Nalco: Costs of equity restructuring pull down profitability - Views on News from Equitymaster

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  • Jul 27, 1999 - Nalco: Costs of equity restructuring pull down profitability

Nalco: Costs of equity restructuring pull down profitability

Jul 27, 1999

National Aluminium Company Ltd. (Nalco) has reported sales of Rs 4.27 bn (up 52% YoY) and a net profit of Rs 737 mn (up 22% YoY) for the quarter ended 30th June 1999. Nalco (FY99 Sales Rs 15.05 bn) is India's most efficient aluminium producer. The company is the lowest cost producer of alumina and one of the lowest cost producers of metal in the world.

The net profit margins at Nalco have fallen from 21.5% to 17.3%. This is due to the 50% fall in other income, a 72% rise in the interest expenses and a fall in the operational efficiency at the company. The rise in interest expenses is due to the conversion of 50% of the company's equity into debt, bearing a 14.5% interest coupon.

With the metal prices on an uptrend, Nalco is expected to post a better growth in turnover, while the interest cost is likely to pull down the growth in profitability.

Market View:
Analysts have rated the stock as a 'BUY' on account of the upward movement in the LME aluminium prices and the equity restructuring of the company.

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