Hindalco’s profit falls 35 per cent due to cost pressure, but revenue rises 18 per cent

The average aluminum price on the London Metal Exchange is $2,395 a tonne, down 11% from a year ago and down 18% sequentially. Rising energy costs, coupled with higher coal prices, further affected its operating performance.

The company’s quarterly consolidated earnings before interest tax depreciation and amortization (Ebitda) fell 29% from a year ago 5,743 crores. Its aluminum upstream business Ebitda fell 57% in Q2 of FY13 to 1,347 crore 3,128 crore during this period.

However, some support was provided by aluminum downstream operations, which saw EBITDA 200 crore in Q2, a growth of 163%, mainly due to better pricing of downstream products. The value-added products did not see much effect of volatility in LME or coal prices. Copper segment performed well with EBITDA up 55% 544 crore year-on-year on account of higher domestic sales and better by-product realizations. But it wasn’t enough to push the overall performance forward.

The company’s US subsidiary, Novelis Inc., which contributes more than half of its operating profit, also saw pressure on Ebitda, falling 8% to $506 million. But Novelis delivered with an adjusted EBITDA of $514 a tonne despite challenges in the second quarter. Analysts said contracts would resume from January 1, when Novelis would try to cover the increased costs and push for a higher EBITDA of $525 a tonne on a normal basis.

Satish Pai, Managing Director, Hindalco said, “Hindalco has transitioned into a flexible and integrated business model… Despite the increase in input cost, the company has produced the highest ever aluminum metal ever.”