12 February 2011
Hindalco announces Q3 FY 2010-11 results
here to view the result
Highest Ever Quarterly Sales.
CRISIL upgrades rating to 'AA+' from 'AA'
Financial Highlights [Standalone]
sales and operating revenue
|Profit before depreciation,
interest and tax
and finance charges
Aditya Birla Group Company, Hindalco Industries
Limited's performance for the third-quarter
has been better than that in the comparable
quarter of the previous year.
Net sales and operating revenue at Rs.5,975
crore in Q3FY11 were up 12% over Q3FY10, driven
by better geographic mix and improved realisation,
despite lower metal volumes. Metal volumes were
impacted due to power outage at the Hirakud
smelter and cooling tower outage at Dahej smelter,
which, in turn affected production.
PBITDA is maintained despite lower metal volume,
with improved efficiencies and planned cost
saving initiatives. The company benefitted from
higher LME in its Aluminium Business and better
by-product realisation in Copper Business.
The results for the quarter could have been
better but for the cost escalations and plummeting
Copper Treatment and refining charges (TcRc).
Additionally, the disruption of production at
the Hirakud Smelter and cooling tower outage
at the Dahej smelter affected the PBITDA. Lower
interest and financing charges were due to lower
average interest rate.
Quarterly PBIDTA has been impacted by around
Rs. 200 crore of which Rs. 100 crore relates
to one timers related to Hirakud and Dahej outages
and balance is on account of higher carbon and
energy cost along with lower TcRc compared to
Profit before tax is higher by 4% at Rs.
578 crore vis-à-vis Rs. 557 crore in
Q3FY10. Net profit increased by 8% to Rs. 460
crore vs. Rs. 427 crore in Q3FY10.
Business Segment Results
Aluminium Revenue grew from Rs.1,884
crore in Q3FY10 to Rs.1,977 crore in Q3FY11,
a rise of 5%. Strong upward aluminium prices
on the LME, coupled with an improved geographic-mix
were the growth drivers for the Aluminium Business.
Lower sales volume due to Hirakud smelter outage
and appreciating Rupee impacted the Company's
performance. However, despite the strong inflationary
pressures, profit before interest and taxes
increased by 6% from Rs. 438 crore to Rs. 465
Production at the Hirakud Smelter was affected
since early July due to pot outage caused by
heavy rains and lightning. This affected production
to the extent of 8.9 Kt and 26.5 Kt for Q3 and
9-month ending Dec 31, 2010 respectively, compared
to corresponding periods of the previous year.
Pot start-up and restoration work has been completed
and operations have stabilised at the Smelter.
In the Copper Business, revenues rose
by 17% to Rs. 4,000 crore from Rs. 3,432 crore
in Q3FY10, mainly on account of higher copper
LME. Given, that the Copper Business is a custom
smelting operation, with offset hedging programme,
Profit before interest and taxes was not significantly
impacted by the gain or loss on changes in LME.
Profit before interest and taxes was lower at
Rs.143 crore from Rs.159 crore due to lower
volume on account of cooling tower outage, lower
TcRc, higher energy costs and appreciating Rupee,
despite better efficiencies and improved mix.
A breakdown of cooling tower of Sulphuric Acid
Plant- 3 of Dahej Copper Plant in November 2010
resulted in the disruption of production in
Smelter-3. The repair and restoration of the
cooling tower has been completed and normal
production has resumed. The loss of cathode
production is estimated at around 10 Kt.
In both the cases, necessary steps for insurance
claims have been initiated under the Company's
comprehensive insurance policy, covering property
damage and business interruptions.
Novelis Inc., the Company's wholly-owned subsidiary
and a global leader in aluminium rolled products
and beverage can recycling, has completed refinancing
transactions to recapitalise its Balance Sheet.
The refinancing consisted of the sale of $1.1
billion of 8.375% Senior Notes due 2017, $1.4
billion of 8.75% Senior Notes due 2020 (collectively,
the "New Senior Notes") and a new
$1.5 billion secured term loan credit facility.
The proceeds were used to refinance Novelis'
prior secured term loan credit facility, to
fund its previously announced cash tender offers
for any and all of its $1.124 billion 7.25%
Senior Notes due 2015 (the "7.25% Notes")
and its $185.0 million 11.50% Senior Notes due
2015 (the "11.50% Notes") and to pay
premiums, fees and expenses associated with
the refinancing. In addition, a portion of the
proceeds were used to fund a distribution of
$1.7 billion as a return of capital to Novelis'
parent company, AV Metals, Inc. Canada, which
in turn repatriated the same as return of capital
to its parent, AV Minerals (Netherlands) B.V.,
a fully owned subsidiary of Hindalco. Novelis
also replaced its existing $800 million asset
based loan ("ABL") credit facility
with a new $800 million ABL facility. The new
ABL terms and conditions are similar to the
AV Minerals (Netherlands) B.V. has used this
amount for repayment of its outstanding debt
and to return $650 million to Hindalco by way
of reduction of the nominal value of its shares
in the current quarter
The new capital structure has strategic implications
for Hindalco and Novelis. Novelis' ability to
optimise its balance sheet is a testament to
the management actions taken over the past two
years to strengthen its core business and financial
position. The refinancing provides Hindalco
and Novelis with increased flexibility to address
growth opportunities in order to further strengthen
their global footprint.
Rating: CRISIL has recently upgraded
its rating on the long-term bank facilities
of Hindalco Industries Ltd (Hindalco) to 'AA+'
The total Alumina production is lower by 6%
in Q3FY11 on back of scheduled maintenance shutdown
at Renukoot. Alumina production at Muri is 11%
higher over Q3FY10.
Metal volumes have been lower on the back of
the Hirakud outage. Downstream production is
lower by 16% in the case of Flat Rolled Products
and 12% in case of extrusion products. Given
the integrated nature of the Company's operations,
any disturbance in upstream operations has a
cascading impact on downstream facilities.
Quarterly cathode production is lower by 10%
due to the cooling tower breakdown. The value-added
CCR production is lower by 18% based on market
Brownfield Expansion Projects
Hirakud Smelter Expansion: The smelter
expansion from 155 KTPA to 161 KTPA is nearing
completion and will soon be taken on the production
line. Further expansion from 161 KTPA to 213
KTPA, along with a 100 MW Captive Power Plant
[CPP] will be completed in Q4 FY12. Major orders
have been placed. Engineering is nearing completion
and civil work is in progress.
The next phase of expansion of the Smelter from
the proposed 213 KTPA to 360 KTPA, with a corresponding
increase in CPP capacity from 467.5 MW to 967.5
MW is under evaluation. The environmental clearance
is already in place.
Hirakud Flat Rolled Products Project:
This project is underway for the transfer of
all key equipment for flat rolled production
from Novelis plant at Rogerstone, UK to Hirakud.
In addition to the equipment from Novelis, orders
have also been placed for other equipment to
balance production. This will enable the Company
to produce a wide range of superior engineering
products, including can-body stock for the local
and export markets. The project is slated for
completion in October 2011. Nearly 1,800 people
are working at the site for completion of civil
and structural jobs.
Belgaum Special Alumina: The production
of value-added special alumina at the Belgaum
plant is proposed to be ramped up to 316 KTPA
from 138 KTPA. The proposals for an 18 MW co-gen
power plant and a railway siding facility are
also being evaluated from the perspective of
Utkal Alumina Project (UAIL): The construction
of the alumina refinery, along with a 90 MW
captive co-gen plant is in progress at UAIL,
a 100% subsidiary of the Company. The output
from UAIL 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 have mobilised more
than 8,000 people at the site. Erection of major
equipment like boilers, evaporators and turbines
has begun. Around 87% of the project cost has
already been committed.
The total cost of the project is expected to
be Rs.5,600 crore without financing cost. Financial
closure of the project has been achieved and
Rs. 1,500 crore is already drawn down against
the negotiated debt facility. Its commissioning
is expected to begin in early 2012.
Mahan Aluminium Project: The 359 KTPA
aluminium Smelter, along with a 900 MW Captive
Power Plant (CPP), is coming up in Bargwan,
Major approvals are in place and site activities
are progressing well. Contractors have mobilised
about 17,000 people at the site. The engineering
is near completion and major equipment for both
smelter and the CPP have started arriving at
the site. Civil foundations and fabrication
and erection of structures have progressed substantially
in both the smelter and the CPP. Around 90%
of the total project cost (without financing
cost) of around Rs. 9,200 crore has been committed.
The project is expected to be commissioned in
The coal requirement for the CPP will be primarily
met from Mahan Coal Block being developed by
Mahan Coal Limited (MCL), a joint venture between
the Company and Essar Power Limited. As most
of the land of coal block is in the forest area,
MCL is required to obtain approval of Ministry
of Environment and Forests (MoEF), Government
of India under Forest (Conservation) Act, 1980.
The proposal for Forest Clearance was forwarded
to MoEF by Government of Madhya Pradesh in December
2007 for Stage-1 clearance and considered by
Forest Advisory Committee (FAC) of MoEF in its
four meetings held from time to time and finally
in December 2009. MCL has complied with all
the directions of the FAC.
As the Mahan Coal Block was included under
the category of 'NO GO' area, the FAC has not
given its decision on MCL's application for
forest clearance. The Mahan coal block is awaiting
forest clearance approval before further progress
can be made. A Group of Ministers [GoM] has
been set up by the Prime Minister to resolve
all cases where there is significant progress
on construction of the down-stream projects
and mining approval is awaited from the Forest
Inter-Ministerial Team comprising officials
from CEA, MoP, MoC and MoEF visited the end-use
project sites in July 2010 and confirmed that
in end-use project, significant investments
have already been made / committed in acquisition
of land, placement of orders and work has progressed
considerably. Considering that our projects
are at advanced stages of implementation, it
is expected that our block will be recommended
for forest clearance.
As an interim measure, we have applied to Ministry
of Coal for temporary supply of coal (tapering
linkage) to the Mahan CPP, until the Company's
own mines commence operating at full capacity.
Financial Closure: The Company has mandated
SBI Capital Markets Ltd, Citibank, Kotak Mahindra
Bank and The Royal Bank of Scotland for launching
Rupee term loan syndication for achieving financial
closure for the Mahan Aluminium project and
hope to have facility in place within a short
Aditya Aluminium Project: A 359 KTPA
aluminium Smelter, along with a 900 MW CPP,
identical to the Mahan Project, is coming up
All approvals are in place. Critical long lead
equipment orders have been placed for both the
Smelter and the CPP. Preliminary site activities
like area grading and boundary walling are on.
Around 77% 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 is expected to be commissioned
by end 2012.
Aditya Refinery Project: A 1.5 million
TPA Alumina Refinery, along with a 90 MW co-gen
plant, replica of the UAIL, has been planned
to come up in Orissa. The project cost is estimated
at Rs. 6,000 crore without the financing cost.
It is slated for commissioning by end 2014.
Jharkhand Aluminium Project: For the
359 KTPA aluminium Smelter, along with a 900
MW CPP in Sonahatu, Jharkhand, the land acquisition
process has begun. The process for obtaining
regulatory clearance has also commenced. Tubed
coal mine has been allotted to the project jointly
with Tata Power. This project seeks to replicate
the Aditya / Mahan Smelter. The project cost
is estimated to be about Rs.10,000 crore without
the financing cost. Its commissioning is expected
in mid 2015.
Aluminium prices have crossed USD 2,450/t in
December, highest in 2010. This was fueled by
strong demand globally from all the sectors.
Global Aluminium demand in Q3FY11 reflected
a growth of 12.7% over Q3 FY10. Good growth
has been observed in almost all the major regions.
Global demand is expected to be robust for
rest of the year. Indian industry had a good
y-o-y growth in Q3 FY11.
International copper prices have hardened substantially
on account of the continued recovery in demand
and strong interest by financial investors.
Global refined copper supply lagged behind demand
in recent quarters - a trend that is expected
to continue into 2011. This could help copper
prices sustain at high level.
Refined copper demand in India has been adversely
affected in the major consuming segment, i.e.
wire and cable segment. At high copper prices,
customers of this segment are facing substitution
by scrap-based products due to the price gap.
The trend for auto and transformer segments
remains broadly positive.
The Treatment and refining charges (TcRc) in
the spot market have improved sharply on account
of temporary market surplus. Negotiations between
major global miners and smelters for annual
TCRC benchmark are currently underway, and are
likely to result in terms that could be more
favourable to smelters vis-a-vis the previous
year. However, the overall tightness in the
concentrates supply, though improved from previous
year, is expected to continue, resulting in
the likely softening of TcRc in the spot market,
The upward trends in the commodity prices and
also demand in the key markets in which the
company operates are encouraging. However higher
input costs, especially the cost of coal is
a concern. With aggressive cost containment,
enhanced asset productivity, higher share of
value added products and strong fundamentals,
the outlook of the Company remains positive
in both the short term and long term.
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.