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Hindalco: A peep into past I

Jul 9, 2008

In the last few articles, we have discussed about the performances of two of the biggest players in the domestic steel market. Let us now turn our attention to non-ferrous metals companies and track the performance of some of the biggest Indian companies in this space over the same time period i.e. from 1999 to 2003 and 2003 to 2007. In this article, we will discuss about the profit and loss account of Hindalco, one of India's largest aluminium and copper producers, between 1999 and 2002. It should be borne in mind that the business model of the company underwent a change in 2003 as the company merged its group company Indo Gulf's copper division with itself. Hence, for a like-to-like comparison to hold good, we have considered the time period from 1999 to 2002 and 2003 to 2007 for Hindalco.

The topline of the company grew at a CAGR of 10% during the period under consideration. Primary aluminium and aluminium value added products contributed more than 90% to the total revenues during this period. The revenues from primary aluminium grew at a CAGR of 3%, but its volumes declined at a CAGR of 1%. However, realisations increased from Rs 79,812 in FY99 to Rs 88,497 in FY02. This can be owed to LME prices, which raised from U$1,362 in FY99 to U$1,395 in FY02 a CAGR of 1%. The revenues from value added products grew at a CAGR of 15% and its volume grew at a CAGR of 8.4%. The realization from value added product increased from Rs 94,533 in FY99 to Rs 113,746 in FY02, a CAGR of 6.4%.

On the operating performance front, operating profits grew at a CAGR of 9%. It showed a rising trend except for the year FY02 where it declined by 5.6% on YoY basis. This was mainly on account of rising costs of key inputs and loss of volumes. The operating costs grew at a CAGR of 11%, which can mainly be attributed to increase in the prices of raw materials and power generation costs.

The bottomline of the company grew at a CAGR of 5% in the period under consideration. But the trend in net profit margin was declining. It decreased from 32% in FY99 to 28% in FY02. This can be explained by increased depreciation, which grew at a CAGR of 7%. However reduction in interest outgo, which declined at a CAGR of 18%, cushioned the margins from further decline.

In the next article, we will take a look at the company's performance during the period 2003 and 2007, considered to be an extremely favorable period for commodities.

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