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Non ferrous metals: 3QFY09 review - Views on News from Equitymaster
 
 
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  • Feb 10, 2009

    Non ferrous metals: 3QFY09 review

    Indian industry witnessed one of the worst quarterly performances during 3QFY09 in recent years. Metal sector was no exception to it. In this article, we will discuss the consolidated performance of the major companies in the non ferrous metals space during 3QFY09. For this purpose, we have considered three major players in the industry viz. Hindalco, Nalco and Sterlite Industries.

    Consolidated performance of Non Ferrous metal companies in 3QFY09
    (Rs m) 3QFY08 3QFY09 Change
    Net sales 82,756 77,474 -6.4%
    Expenditure 68,518 66,060 -3.6%
    Operating profit (EBDITA) 14,238 11,414 -19.8%
    EBDITA margin (%) 17.2% 14.7%
    Other income 4,123 4,476 8.6%
    Interest (net) 1,029 1,638 59.2%
    Depreciation 2,469 2,618 6.0%
    Profit before tax 14,863 11,633 -21.7%
    Extraordinary income/(expense)
    Tax 5,304 3,199 -39.7%
    Profit after tax/(loss) 9,559 8,434 -11.8%
    Net profit margin (%) 11.6% 10.9%

    The consolidated topline declined by 6.4% on a YoY basis mainly on account of lower realizations and sales volumes during the quarter. However, the steep depreciation of rupee by 24% YoY has helped the industry to protect the topline from further decline.

    Average LME(US$/tonne) of Non ferrous metals
    3QFY08 3QFY09 % change
    Aluminium 2,444 1,822 -25.4%
    Copper 7,188 3,910 -45.6%
    Source : CMIE

    The operating profits declined at a higher rate of 19.8% YoY as compared to the topline. This was mainly on account of lower than proportionate decline in operating expenditure as compared to topline during the quarter. This has led to the contraction in the EBITDA margins by 250 bps to 14.7%.

    The net profits declined at a lower rate of 11.8% YoY as compared to operating profits during the quarter. This was on account of steep fall in taxes and rise in other income. Furthermore, had there been no growth in depreciation and interest outgo, bottomline decline would have been even lesser.

    Non ferrous metals industry would continue to get impacted till the global economy starts recovering. However, the demand from the domestic markets will remain strong on account of government's emphasis on key non ferrous consuming industries like power, telecom and infrastructure. Taking these factors into account, investment into non ferrous metals stocks, especially at current depressed valuations are likely to yield attractive returns from a long-term perspective. However, investors need to take into account the concerned company's historical performance and its overall cost structure.

     

     

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