Hindalco: Hurt by subdued LME prices

Let us have a look as to how the two main segments of the company viz. Aluminium and Copper performed during the quarter:
• Aluminium: On a standalone basis, the segment accounted for 34% of the company’s total revenues during 2QFY10 as compared to 37% in the previous fiscal. Segmental revenues declined by 22.2% YoY during the quarter. This was mainly on account of lower realisations that can be attributed to a 35% fall in LME prices over 2QFY09 levels. However, weaker rupee, higher volumes and improved product and geographic mix impacted positively. In fact, overall volumes sales in the segment grew by 15% YoY. PBIT of the segment was lower by 63.8% YoY, with margins falling by 18% as increase in cost of coal hurt the margins of the segment.

• Copper: The copper segment’s revenues declined by 8.3% YoY, mainly on account of lower LME prices. However, the segment registered increase in its proportion to the company’s total revenues from 63% in 2QFY09 to 66% in 2QFY10. Total volumes sales in the segment grew by 13% YoY. PBIT of the segment grew by around 57.3% YoY, with margins improving by 2.8% despite the lower by product credit and lower TcRc charges during the quarter.

• As far as the operating performance is concerned, lower than proportionate decline in the operating expenses as compared to topline resulted in EBITDA margin decline of 5.1% to 12.4% during the quarter. It may be noted that the figures pertaining to raw material costs and other expenditures are not strictly comparable as the company adopted AS 30 principle for all derivatives during the quarter.
  Cost break-up…

  (Rs m)	2QFY09	2QFY10	Change	1HFY09	1HFY10	Change
  Raw materials	35,168	31,980	-9.1%	61,879	57,099	-7.7%
  % sales	61.9%	65.0%		59.9%	64.8%
  Staff cost	2,067	2,282	10.4%	3,928	4,352	10.8%
  % sales	3.6%	4.6%		3.8%	4.9%
  Power and fuel	5,262	5,223	-0.7%	10,028	9,433	-5.9%
  % sales	9.3%	10.6%		9.7%	10.7%
  Other expenditure	4,401	3,595	-18.3%	8,048	3,612	-55.1%
  % sales	7.7%	7.3%		7.8%	4.1%

  
  
• The bottomline declined by 41.8% YoY mainly on account of lower operating profits as well as subdued other income. Moreover, the increase in depreciation charges impacted the bottomline further. However, lower interest charges and tax out go had a favorable impact on the bottomline.

What to expect?