Hindalco’s Q4FY11 standalone adjusted PAT (profit after tax) declined 3.7% YoY to R6.7 bn; above our estimate of R6 bn due to a lower tax rate and higher other income. Ebitda (earnings before interest, taxes, depreciation and amortisation) of R8.7 bn was broadly in line with our estimate of R9 bn. Reported PAT of R7.08 bn included forex gains of R410m, accounted in other expenditure.
Aluminum production rebounded to 139k tonnes, implying that the smelter has recovered from damage due to power disruption during the monsoons. Extrusion production was hampered due to a lock-out at Alupuram, Kerala unit, since 22 February 2011.
Ebitda from the aluminum segment was R6.6 bn, slightly lower than our estimate of R6.9 bn. The CoP (cost of production) of aluminum was sequentially flat at $1,763/tonne. Extraordinary expense of R1 bn due to pot repair had inflated CoP in Q3FY11. Higher coal costs raised the CoP in Q4FY11. Staff cost was inflated by R600m due to actuarial provisioning of retirement funds.
The treasury of the Indian business increased by R29.6 bn due to the return of $1.7 bn as capital from Novelis after Hindalco paid $1 bn of acquisition debt. This boosted the other income by R270m. Tax rate at 10.6% was lower due to year-end adjustments.
Although a stronger LME (London Metal Exchange) tends to expand margins for the Indian aluminum company, cost inflation due to rising coal prices, CPC (corrosion prevention and control), and general inflation tend to offset part of the gains. We have increased fuel cost estimates used in power generation. We have also raised our LME assumptions to $2,500 per tonne (to factor in higher aluminum prices) for FY12 and FY13 from $2,200 and $2,300, respectively.
Hindalco will invest $5 bn in domestic high margin green-field aluminum projects to triple smelting capacity to 1.6 mt and double alumina capacity to 3 mtpa. Timely execution of the projects is the key to earnings growth in the Indian business. |
