NALCO Q3: Analysts expect profit to grow 57% at Rs 80 cr

State-owned National Aluminium Company (NALCO) is set to declare its results for the third quarter of financial year 2012-13 on Wednesday. Analysts on an average expect the company to report higher profits both YoY and sequentially with higher volumes and better realizations in the aluminum segment.

According to CNBC-TV18 poll, profit after tax of the company to grow by 57 percent year-on-year and 15.7 times quarter-on-quarter to Rs 80 crore in the quarter.

Net sales are expected to rise by 15 percent YoY and 4 percent QoQ to Rs 1,650 crore during the quarter.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are seen going up by 2.4 times YoY to Rs 109 crore in October-December quarter. EBITDA is likely to turn black in December quarter as against loss of Rs 24 crore in previous quarter.

EBITDA margin is expected to be at 6.6 percent in the third quarter of FY13 as against 3.2 percent in a year ago quarter and -1.5 percent in second quarter of FY13. 

Aluminum segment contributes more than 50 percent of its total revenues:

LME aluminium prices improved by 4 percent sequentially but were lower by 5 percent YoY.

However, the Indian rupee depreciation of 7 percent YoY and higher domestic premiums offset the decline in LME prices on a YoY basis.

Alumina sales are likely to flattish sequentially with a negative bias:

Alumina sales have not been ramping up as October sales suggest a run-rate lower than Q2FY13. Analysts have taken flat QoQ sales of Alumina assuming the company was able to make up in November and December 2012.

Disruption in the bauxite mining impacted alumina production:

Alumina production was affected due to lower bauxite availability

Its Panchpatmal bauxite mining operations were temporarily shut down due to expiry of mining lease

EBITDA to turn positive versus negative number in Q2FY13:

On a QoQ basis, there is likely to be a decline in aluminum cost per tonne owing to seasonal improvement in coal supply post monsoon.

Operating performance was severely impacted in Q2FY13 due to insufficient and inferior quality of coal during the monsoon.

Power cost will remain high till Utkal coal block's commissioning;

Nalco has been unable to get sufficient linkage coal from the Mahanadi Coal Field and has to depend on high cost e-auction and imported coal

Till the commissioning of Utkal coal block, NALCO would not be able to reap full benefits of its increased refining and power capacity

Investors should watch out for:

-Divestment trigger

-Utkal coal block remains the key to future profitability of the company. Nalco received stage I forest clearance so far.

-Panchpatmal bauxite mining operations were temporarily shut down due to expiry of mining lease, which affected refinery output in the quarter. Recently, it got a temporary 1-year work permit.