Hindalco Industries (HINDALCO) Q4 01/02 earnings summary

Executive summary

• FY02 delivered record metal volumes, revenue and profits despite weak global demand, a 30-month low in aluminium prices and domestic industrial slowdown.

• Revenue growth came from higher sales volumes and a richer value-added mix; rising input costs and competition compressed operating margins.

• The 9th potline began the Rs.18,000 million brownfield expansion, with remaining capacity additions scheduled in phases through FY04.

Financial highlights

• Standalone net sales rose 2.5% YoY to Rs.23,313.6 million; profit after current tax increased 10.3% to Rs.7,480 million.

• After a Rs.620 million deferred-tax provision, standalone net profit was Rs.6,860 million, up 1% YoY; EPS was Rs.92.12 versus Rs.91.06.

• Consolidated net sales were Rs.35,651.76 million and net profit after minority interest was Rs.7,489.82 million; consolidated EPS was Rs.100.58.

• Standalone operating profit fell 6% to Rs.9,940.1 million; other income rose 60% to Rs.2,109.1 million, supporting profit before tax growth of 3% to Rs.10,050 million.

Outlook and guidance

• Domestic aluminium demand was forecast to grow 6–7% in FY03 and average ~8% over the next 3–5 years, supported by infrastructure, power, construction, transport and packaging.

• Global consumption growth was expected to exceed 4% in 2002, with production rising ~5.5%; analysts expected a 2002 surplus and a market balance in 2003.

• LME prices were forecast at $1,350–1,450/tonne in 1H, with recovery later in 2002; expanded capacity and process improvements were expected to support growth and profitability.

• Remaining brownfield capacity was scheduled to become operational in phases by FY04; management expected the expansion and efficiency initiatives to improve future returns.