Aditya Birla group flagship company Hindalco is keeping close watch on input prices and has secured around 3.2 million tonnes of coal in the linkage auctions, which makes up 71 per cent of its annual coal requirements, a top company official said.
"We will continue to keep a close watch on input prices. These have a bearing on the cost of production, including that of coal. We will make efforts to mitigate these by utilising its resources well, with better efficiencies across all plant locations," Hindalco chairman Kumar Mangalam Birla told shareholders at the company's annual general meeting (AGM).
Highlighting the coal linkages, Birla said that, "Hindalco has secured around 3.2 million tonnes of coal in the linkage auctions that concluded during FY18. With this, the total quantity of secured coal via linkages to 11.9 million tonne. This accounts for 71 per cent of the annual coal requirements of the company."
The overall annual requirement of coal is currently secured at more than 90 per cent, through long-term linkages and captive mines. Currently, three captive mines namely Gare Palma IV/4, Gare Palma IV/5 and Kathautia are operational. The fourth captive mine at Dumri is in the process of obtaining necessary statutory clearances. It will hopefully be operational by the end of FY19, he said.
On the outlook for the future, Birla said that, the company has a strong focus on strengthening the balance sheet through deleveraging, allocation of capex towards growth strategies and generating positive free cash flows. It will also continue to increase its share in the value added product segment in both the businesses.
Commenting on the company's thrust going forward, Birla added, "The company is focusing on enriching its product mix. It is evaluating investments in aluminium downstream facilities towards newer products and its existing product lines. On the domestic front, demand is expected to recover significantly in FY19."
Birla said the outlook for the aluminium prices is also bullish due to deficit of 1 million tonne in the global market outside China and 0.5 mt in China.
To strengthen the balance sheet, Hindalco has prepaid close to Rs 8,000 crore of long-term project loans in India.
This has led to a significant improvement in the consolidated net debt to EBITDA at below 3 times at the end of March 2018.
He characterised the proposed acquisition of Aleris Corporation as the most significant strategic move made in the current year. Headquartered in the United States, this global aluminium rolled products major is at an EV of USD 2.58 billion through a debt finance deal.
"The acquisition of Aleris is the next phase of our aluminium value added products growth strategy. This will solidify our position as the world's No 1 aluminium value-added products player. Post this acquisition, we are well placed to serve our customers across geographies in automotive and now the high-end aerospace segments," Birla said.
"We will have presence throughout the downstream aluminium value chain in Asia, positioning us for future growth in the region. This also enhances the access to world class manufacturing capabilities for our existing Indian aluminium value added operations and accelerates our path to making world class products in India", he added.
Commenting on impact of trade war between US and China, Birla said Novelis has operations in US and China and the impact of trade war will be very marginal as each plant is built to cater to nearby markets. However, domestic market can expect a lot of Chinese dumping, as they will be unable to find a market in the US due to the heavy duties, he said.
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