National Aluminium Company Ltd (NALCO) shares scaled fresh highs on Tuesday, gaining more than 3% after the company posted a nine-fold increase in net profit during the March quarter. The strong rise in aluminium prices continues to boost the company’s performance, which is supported by revenues from the alumina segment.
Aluminium prices on the London Metal Exchange or LME averaged at $2,093 a tonne during Q4FY21 as against $1694 in the year-ago quarter. On a sequential basis too, the prices were up 9%.
The aluminium segment revenues jumped 19% sequentially and 72% year-on-year to ?1,944 crore. Aluminium production volumes at 112,000 tonnes jumped 10% year-on-year. The company’s reported EBIT for the aluminium segment rose 273% sequentially.
Alumina segment revenue (including inter-segment) at ?1,218 crore also was up 23% sequentially and 4% year-on-year. EBIT came in at ?296 crore (up 65% sequentially). Alumina external sales rose 10% sequentially. All these helped overall revenues grow 45.7% year-on-year.
Lower costs boosted operating performance further. Ebitda at ?944 crore almost doubled from the previous quarter and was much higher than ?208 crore in the year-ago quarter. Deferred tax boosted net profit further as reported net profit at ?935.6 crore was much higher than ?102.76 crore in the year-ago quarter.
Moving forward, favourable aluminium price movement is likely to drive 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,” said analysts at Kotak Institutional Equities in their report.
However, rising input costs need to be watched. The company benefitted from low costs (coal, carbon and caustic soda) prices that are seeing a rise in FY22.
Meanwhile, aluminium prices on the LME have significantly inched in Q1FY22. 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 the 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” say analysts at MOFSL.
News Source:- Livemint