Hindalco Q3 net falls 23% on higher taxes

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Firm gets stage-II clearance for Mahan coal block

Hindalco Industries, the flagship company of Aditya Birla group, reported a 23 per cent decline in October-December standalone net profit due to higher effective tax rate for the quarter.

The company’s revenue from operations grew six per cent from a year ago to Rs 7,273 crore, driven by higher volume.

“Improved operating inefficiencies cushioned the adverse impact of higher input cost and lower realisation,” Debashish Bhattacharya chairman of Hindalco Industries said in a press conference.

On Mahan coal block, Bhattacharya said, “What I understand is that the company has got stage II clearance for the Mahan coal block.” But he declined to give any further details.

The Mahan coal block was granted to Mahan Coal, a joint venture of Essar Power and Hindalco Industries, in 2006 after it was initially rejected by then environment minister Jairam Ramesh. It was granted in-principle approval by the union environment and forests ministry on October 18, 2012, after pressure from the group of ministers (GoM) on coal mining. Hindalco has 50 per cent stake in the block comprising coal of about 3.6 million tonnes per annum in the coal block.

The company’s greenfield projects are ramping up well. Mahan smelter produced 18 kilo tonne of aluminium metal and Utkal International produced 87 kilo tonne of alumina in the third quarter. The first metal has been produced at Aditya Smelter in January 2014, said Bhattacharya.

Analysts said that the results were slightly above their expectations.

“The copper business performed well in the quarter and even aluminium business had seen good volumes. Getting clearance for stage two of Mahan coal block is definitely a positive and the company now has to just get the mining leases from the state government to start mining,” said Bhavesh Chauhan, an analyst at Angel Broking.

Sanjay Jain, an analyst at Motilal Oswal also said the results were above expectations while the stage two clearance of Mahan Coal Block is a step forward towards getting the final mining lease.

In the quarter, tax expenses, increased by 23.8 per cent from a year ago to Rs 135 crore.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) rose eight per cent from a year ago to Rs 629 crore.

Aluminium business contributed Rs 2,471 crore with an EBIT of Rs 170 crore. Aluminium sales were higher sequentially on the back of higher volume despite realisation being lower. Quarterly aluminium production at 158 kt has been the highest ever.

In the copper business, revenues were higher at Rs 4,817 crore up by 21 per cent sequentially, driven by copper LME and by-product realisation.

Cost pressures are likely to continue on account of interest costs increasing in the coming quarters as the company will have to start paying for its debt with the projects ramping up. Further the company is purchasing coal at market price and till the company’s captive coal is available, said Praveen Maheshwari, chief financial officer, Hindalco Industries said.

Meanwhile, Mahan coal block, which is a 50:50 joint venture between Hindalco Industries and Essar Power, has secured stage II forest clearance from Ministry of Environment and Forests.
 

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