Hindalco is yet another company to be struck by a one-time exceptional item in the March quarter. While the company's sales and operating income was largely in line with the Street's estimates, a provision of Ra 146 crore for its renewable power obligation hurt profit growth.
Sales growth in the fourth quarter grew 11% year-on-year and nine% sequentially to Rs 9,372 crore on higher volumes of aluminium and copper.
Despite higher metal volumes, Hindalco's operating income remained flat YoY at Rs 850 crore. Goutam Chakraborty, metals analyst at Emkay Global, says the company's performance is in line with estimates on higher volumes, even though margins in the aluminium segment have contracted. Adjusting for the exceptional item, Hindalco's adjusted net profit was down 53% YoY and 15% sequentially to Rs 306 crore.
During the quarter aluminium sales grew 14% sequentially, during the quarter compared to the previous quarter. However, the aluminium segment's earnings were down as aluminium EBIT margin was at 7.4%, down 400 basis points YoY and 300 sequentially. Higher volumes ensured that sales growth, but lower realisations in the aluminium segment impacted profit growth. Revenues of the copper segment increased five% sequentially on higher volumes and margins remained flat despite demand conditions.
In the December quarter, EBIT margin for the aluminium had improved to 10.6% from 6.9% a year ago. The marked improvement in the aluminium business had contributed to Hindalco's operating profit. But most of the margin related gains have been wiped out in the March quarter.
Despite the weak performance of the aluminium segment and a one-off loss provision, analysts believe that the stock price factors in all the negatives and a further fall is unlikely. Global commodity risks remain, but on the domestic front, there are fewer concerns. However, the fresh triggers for the stock will come from progress in the coal block and output from therein
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