* Says EBITDA streams will take time to scale up
* Says Aditya aluminium smelter in advanced stage of
* Posts July-Sept profit, revenue below expectations
(Adds CEO quote on aluminium, coal)
By Krishna N Das
NEW DELHI, Nov 12 Indian aluminium and copper
producer Hindalco Industries said on Tuesday that
delays in obtaining coal mining rights would weigh on its profit
growth, as it will be forced to buy the fuel on the open market.
Hindalco and its chairman, billionaire Kumar Mangalam Birla,
are being investigated by India's federal police as part of a
probe into possible irregularities in the allocation of coal
blocks to several companies over the past two decades.
The company has denied any wrongdoing, and India's prime
minister and the coal ministry have said they were satisfied
with the outcome of the allocation process.
However, Hindalco is unable to exploit the block that was
allocated to it along with Mahanadi Coalfields, a unit of Coal
India Ltd, and Neyveli Lignite Corp eight
The coal from the block was supposed to fuel a project
currently ramping up in the eastern Odisha state which includes
a bauxite mine with capacity of 4.2 million tonnes a year, a 1.5
million-tonnes-per-year alumina refinery and a smelter.
The smelter is expected to start operating by the end of the
year, according to Hindalco's website.
"We will have to buy coal from the open market and will be
vulnerable to market vagaries," Managing Director D.
Bhattacharya told reporters in Mumbai.
The company, India's second-biggest producer of both copper
and aluminium, reported a lower-than-expected net profit for its
fiscal second quarter.
"Greenfield projects are ramping up as planned, however
EBITDA (earnings before interest, taxes, depreciation and
amortisation) streams will take time to scale up with delayed
access to captive coal," it said.
Hindalco has also been hit by falling global prices.
Three-month aluminium prices on the London Metal
Exchange averaged 5 percent lower in the July-September quarter
from a year earlier, while copper prices averaged about
8 percent lower.
Bhattacharya said there was "degrowth in demand" for
aluminium, which means that oversupply will continue in the
short term as India's economy slows down.
Bhavesh Chauhan, senior analyst at Angel Broking in Mumbai,
rates the company's stock "neutral".
"Looking ahead, low aluminium prices, sticky costs and delay
in commencement of mining from captive blocks are expected to
mute Hindalco's profitability growth over the coming two years,"
Hindalco's shares, which have lost a fifth of their value
this year, fell slightly after it reported its second-quarter
results. They were up more than 2 percent earlier on Tuesday.
Its unit Novelis Corp, the world's top maker of
rolled aluminium sheets, said on Monday net income for the
April-September period sank 74 percent due to overcapacity in
the North American beverage can market.
($1 = 63.2750 Indian rupees)
(Editing by Prateek Chatterjee, Miral Fahmy and Pravin Char)