Hindalco profit sinks on high costs, plans to raise $124 million

Bloomberg

Hindalco Industries Ltd., the metals flagship company of billionaire Kumar Mangalam Birla’s conglomerate, posted a sharp decline in quarterly profit as higher input and energy costs hurt its margins.
The aluminum and copper producer’s board also approved a proposal to raise as much as 10 billion rupees ($124 million) through bonds, loans, debentures and other securities, it said on Friday.
Hindalco’s group net income fell 35% from a year earlier to 22.1 billion rupees in the July-September quarter, missing analysts’ average estimate of 23.85 billion rupees. Sales, however, increased 18% from a year earlier to 561.8 billion rupees.
The company’s weak performance is in line with results from its peers, including Alcoa Corp. that reported a surprise loss last month, highlighting how producers are getting squeezed by higher costs and falling prices for aluminum. Prices of the metal have fallen almost 15% so far this year, battered by high inflation, energy costs and a weaker
economic outlook.
Operating margins of aluminum producers in India are expected to drop to 22%-24% in the financial year ending March, from a decade-high of 36% last year, Crisil Ltd. said last week. The output cost for Indian mills may jump 10% because of rising coal prices, it said.
Hindalco’s costs surged 24% during the quarter, with power expenses almost doubling. Its performance was impacted by rising input costs and unfavorable macro-economic conditions, but partially offset by higher volumes and better realisations, the company said in its earnings presentation.
Net debt of the company fell 12% from a year earlier to 420.63 billion rupees at the end of September. Hindalco’s US unit Novelis Inc. reported this week a 23% year-on-year drop in net income from continuing operations. Analysts have 23 buy recommendations on the company, one hold and no sells, according to data compiled by Bloomberg.