A metal supplier works at a shop in Mumbai, India.. (Photographer: Abhijit Bhatlekar/Bloomberg News)

Billionaire Birla’s Hindalco Posts Profit Amid Cost Pressures

(Bloomberg) -- Indian billionaire Kumar Mangalam Birla’s Hindalco Industries Ltd. reported a jump in quarterly profit driven by higher revenue at its aluminum operations even as it flagged risks from higher raw-material costs and rising imports.

  • Net income, including that of its Utkal Alumina unit, rose to 7.3 billion rupees ($100 million) in the three months through September from 4.7 billion rupees a year earlier, the Mumbai-based company said Friday.

Key Insights

  • Hindalco’s U.S. unit Novelis Inc. reported a drop in second-quarter earnings from a year earlier, when the company benefited from a one-time gain due to a stake sale in Ulsan Aluminum.
  • Through Novelis, Hindalco has been aggressively expanding its presence globally this year. It agreed to buy U.S.-based Aleris Corp. for about $2.6 billion after announcing a $300 million investment in an automotive finishing plant in Kentucky.
  • It has also pledged investments of $180 million in China and 200 million euros in Europe.
  • The company said it secured commitment from banks for financing the Aleris acquisition and that it has broken ground for a new automotive finishing line in Changzhou, China.

Market Reaction

  • Hindalco shares rose as much as 5.8 percent in Mumbai Friday and are down 12 percent this year.
  • Analysts have 27 buy recommendations on the company, 1 hold and 3 sells, according to data compiled by Bloomberg.

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  • Standalone profits fell, missing analyst estimates, while sales rose 5 percent
  • Global demand for aluminum flat-rolled products remains high and the beverage can market is strong, the company said.
  • India’s aluminum demand grew 14 percent in first half of the fiscal year and copper consumption accelerated 8 percent.
  • Key risks seen in rising input costs, mainly of coal and furnace oil prices
    • The company has been vocal about rising imports of aluminum into the Indian market as a result of the trade wars between the U.S. and China, a risk flagged by rival Vedanta Ltd. as well.
  • Read more on the company’s earnings.

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