MUMBAI (Commodity Online): Hindalco Industries, India’s aluminium and copper major, suffered blows due to lower sales realisation and higher operating expenses.

According to a press note issued by the company, despite strong volume growth and lower cost of production, the company’s quarterly net profit more than halved on a year-on-year (y-o-y) basis. The net profit at Rs 344 crore is below expectations; the revenue figures beat expectations though.

Hindalco’s aluminium business has performed better than its peers such as National Aluminium Company (Nalco) and Sterlite Industries. Hindalco is the lowest-cost producer of aluminium in India. However, Hindalco, by its own standard, failed to report a good set of profit numbers.

Its operating profit (profit before interest and tax) margin, in the aluminium business, at 15.6%, is the highest among its peers, but is almost half of what it was in the June 2009 quarter. This happened despite a 15% sequential rise in London Metal Exchange aluminium prices. Somehow, the company couldn’t manage its operating expenses in the aluminium business very well.

The copper business, however, seems to have performed in line with expectations. Despite a sharp fall in by-products realisation, mainly sulphuric acid prices, the operating profit grew by more than half, on a y-o-y basis. The excellent performance in the copper business would not have been possible had the company not lowered the cash cost of production by one-third and sold 15% more than what it did in September 2008 quarter.

Going forward, the management of Hindalco has hinted at aluminium prices may not rise significantly from current levels. The treatment and refining charges (TC/RC) are also unlikely to gain any further strength.

It is unlikely that Hindalco’s absolute profit figures will rise significantly in the next two quarters unless there is sharp recovery in demand or drop in cost of production.