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Hindalco Industries quarterly profit falls on weaker commodity prices

Net income slumps 28% on-year in April-June

MUMBAI (NewsRise) -- Hindalco Industries posted a 28% slump in first-quarter net profit, hurt by falling commodity prices amid a global economic downturn.

The weak results of Hindalco, controlled by billionaire Kumar Mangalam Birla, come in the backdrop of an escalating trade war between the U.S. and China that has damped industrial commodity prices and triggered fears of a global economic recession. The demand in Hindalco's domestic market has also been hit by tighter liquidity that squeezed private capital investment in Asia's third-largest economy.

Globally, the prices of non-oil commodities have been sagging since mid-2018. Last month, the International Monetary Fund further cut its global economic growth forecast for this year and the next citing the ongoing Sino-American trade dispute and Britain's likely exit from the European Union without a trade deal.

According to Edelweiss Securities, domestic prices of aluminum slumped 21% in April-June to $1,793 per ton, while that of copper shrank more than 12%. Globally, Hindalco has been expanding through its U.S. unit Novelis, which last year agreed to buy Aleris in a $2.6 billion deal.

Hindalco said its consolidated net profit in April-June stood at 10.6 billion rupees ($150 million). The latest quarter included exceptional expenses of 218 million rupees on account of the costs incurred at a refinery in central India.

Revenue from operations fell 3.6% to 299.7 billion rupees. Operating earnings at the company's standalone aluminum business slipped 3.5%.

The company faced "headwinds" in aluminum and copper businesses, Hindalco said in a statement. The economic conditions in the domestic market remain "subdued," it said.

On Tuesday, Hindalco's U.S.-based unit Novelis, the world's largest recycler of aluminum, reported a 7.3% drop in net profit to $127 million. However, its operating earnings grew 11% , helped by better prices and product mix.

Novelis is still in the process of acquiring Aleris, as the deal remains stuck in a regulatory loop in the U.S., Europe, and China. Hindalco said it expects the deal to be closed in the third quarter of this year.

Last month, Hindalco's rival Vedanta reported a 12% drop in profit hurt by falling commodity prices and a shutdown of its copper smelter in southern India.

Shares of Hindalco lost 2.7% in Mumbai trading on Friday, while the benchmark S&P BSE Sensex gained 0.7%.

-- Dhanya Ann Thoppil

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