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Non ferrous metals: 2QFY09 performance review. - Views on News from Equitymaster
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Non ferrous metals: 2QFY09 performance review.
Nov 17, 2008

The BSE Sensex is down by nearly 60% since the start of the year 2008, while the BSE metal index is down by around 80%. The investors, on account of fears of economic recession in the US and European markets and the expected slow down in the domestic markets have made a rather hasty retreat from the metals pack.

Non Ferrous metals industry is an important component of the metal index. In this article, we will discuss the consolidated performance of the major companies in the non ferrous metals sector during 2QFY09. 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 Q2FY09

(Rs m) 2QFY08 2QFY09 Change
Net sales 98,108 110,126 12.3%
Expenditure 81,525 89,282 9.5%
Operating profit (EBDITA) 16,583 20,845 25.7%
EBDITA margin (%) 16.9% 18.9%  
Other income 4,278 4,422 3.4%
Interest (net) 1,074 1,260 17.3%
Depreciation 2,475 2,653 7.2%
Profit before tax 17,312 21,354 23.3%
Extraordinary income/(expense)      
Tax 4,358 5,080 16.6%
Profit after tax/(loss) 12,954 16,273 25.6%
Net profit margin (%) 13.2% 14.8%  

The consolidated topline grew by 12% YoY during the quarter. This was nearly three times higher than the 4.5% YoY growth witnessed during 2QFY08. The topline growth was largely a result of higher realizations and steep depreciation of rupee against dollar. The rupee had depreciated by nearly 8% YoY, leading to a favorable impact on the topline growth of industry.

Average LME(US$/tonne) of Non ferrous metals

2QFY08 2QFY09 % Change
Aluminium 2546 2787 9%
Copper 7703 7680 -0.3%
Source : CMIE

The operating profits growth came in at a higher rate of 25.7% YoY as compared to the topline as input costs grew at a lower rate than the topline. This has led to the expansion in the EBITDA margins by 200 bps to 18.9%.

The bottomline growth came in at a higher 25.6% YoY as compared to the topline mainly on account of expansion at the operating levels. Also, the benign growth in depreciation and interest outgo further aided the bottomline growth. The net profit margins improved by 160 bps to 14.8%.

The demand for non ferrous metals like Aluminium, Zinc and Copper will remain strong on account of government’s emphasis on key non ferrous consuming industries like power, telecom and infrastructure. Moreover, the growth in automobile and consumer durables industry would also further aid the increase in consumption of non ferrous metals, especially copper and aluminium. However, the current slowdown in key growth driver sectors such as housing and auto due to the global liquidity crisis is likely to impact the industry in the short term.

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