Aug 29, 2001|
Non-ferrous metals: Cyclical curse
Commodity stocks are among the worst affected in a slowdown, as fortunes of these companies are closely related to the business cycle. To make matters worse the global slowdown has been accompanied with a weakening in the domestic economy. Consequently, commodity prices, including non-ferrous metals, have taken a hit.
Both aluminium and copper pivotals, Hindalco and Sterlite, are having a rough time on the bourses. Both companies in their latest quarterly announcements have declared lower profits. While Hindalco reported a negative 2.9% growth in topline for the quarter ended June'01, turnover of Sterlite grew by 7% over the same period. However, bottomline of Hindalco and Sterlite declined by 8.4% and 41.5% over the concerned period.
The poor performance in the previous quarter could largely be due to the slackening of demand. Aluminium production, which could be a proxy for demand, declined by 13% while copper reported a modest decline of 1.7% over the April'01 to June'01 period. Although international prices of the non-ferrous metals were declining the average aluminium prices for the period were higher by a marginal 1.5% YoY. Copper prices, on the other hand, on an average, fell by 5.2% YoY over the same period. With realisations under pressure both companies reported a drop in operating margins and profits.
The outlook on the global economy continues to be sketchy. Most market participants expect a turnaround in fortunes in the first quarter of the new calendar year. However, could there be more weakening before a turn for the better? Over the past two weeks, non-ferrous metal prices have remained firm, which could hint at a possible bottoming of prices. Consequently, the concerned stocks have shown some stickiness in prices over this period.
Nevertheless, the current quarter will prove to be challenging for the sector, as the domestic economy continues to remain sluggish. Further, for the quarter to date, international aluminium and copper prices have decreased by 9.6% and 18% YoY.
More Views on News
Jun 14, 2017
Should you subscribe to the IPO of Tejas Networks Ltd?
May 26, 2017
Don't be surprised to come across some Super Investors there!
May 19, 2017
Not all small-cap investors see themselves as traders. Some see themselves as business owners.
Jul 31, 2017
Should you subscribe to the IPO of Securities & Intelligence Services Ltd?
Jul 8, 2017
If Super Investors can wait for the right pitch, so can you.
More Views on News
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407