Nonferrous metals producer Hindalco Industries missed estimates with 2% drop in quarterly net profit as rising costs in its aluminum business and sluggish market conditions crimped its margins.

Hindalco, part of the diversified Aditya Birla Group, said that spiraling energy costs and volatility in metal prices remained challenges in the short term but it was optimistic on aluminum and copper demand in the longer term. It reported standalone net profit of INR 451 crore for the fiscal Q3 ended December 31 compared with net profit of INR 460 crore last year.

A Reuters poll of analysts had estimated standalone net profit of INR 463 crore. Net sales rose 11.4% to INR 6,590crore. The profit would have been lower but for 51% jump in profitability of its copper business on the back of gains from higher processing charges, by product credits and improved efficiency. Sales volumes were also higher in the copper business which contributes 60% of Hindalco’s revenue.

Sales volumes were higher in the copper business which contributes 60% of Hindalco's revenue. Profitability in its aluminum division slumped despite higher metal production mainly due to a jump in input costs by about INR 250 crore.

Nonferrous metal prices have rallied globally over the past few weeks on expectation of improving demand from developed economies such as the United States as well as from China.

Copper futures on the London Metal exchange were trading around USD 8,565 per tonne having risen nearly 13% so far in 2012. Aluminum futures are also up nearly 13% this year, at USD 2,285 per tonne.

Hindalco, India’s largest aluminum maker by capacity expects recent production cuts by some global producers to support prices with demand to be led by emerging economies like China and India and the United States. The company which is trebling aluminum production capacity in India to 1.9 million tonnes by 2013 at a cost of about USD 5 billion said all the projects were developing well.

(Sourced from Reuters)