National Aluminium Company Ltd (Nalco) posted a nine-fold jump in net profit in the March quarter. A strong rise in aluminium prices continues to boost the company’s earnings, supported well by revenue from the alumina segment.
Aluminium prices on the London Metal Exchange averaged $2,093/tonne in Q4, sharply higher from $1,694/tonne a year ago. On a sequential basis, too, prices rose 9%.
Aluminium segment revenue jumped 19% sequentially and 72% year-on-year (y-o-y) to ₹1,944 crore. Aluminium production volumes at 112,000 tonnes rose 10% y-o-y. Nalco’s reported Ebit for the aluminium segment climbed 273% sequentially.
Alumina segment revenue was also up 23% sequentially and 4% y-o-y. Ebit came in at ₹296 crore (up 65% sequentially). Alumina external sales rose 10% sequentially to 378,000 tonnes. All this helped overall revenues grow 45.7% y-o-y. What’s more, lower costs boosted operating performance further. Ebitda at ₹944 crore almost doubled from the previous quarter and was much higher than the ₹208 crore a year earlier. Deferred tax also helped net profit grow to ₹935.6 crore from ₹102.76 crore in the year-ago quarter. Moving forward, favourable aluminium price movement is likely to continue driving performance.
“Aluminium metal enjoys favourable fundamentals both on demand and supply. It is currently witnessing strong synchronized demand growth across the world. China is approaching its capacity cap whereas the rest of the world has a lean capacity addition pipeline," wrote analysts at Kotak Institutional Equities in a report. However, rising input costs need to be watched. The company benefitted from lower prices of coal, carbon and caustic soda, which are seeing a rise this fiscal.
Meanwhile, aluminium prices on the LME have inched up significantly in Q1. Spot LME aluminium prices are hovering at $2,450/tonne, up 10% year to date in FY22. This keeps analysts at Motilal Oswal Financial Services positive on near-term profitability outlook. “Alumina prices have not yet reacted to the strength in aluminium and could surprise positively in FY22. With integrated mining operations, Nalco is the best play on higher LME prices," the Motilal Oswal analysts say.
Nalco shares corrected about 4% post results, but they are near 52-week highs, and the correction may be due to profit-booking, say analysts.
