Sales: Rs. 569.7 Crores
Profit before Deferred Tax: Rs. 149.7 Crores
Net Profit: Rs. 125.2 Crores
Hindalco (BSE:HALC)(LSE:HALCq)(FRA:HALC), the flagship Company of Aditya Birla Group, has reported better sales, revenues and production despite constraints from several quarters.
Among the factors that have impaired performance are – the depressed economic scenario, lower LME prices, higher input costs – mainly coal, and major power disruptions in the month of September. The latter has resulted in a production loss of 6000 tons of aluminium metal. The Company is in the process of normalizing the smelter operations at the earliest. Its performance must therefore be viewed in the context of the difficulties it had to overcome.
The Company's Net Sales at Rs. 569.7 Crores are up 2.2 % (Rs. 557.3 Crores). Sales volumes at 63,587 MT (60,069 MT) are higher by 5.9 %. To partially offset lower realizations, Hindalco's ongoing focus has been on sales of higher value-added products.
Profits before Deferred Tax during Q2 of the current Fiscal stand at Rs. 149.7 Crores, as against the Rs. 184.5 Crores in Q2 Fiscal 2003. A sharp increase in cost of coal and other inputs, disruptions of power generation and smelting operations have impacted the Company's bottom line. Consequently, Net Profit during the Quarter was Rs. 125.2 Crores as against of Rs. 167.1 Crores in the corresponding Quarter last year.
On the production front, in all areas, Hindalco's output bettered that of the comparable quarter of the earlier year:
-- Metal Production at 63,665 MT, is higher by 2.1% against output of 62,330 MT in the corresponding period previous year.
-- Alumina production, at 118,528 MT is lower by 5.9 % over that of 125,943 MT in the comparable quarter. This was largely due to a planned shutdown of operations for routine maintenance as well as hook up of capacity expanded as part of the ongoing brownfield expansion.
-- Output of Rolled Products at 18,674 MT is higher by 3.5 % vis-à-vis 18,043 MT in the comparable Quarter last year, as a result of better utilization of available capacity and an improved product mix.
-- Extrusion Production stood at 5,074 MT, up by as much as 23.2% vis-à-vis 4,120 MT in the corresponding period last year. Increased on account of improving market demand as well as aggressive marketing efforts.
-- Production of Redraw Rods at 13,251 MT, reflects a 1.1% growth over 13,112 MT in Q2 Fiscal 2002.
-- Power sent out from the Company's Renusagar Power Plant was 1,041 MU, higher by 7.7% as against 967 MU in the comparable Quarter last year.
-- Power sent out from its Co-Generation Unit was 62 MU as against 72 MU in the corresponding Quarter last year. The Co-generation Unit is allied to the Company's Alumina Refinery. The output is lower because of the shutdown of Alumina Refinery for routine maintenance and expansion.
-- Foil Production increased to 4,646 MT, up 5.6%, over 4,400 MT in the corresponding period last year.
-- Production at the Aluminium Alloy Wheel Plant improved significantly to 19,994 Wheels vis-à-vis 7,409 Wheels in Q2 of the previous fiscal.
Comparison - H1 FY 2003 / H1 FY 2002
For the half year, ending September 02, the Company's financial performance is as indicated hereunder:-
Rs. in CroresFund Raising
H1 FY 2002 H1 FY 2003
Net Sales 1,106.3 1,155.7
Profit before Deferred Tax 356.8 313.9
Net Profit 328.2 265.4
The Company has raised a Debt of Rs. 100 Crores in August 2002 for General Corporate Purposes, by issuing Secured Non-Convertible Debentures, with Put/Call Option of varying tenor, at rates ranging from 6.95 % to 7.2 %.
Hindalco's brownfield expansion at Renukoot entailing an investment of Rs.1800 Crores is on course. On its completion, Aluminium Smelting Capacity will stand raised by 100,000 MTPA to 342,000 MTPA. Alongside, with its emphasis on ensuring self-sufficiency in key inputs, Alumina Refining Capacity will be augmented by 210,000 MTPA to reach 660,000 MTPA (450,000 MTPA) and Power Generation Capacity will be increased to 769 MW (619 MW). This project is slated to be completed in phases, by middile of Fiscal 2003-04.
As part of this project, the 2nd of the 3 Potlines in the smelter, has been commissioned in September 2002.
The expansion of the Alumina Refinery capacity has been largely completed. With the hook up of expanded facilities in October 2002, additional capacities will gradually come on stream. The increased output of alumina will support higher metal output.
Of the two power generating Units of the planned expansion, the first Unit, entailing a 75 MW capacity is slated for commissioning by December 2002.
On completion of the ongoing brownfield expansion, Hindalco's market leadership will be further consolidated, while ensuring improved availability for a larger presence in international markets. It will also bring in a significant cost reduction.
Other Growth Initiatives
Strengthening of synergies with Indal is yielding increased benefits to both Hindalco and Indal. Synergies accrue from exchanging best practices, undertaking product rationalization and working closely in marketing products. The two Companies continue to work forwards optimizing capacities by way of tolling of alumina.
Hindalco has made an open offer to acquire the balance 25.4% public holding, at a price of Rs.120 per share. The offer opened on the 14th October, 2002 and will close on the 12th November, 2002. The total payout on this account will be Rs.218 Crores.
The Company has already purchased 889,823 shares from the market, at a cost of Rs 10.56 Crores. On successful completion of the open offer, Indal will be delisted from all the stock exchanges and will become a wholly owned subsidiary of Hindalco.
Hindalco's structured Profit Improvement exercise, Rocket 2K, launched to bring in higher productivity, significant costs reduction, strengthening efficiencies and lower inventories, is progressing well. On its completion in about two years, Hindalco expects annualized saving of nearly Rs.40-50 Crores. Of this, a saving of Rs. 23 Crores has already been realized.
The Company has also recoursed to ERP, to integrate operations, ensure real time data availability, enable improved and faster decisions, effective Supply Chain Management and strengthen Customer Relations Management Systems. The first phase is scheduled for completion by end FY 2004.
Domestic competition continues to be intense. The weak monsoon has cast a shadow over the prospects of an accelerating economic growth. There are apprehensions that a poor agricultural performance will hit the demand for consumer durables and impact other important segments Prices are expected to continue to be under pressure, on account of increasing output at home as well as a discouraging outlook for international prices. On the positive side, the economy continues to grow. In addition, it is hoped that an environment of lower interest rates, innovative financing schemes and the Government's proposed thrust on infrastructure building will play a positive role in stimulating aluminium demand growth.
Even as the long term fundamentals for the Company remain excellent, its outlook in the near term continues to be cautiously optimistic. While the Company's performance has suffered a temporary setback on account of the disruption of its operations in September 2002, the medium and long term outlook remains extremely encouraging. Aluminium by virtue of its unique intrinsic qualities has carved a niche for itself amongst metals. In India, Aluminium has a unique role to play in the country's economic progress and has a vast untapped potential. Normalisation of Hindalco's smelter operations, completion of the brownfield expansion, the ongoing cost reduction, improved operational efficiencies and its single-minded focus on value added products should take the Company forward.
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