Metals Producer Posts 77% Profit Drop as Weak Prices Hurt Margins

09 Aug 2019, 02:34 PM IST

(Bloomberg) -- India’s Hindalco Industries Ltd. reported a 77% drop in quarterly profit as softer metals prices and higher costs hurt margins.

Net income, including its Utkal Alumina unit, declined to 1.67 billion rupees ($24 million) in the three months ended June 30 from 7.34 billion rupees a year earlier, the metals producer run by billionaire Kumar Mangalam Birla said Friday. The company incurred a one-time loss of 218 million rupees.

The weak earnings at Hindalco follow local rival Vedanta Ltd.’s 12% drop in profit. Shares of Indian metal companies are taking a battering this year, with the S&P BSE Metal Index down 24% amid concerns about a slowdown in demand.
The company said Friday that U.S.-China trade tensions continue to impact commodity markets and LME aluminum prices are expected to remain depressed due negative sentiment in the short-term, despite a deficit in supply forecast for this year. Profitability at copper smelters is under pressure due to a moderation in treatment and refining charges and sulfuric acid prices.
Analysts remained concerned about the company’s Novelis unit’s planned takeover of U.S. aluminum producer Aleris after it received a statement of objections from the European Commission in July. Novelis said in its earnings earlier this week that the acquisition is progressing and the transaction is expected to close in the fourth quarter.

Shares declined as much as 3.2% in Mumbai to 175.35 rupees, taking losses to 22% this year.
Analysts have 24 buy recommendations on the company, 2 holds and 2 sells, according to data compiled by Bloomberg.

Sales fell 6% to 100.5 billion rupees.
Power costs climbed 13% to 17.5 billion rupees.
Hindalco said India’s consumption of aluminum grew 7% during the quarter from a year earlier, while demand for copper expanded 9%.
Hindalco’s group profit, including that of Novelis, fell 28% from a year earlier to 10.63 billion rupees.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Alpana Sarma