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

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 realizations, 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.

Shares of Hindalco rose as much as 4% in Mumbai on Friday.

(By Swansy Afonso)