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Hindalco profit beats estimates as aluminum prices rally

MUMBAI (NewsRise) -- Hindalco Industries, India's second-largest producer of aluminum, posted a better-than-expected 26% jump in fourth-quarter profit, helped by a rally in metal prices.

The company, controlled by billionaire Kumar Mangalam Birla, said net profit in the January-March quarter rose to 5.03 billion rupees ($78 million) from 4 billion rupees a year earlier. Analysts were expecting Hindalco to report a net income of 4.49 billion rupees.

Revenue from operations surged 27% to 117.47 billion rupees. The company's U.S.-based unit Novelis, the world's largest recycler of aluminum, earlier this month reported a 62% jump in net profit to $47 million.

Hindalco, the flagship company of the Aditya Birla Group, is riding on a boom in global metal prices amid hopes of a massive government spending on infrastructure in the U.S. after President Donald Trump took over. Aluminum was the best performer among the London Metal Exchange's major metals until the end of last month, as inventories plunged and China's crackdown on smelters to curb pollution created a capacity squeeze.

In the quarter ended in March, the average spot aluminum prices on the LME jumped more than 22% to $1,853 per ton.

Earlier this month, Vedanta, India's biggest producer of base metals, swung to a quarterly profit on the back of the price rally. Vedanta's performance was also bolstered by a surge in global zinc prices that boosted unit Hindustan Zinc's profit by 43% in the quarter. Zinc prices jumped over 66% in the last quarter.

However, worries of a slowdown in Chinese manufacturing have halted the metals rally, plunging the LME prices of copper and aluminum earlier this month. China is looking to restrict lending after a massive surge in credit in the first half of last year, casting a shadow over raw material demand.

Still, analysts said the price fall is temporary as the word economy continues to grow at a reasonable pace.

"On aluminum pricing outlook, we believe production cuts in China during winter heating period can set bullish trajectory, given the deficit in the world, excluding China," Kotak Institutional Equities said in a report earlier this week.

Alumina production at Hindalco grew 3.3% to 317 kilo tons, while copper production jumped more than 19% in the quarter.

On Tuesday, Hindalco said in a statement that its operational performance was supported by a "positive macro-economic environment for the business." However, high level of aluminum and copper imports into India continue to impact domestic sales volumes, it said.

Faster pace of urbanization and expansion of infrastructure in India have been a major growth driver for the metals industry. India has earmarked a record $59 billion of investment this year for infrastructure projects such as ports, roads, railways and power.

The robust performance in the last few quarters has also allowed many metals producers to pare their debt.

Hindalco paid off 10.31 billion rupees of debt in the last fiscal year and an additional 45.05 billion rupees in April. The company had in March raised $500 million through a qualified institutional placement, which it used to pay off a part of the debt.

Shares of Hindalco lost 1.30% in Mumbai trading on Wednesday, while Vedanta closed 2.41% lower. The benchmark S&P BSE Sensex was down 0.04%.

--Dhanya Ann Thoppil

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