strong EBIDTA growth of 166% over Q4FY09.

Profit before tax is higher at Rs. 674 crore vis-à-vis Rs.159 crore in Q4FY09. Net profit after tax before tax adjustment for earlier years is at Rs. 551 crore as against Rs. 118 crore in Q4FY09.

This superior quarterly performance is reflection of the Hindalco’s continued focus on operational efficiencies and cost management. Better geographic and product mix along with improving realisation also contributed to the performance. The adverse impact of the rupee appreciation, higher coal cost and lower by-product credit have been largely offset by the improved efficiencies in the quarter.

The integrated nature of both its businesses helped the company deliver relatively better results compared to its peers. In the case of aluminium business, bauxite mining to value-added downstream products and in copper business, copper mining to value-added products along with fertiliser stream and precious metal refinery bolstered growth.

On a sequential basis, sales are up by 2% over Q3FY10 and EBITDA rose by 12%. The advantages of better efficiencies and improving commodity prices were partially negated by the impact of stronger rupee in both businesses and lower TcRc in copper business.

Business segment results
Of the total quarterly revenues of Rs.5,404 crore, aluminium business contributed Rs.2,045 crore with an EBIT of Rs.614 crore. The results would have been even better, but for the constraints that came in because of increased input costs and an appreciating rupee. However the substantial cost saving through improved efficiencies, better geographic / product mix and higher LME led to a 2.8 times increase in EBIT.

In the copper business, revenues for the quarter were higher at Rs.3,361 crore, up by 52% from Rs.2,213 crore in Q4FY09, mainly on account of higher copper LME. Copper being a custom smelting operation with offset hedging program is relatively insulated from the vagaries of volatile commodity prices. The benefits of the marked improvement in operational efficiencies including energy efficiencies and recovery were partially set off by lower fertiliser subsidy. These factors led to an EBIT of Rs.127 crore, which is 150% higher over Q4FY09.

Annual results
For the year ended 31 March 2010, net sales at Rs.19,536 crore were higher by 7%.The highest ever metal volumes, better product and geographic mix despite subdued commodity prices helped improve the company’s performance. The superior operational performance in terms of highest ever metal production and substantial cost savings on improved efficiencies were negated by adverse macro-economic factors, which was pronounced in both businesses.

In the aluminium business, lower rupee LME eroded around Rs.750 crore. Additionally Rs.100 crore was lost on account of the higher coal cost at Renusagar. Copper business which benefited by higher contracted TcRc (treatment charges and refining charges) lost Rs.750 crore on lower by-product credit in terms of sulphuric acid realisation and lower fertiliser subsidy. Against this backdrop, the performance of both the businesses is quite satisfactory.

Other income at Rs.260 crore was lower by Rs.377 crore on account of low treasury corpus post repayment of bridge loan in November 2008 taken for Novelis acquisition and higher project spending. Abundant liquidity kept short-term rates low. This affected yields on the company’s investments which are mostly in liquid plans. It also reduced the cost of working capital borrowing. As a result the interest and financing charges have also reduced from Rs.337 crore in FY09 to Rs.278 crore in FY10.

Operational review
Aluminium
The capacity expansion at Muri and Hirakud has resulted in a 52% rise in alumina production at Muri and metal production by 16% at Hirakud in FY10. The total alumina and metal production is up 6%.The wire rod production soared by 23% in FY10.

The downstream production rose by 13% and 8% each in the case of flat rolled products and extrusion products respectively, compared to FY09.

Copper
The copper cathodes production is higher by 12%, while value added CCR production is up by 7% compared to FY09.

The quarterly cathode production has been lower due to the smelter shutdown. As the spot TcRc was at historic lows, the company advanced the planned shutdown of its copper smelter

Brownfield expansion projects
Hirakud: The smelter expansion: The smelter expansion from 155 KTPA to 161 KTPA is now underway and will be completed by Q2FY11. Smelter expansion from 161 to 213 KTPA along with 100 MW power plant expansion will be completed in Q4FY 12. Site activities like boundary wall, area grading, are progressing well.

Flat rolled products: A project is underway for transfer of all key equipments for flat rolled products from the Novelis plant at Rogerstone, UK to Hirakud. This will enable the company to produce can body stock for local and export markets. The project is slated for completion in Q2FY12. Dismantling activities are around 65% completed. Many of the major orders for refurbishment of existing equipment and procurement of new equipment have been placed.

Belgaum: The special alumina production from Belgaum is proposed to be ramped up to 316 ktpa from 138 ktpa. To reduce the cost of production substantially, a proposal for an 18 MW co-gen power plant and a railway siding facility are also being evaluated.

Greenfield projects
Utkal alumina project: Construction of 1.5 Mio TPA alumina refinery along with a 90 MW captive co-gen plant is in full swing. The output from Utkal would be sufficient to feed alumina to the Mahan and the Aditya smelters. Engineering for refinery and captive co-gen plant is nearing completion. Contractors are working at site for civil and structural work and have mobilised more than 5,000 people at site. Piling is 85% complete, fabrication and concreting are around 35% complete. Major equipment like boilers, evaporators and turbines have started arriving at site. The erection and structural work for various equipments is in progress. Orders for all the long delivery equipments have been placed. Around 81 % of the project cost has already been committed.

The project team has estimated a total cost of Rs.5,600 crore without financing cost. The project commissioning is expected to begin in Q2FY12.

Sanctioned credit approvals from a consortium of banks for the entire debt requirement of the project have been obtained. Documentation is at an advanced stage and the drawdown is expected soon.

Mahan aluminium project: A 359 ktpa, aluminium smelter of capacity along with a 900 MW captive power plant is coming up in Bargwan, Madhya Pradesh.

All the major approvals are in place and site activities are on track. Major contractors have mobilised about 6,500 people at the site. Three out of the six boilers and electrostatic precipitator foundations are complete. The powerhouse foundation work is in progress. Two chimney rafts are complete. The erection of the engineering structure for boilers is in progress.

Around 73% of the total project cost has been committed. The project team has estimated a total cost of Rs.9,200 crore without financing cost. The project is expected to be commissioned in Q2FY12.

The Aditya aluminium project: A 359 ktpa, aluminium smelter along with a 900 MW captive power plant, identical to the Mahan Project, is coming up in Orissa.

All the major approvals are in place. Critical equipment orders have been placed for both the smelter and the power plant. The site activities like area grading and boundary wall are on.

Around 52% of the total project cost has been committed. The project team has estimated a total cost of Rs.9,200 crore without the financing cost. The project commissioning is slated in Q3FY12.

The Aditya refinery project: A 1.5 Mio TPA alumina refinery along with a 90 MW co-gen plant, replica of the Utkal Alumina refinery, is coming up in Orissa. The cost estimate in the order of magnitude is Rs. 6,000 crore without financing cost. It is planned for commissioning in Q1FY14.

The Jharkhand aluminium project: A 359 ktpa aluminium smelter along with a 900 MW captive power plant is coming up in Sonahatu, Jharkhand. The land acquisition process has already begun. The process for obtaining environmental clearance has begun. To that effect, a presentation has been made to the MoEF expert committee. The tubed coal mine has been allotted to the project jointly with Tata Power.

This project seeks to replicate the Aditya / Mahan smelter. The cost estimate in the order of magnitude is Rs.10,000 crore without financing cost. It is planned for commissioning in Q1FY14.

Industry outlook
Aluminium
World aluminium consumption increased sharply by 27% in Q4FY10 vis-à-vis Q4FY09, albeit on a low base. While consumption in China continued to rise sharply, non-Chinese consumption recorded positive year-on-year growth after a gap of seven quarters. Though the low-base effect may gradually wear out, world aluminium consumption is projected to grow at around 9% in 2010. The continued economic recovery in most economies is also reflected in firming up of merchant premia in international markets.

The price of aluminium on the London Metals Exchange (LME) has remained firm, barring the increased risk aversion recently. LME has held up despite exchange stocks remaining at very high levels. At the end of March, LME stocks were close to 4.6 million tonnes – around the same level as at the end of the previous two quarters.

The Indian economy is exhibiting a robust growth trend. The demand for aluminium continues to be strong amongst all major consuming sectors, including electrical, transportation, buildings and construction. The Indian aluminium market expanded 21% in Q4FY10. The sector growth is likely to remain strong in the coming months as well.

Copper
Globally refined copper consumption increased 13% in Q4FY10 over the same period last year, again on a low base. Projections suggest that world copper market is likely to remain in surplus in 2010, although at a much smaller surplus than in the previous year. The copper price on LME has generally been firm, though it witnessed some decline in the last few days due to increased risk aversion.

The robust growth outlook for the Indian economy – especially the growth of infrastructure industries, power sector and auto industry – would have a positive impact on the Indian copper market. Refined copper consumption in India increased 16% in Q4FY10, which is expected to be sustained.

The mismatch between global copper mining capacity growth and smelting capacity growth has resulted in a deficit scenario in the concentrates market. Spot market continues to remain tight, reflected in very low spot TCRC. The annual benchmark TCRC for 2010 has been settled at nearly 38% lower than in the previous year. However, sulphuric acid realisations are improving of late, after being depressed in the previous year.

Company outlook
The volatile financial and commodity markets in FY09 and FY10 have tested the resilience of the company’s business model. The company has emerged stronger with a highly proactive approach in managing the downturn through focused cost reduction and efficient asset utilisation. Improving commodity prices and domestic / global demand are encouraging.

Hindalco’s continued focus on cost control, operational efficiencies and integrated business approach will enable the company to consolidate its cost leadership as well as its position on the value chain. The company remains on track with respect to the growth projections despite the challenging ground conditions.

The outlook of the company remains cautiously optimistic for FY11 before the quantum growth leap.

Statements in this “Press Release” describing the company’s objectives, projections, estimates, expectations or predictions may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the company’s operations include global and Indian demand supply conditions, finished goods prices, feed stock availability and prices, cyclical demand and pricing in the company’s principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the company conducts business and other factors such as litigation and labour negotiations. The company assume no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development, information or events, or otherwise.

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