Hindalco Industries (HINDALCO) Q4 09/10 earnings summary

Executive summary

• FY10 consolidated net profit reached Rs. 3,925 crore versus Rs. 484 crore in FY09; consolidated revenue declined 8% to Rs. 60,722 crore.

• Record operating performance, higher production, cost reductions and Novelis’ turnaround offset weaker aluminium prices and soft first-half end-markets.

• Outlook was cautiously optimistic, with priority on profitability, free cash flow and timely delivery of brownfield and greenfield growth projects.

Financial highlights

• Consolidated revenue was Rs. 60,722 crore, down from Rs. 65,963 crore; consolidated EBITDA was Rs. 10,069 crore versus Rs. 3,661 crore.

• Consolidated net profit rose to Rs. 3,925 crore from Rs. 484 crore; reported FY10 results included Rs. 2,736 crore of pretax unrealized derivative gains.

• Standalone net sales increased 7% to Rs. 19,536 crore, while net profit fell 14% to Rs. 1,916 crore and basic EPS declined to Rs. 10.82 from Rs. 14.82.

• Standalone operating profit was Rs. 2,950 crore versus Rs. 3,036 crore; operating margin was 15.10% and net margin 9.81%.

Outlook and guidance

• FY11 priorities: protect profitability in uncertain markets, maximize free cash flow from existing operations, and apply scale and technology to upstream and high-end downstream growth.

• Utkal Alumina and Mahan Aluminium were scheduled for Q2 FY12 commissioning; Aditya Aluminium for Q3 FY12; Aditya Refinery and Jharkhand Aluminium for Q1 FY14.

• Hirakud expansion from 155 ktpa to 161 ktpa was expected by Q2 FY11, with expansion to 213 ktpa targeted for Q4 FY12.

• Global aluminium demand was forecast to recover to ~39 million tonnes in 2010; Indian demand was expected to grow ~14%, while inventories and near-term pricing remained concerns.