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Hindalco quarterly profit slumps 33% amid falling commodity prices

One-time loss due to restructuring at Novelis unit also damped earnings

Hindalco's net profit came in slightly lower than analysts had predicted. (Source photos by Reuters and Aditya Birla)

MUMBAI (NewsRise) -- Hindalco Industries posted a 33% slump in second-quarter net profit, hurt by a one-time loss and falling commodity prices amid signs of a deepening global economic slowdown.

An escalating trade war between the U.S. and China has damped industrial commodity prices and triggered fears of a recession. Mumbai-based Hindalco, controlled by billionaire Kumar Mangalam Birla, is also facing a challenging operating environment in India, where tighter liquidity has squeezed private capital investment.

Globally, the prices of non-oil commodities have been sagging since mid-2018. Last month, the International Monetary Fund warned that global output will grow just 3% this year, the slowest since the recession caused by the financial crisis of more than a decade ago.

According to Emkay Securities, LME prices of aluminum slumped 14% in July-August to $1,778 per ton, while that of copper shrank 2%. 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 July-September stood at 9.74 billion rupees ($137 million). The latest quarter included an exceptional loss of 2.56 billion rupees on account of the restructuring expenses at Novelis and costs incurred at a refinery in central India.

Analysts were expecting the company to report a profit of 9.9 billion rupees, according to Refinitiv data.

Revenue from operations fell 8.8% to 296.6 billion rupees. Operating earnings at the company's stand-alone aluminum business slumped 38%.

The domestic market for aluminum shrank 5%, Hindalco said in an investor presentation. The company's operating performance in the copper business was hurt by rains in Dahej in the western Indian state of Gujarat.

Last week, Hindalco's U.S.-based unit Novelis, the world's largest recycler of aluminum, reported a 6% rise in net profit to $123 million. Novelis' performance was aided by the shift toward sustainable packaging, automotive closed-loop recycling systems, and adoption of more recycled content.

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. Last month, the European Commission approved the acquisition of Aleris, on the condition that Novelis sells its automotive body sheet business in Europe.

Shares of Hindalco lost 1.8% in Mumbai trading on Monday, while the benchmark S&P BSE Sensex gained 0.1%.

--Dhanya Ann Thoppil

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