Hindalco – Q2 Results Hit by Costs

Hindalco Industries 2QFY10 adj. standalone PAT was Rs2.2bn down 34% q-o-q, -52% yoy. Adjusting for MTM gains (net) of Rs1.2bn, recurring PAT was Rs2.2bn, -69% yoy.

The decline was on: 1) a 35% drop in aluminium LME prices, 2) high cost e-auction coal and poor quality linkage coal, 3) high caustic soda prices, 4) sharp fall in copper by-product prices. Adj margin was 10% vs 18%.

Aluminium EBIT falls 64% yoy – Reported EBIT margin fell to 16% from 34% last year. Like Nalco, Hindalco was also hit by lower LME prices (US$1,807/t) and higher coal costs. The negative impact was partly offset by rupee deprecation (48.8 vs. 43.8), and a 7% increase in production.

Hindalco is expected to report an EPS of Rs 10 and Rs 13 for fy10 and fy11 respectively according to Citi. However, BoFA-Merrill is expecting just Rs 8.5 and Rs 8.9 for fy 10 and fy11 respectively.