3 August 2010

Hindalco announces Q1 FY2010-11 results
Click here to view the results

		Vs. Q1 FY10
Revenues	Rs.5,178 crore	33%
PBITDA	Rs.901 crore	8%
PAT	Rs.534 crore	11%

Hindalco Industries Ltd, an Aditya Birla Group company, today announced its unaudited financial results for the quarter ended June 30, 2010. Its performance in the quarter has been significantly better than the comparable quarter in the previous year.

Net sales at Rs.5,178 crore in Q1 FY11 were up 33% over Q1 FY10, driven by higher volumes, better product/geographic mix and improved realisation. Additionally its low cost advantage, arising from integration and captive coal for own power generation for the Hirakud smelter, cushioned the adverse impact of spiralling cost escalations of crude and crude derivatives as well as purchased coal for Renukoot and plummeting copper TcRc

The company also benefitted from higher aluminium LME and better by-product realisation in its copper business. Other income and interest/ financing charges were constrained by lower returns on investment and lower average interest rate respectively.

Profit before tax is higher by 12% at Rs.673 crore vis-à-vis Rs.600 crore in Q1 FY10. Net profit is at Rs.534 crore as against Rs.481 crore in Q1 FY10.

.Business segment results
Of the total revenues of Rs.5,178 crore, aluminium business contributed Rs.1,867 crore with an EBIT of Rs.552 crore. Aluminium sales were higher on the back of higher volume, better mix, along with better LME compared to Q1 FY10. These benefits were eroded partly by the appreciating Rupee and higher energy cost. The increase of 32% in revenue translated into an EBIT gain of 21% at Rs.552 crore in Q1 FY11 from Rs.455 crore in Q1 FY10.

In the copper business, revenues were higher at Rs.3,314 crore up by 34% from Rs.2,479 crore in Q1 FY10, mainly on account of higher copper LME. However, the copper business being a custom smelting operation, with offset hedging program, was not significantly impacted by the gain or loss on changes in LME. Lower TcRc, higher energy cost and appreciating Rupee dented the margins, despite better efficiencies and improved mix. The copper business performance is to be seen in the light of planned shutdown of a smelter for 24 days in April 2010. The results of copper business, adjusted for this shutdown, are superior compared to Q1 FY10.

Hirakud outage: Operations of the aluminium smelter at Hirakud have been affected in July 2010 due to continuous bad weather with heavy rains and lightning. A team of experts have now completed the assessment of the situation and have formulated an action plan for quick revival of operations as well as certain remedial actions for the future. In line with the action plan currently under implementation, electrolytic cells taken out of circuit will be restarted in a phased manner. This exercise is expected to be completed by end-August 2010. As a consequence of this unforeseen outage, the Hirakud aluminium production is expected to be lower by around 20,000MT for the current fiscal. Efforts are being made to contain the impact of the loss by appropriate management action to optimise profitability across all other business segments of the company. The company has a comprehensive mega insurance policy which covers property damage and business interruptions.

Strategic initiatives

Utkal Alumina International Limited [UAIL]: UAIL, which is a 100% subsidiary of Hindalco, is setting up a 1.5mtpa alumina refinery in Rayagada district of Orissa. The project will feed the alumina requirements of the Mahan and the Aditya smelters presently under construction.

Hindalco has successfully achieved the financial closure of UAIL with the signing of a common loan agreement of Rs.4,906 crore on July 28, 2010. This constitutes the entire debt requirement of the project. The loan documents were signed in Bhubaneswar by a group of 28 banks. The syndication is led by IDBI Bank with SBI Caps and The Royal Bank of Scotland NV as joint arrangers and book runners.

The equity requirement for this project has already been tied up. This project is expandable to 3mtpa at relatively lower incremental capital cost. This is a significant milestone in Hindalco's strategy to grow its alumina capacity and play the entire value chain in aluminium.

Operational review

Brownfield expansion projects

Hirakud smelter expansion: The smelter expansion from 155KTPA to 161KTPA is scheduled for completion by Q2 FY11. Smelter expansion from 161 to 213KTPA along with 100MW power plant expansions will be completed in Q4 FY12. Site activities like boundary wall and area grading are progressing well. BTG order has been placed and other major orders are to be finalised in the next quarter.

Further to the above, the smelting capacity at Hirakud is intended to be expanded from the proposed 213KTPA to 360KTPA with a corresponding increase in back-up captive power from the proposed 467.5MW to 967.5MW.

Hirakud flat rolled products project: This project is underway for the transfer of all key equipment from the Novelis Plant at Rogerstone, UK to Hirakud. This will enable us to produce can-body stock for local and export markets. The project is slated for completion in Q2 FY12. Dismantling activities are progressing well and are around 98% complete. Most of the major orders for refurbishment of existing equipment and procurement of new equipment have been placed. A strong project team is in place.

Belgaum special alumina project: The special alumina production from Belgaum is proposed to be ramped up to 316KTPA from 138KTPA. To reduce the cost of production substantially, a proposal for an 18MW co-gen power plant and a railway siding facility are also being evaluated.

Greenfield projects

Utkal Alumina Project (UAIL): The construction of 1.5 Mio tpa alumina refinery along with a 90MW captive co-gen plant is in full swing. The output from UAIL would be sufficient to feed alumina to the Mahan and the Aditya smelters. Engineering for refinery and captive co-gen plant is nearing completion. Contractors are working at the site for civil and structural work and have mobilised more than 5,000 people. Piling, fabrication, concreting and tank erection are all well underway. Major equipment like boilers, evaporators and turbines have started arriving at the site and erection and structural work for the various equipment is in progress.

Orders for all the long delivery equipment have been placed. Around 82% of the project cost has already been committed. The production of alumina is expected to start around Q2 FY12.

Mahan aluminium project: A 359KTPA aluminium smelter capacity along with a 900MW captive power plant is coming up in Bargwan, Madhya Pradesh.

Major approvals are in place and site activities are on schedule. Around 10,000 people are working at the site. Site grading work, boundary wall and piling are nearing completion. Concreting and structural work is progressing in line with the first pot start up schedule. Work on boiler foundation, ESP, powerhouse units and chimney rafts is progressing in full swing. Erection of engineering structure for boilers is in progress. Major equipment has started arriving at the site. Around 82% of the total project cost has been committed. The first metal from the smelter is expected by Q2 FY12.

Aditya aluminium project: A 359KTPA aluminium smelter along with a 900MW captive power plant is coming up in Orissa.

Major approvals are in place. Major orders have been placed for both the smelter and the power plant. Around 59% of the total project cost for the smelter and power plant has been committed. Site activities like area grading, boundary wall are in progress. The first metal from the smelter is expected by Q3 FY12

Aditya refinery project: A 1.5 Mio TPA alumina refinery along with a 90MW co-gen plant is coming up in Orissa. This is a replica of the Utkal alumina refinery. The refinery would be mechanically complete by Q1 FY14.

Jharkhand aluminium project: A 359KTPA aluminium smelter along with a 900MW captive power plant is coming up in Sonahatu, Jharkhand. This is a replica of the Aditya / Mahan smelter.

The land acquisition process has already started. Activities for getting environmental clearance have started and a presentation has been made to the MOEF expert committee. The Tubed coal mine has been allotted jointly with Tata Power. The first metal from the smelter is expected by
Q1 FY14.

Industry outlook

Aluminium
Global aluminium demand in Q1 FY11 reflected good growth of 24% over Q1 FY10. A strong growth in Asia has been propelled by Chinese growth, and was partly supported by a "low-base" effect. The key drivers of growth in North America and Europe were the auto and building sectors. Japan, too, had good growth in flat rolled products, extrusions and castings. Pick-up in consumption led to a slight drop of 0.17mt in LME stocks reaching 4.42mt at the end of June.

A strong demand enabled LME to reach USD2,400/t levels in April but due to European fears, the quarter ended at USD1,900 levels. Going forward, LME is likely to be supported by the cost pressures, especially in China, although further gains would be contingent upon improvement in risk appetite in financial markets.

Indian industry had a nominal growth of 8% on Y-o-Y basis. Major growth areas were the electrical sector and castings for the auto Industry. The global demand is expected to continue to be good in Q2, though the base-effect will start to get diluted.

Copper
Global copper consumption continued to improve in the last quarter. The world refined copper market balance was in a small deficit in the first four months of 2010 after recording large surpluses in the previous two years. Exchange stocks at end-June 2010 were at 646,000tonne recording a drop of 107,000tonne over the quarter. Despite this, copper prices at the LME exhibited weakness on account of increased risk aversion.

World copper consumption is likely to continue to grow in the coming quarters on improving demand from emerging countries. The outlook for refined copper consumption in India remains robust, given the continued growth momentum in the economy.

Strong concentrates demand from China and stagnant world mine production continued to keep the concentrates market in deficit which led to spot TcRcs (Treatment and Refining Charges) decline to low single-digit during the current quarter. TcRcs under mid-year negotiations for current year dropped by about 20% over the previous year. There are no signs of any significant improvement in the concentrates market scenario in immediate future.

Company outlook
Aggressive and innovative approaches for low cost brownfield expansions, sweating of existing assets, continuous cost reduction and optimising working capital continue to yield results despite inflationary conditions. The outlook for the coming quarters will be impacted by a subdued financial market sentiment, uncertain commodity and financial markets and lower production at Hirakud. The company is determined to tide over these negatives because of its strong fundamentals and committed resources.

The progress in the greenfield projects and their activity levels are expected to further accelerate during the year.

Statements in this "Press Release" describing the company's objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the company's operations include global and Indian demand supply conditions, finished goods prices, feed stock availability and prices, cyclical demand and pricing in the company's principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the company conducts business and other factors such as litigation and labour negotiations. The company assume no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development, information or events, or otherwise.

For more information, contact:
Dr. Pragnya Ram,
Group Executive President,
Corporate Communications,
Aditya Birla Management Corporation Private Limited
Tel: 91-22-6652 5000 / 2499 5000
Fax: 91-22-6652 5741/ 42
Email: pragnya.ram@adityabirla.com