Coal deficit hampers Hindalco's performance

The aluminium business of Hindalco Industries, the flagship company of the Aditya Birla Group, struggles to catch the momentum because of the uncertainty in the coal allocation and the economic slowdown in China.

Debu Bhattacharya, Managing Director of Hindalco, said that the company will stand firm after the coal issues are resolved.
"Coal requirement is highest in the country", he said.

"Coal availability is posing a significant challenge for ongoing pot ramp-up at the upcoming Mahan and Aditya Smelters," the company said in a statement after announcing its third quarter results.

Net sales rose 18.28 per cent to Rs 8,603 crore, compared to Rs 7,273 crore in the corresponding quarter of the previous year. Profit before interest, depreciation and tax (PBIDT) was Rs 1,135 crore, compared to Rs 834 crore.

However, finance cost and depreciation were significantly higher due to costs for the construction of greenfield projects. As a result, the net profit rose by a moderate 7.5 per cent to Rs 359 crore.

The aluminium business contributed Rs 3,636 crore as against Rs 2,471 crore in the same period last year because of the new capacities from the greenfield projects. As a result, the segment's profit before tax (PBT) went up from Rs 170 crore to Rs 384 crore.

In the copper business, the revenue moved up marginally by 3 per cent to Rs 4,976 crore. The segment's PBT rose from Rs 300 crore to Rs 396 crore.

The coal shortage is expected to impact the company's results negatively from the current quarter. The Mahan coal block, which was jointly operated by Essar and Birla groups, have been taken back and slotted for new allotment under the regulated power category.

Since Hindalco will not be able to bid for the mine, the crisis looms large over the company, shadowing its prospects. The government has started the process of allotting mines afresh and the allocation of a few mines will be completed by April by first week.

The company has a debt of Rs 15,000 crore under Hindalco and $5 billion under Novelis, the overseas subsidiary of Hindalco. On January 9, Novelis reported a 253.85 per cent rise in net profit to $46 million in the third quarter.

The adjusted earnings before interest, tax, depreciation and amortisation (Ebitda, or operating profit) has increased by 16.26 per cent to $236 million, primarily driven by higher shipments as a result of strategic capacity expansions in Asia and South America, favourable product mix, and cost benefits from using recycled metal inputs.

Revenues climbed 18 per cent to $2.8 billion.

Discounting the bleak aluminium outlook, Hindalco's share price rose 2 per cent on BSE to Rs 152.85 even as the BSE Sensex moved up less than 1 per cent.