Hindalco Industries, a flagship of the Aditya Birla Group on Thursday reported a two

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per cent decline in its net profit at Rs 451 crore, beating analyst expectations for the third time in four quarters.

The company’s net sales for the quarter rose a higher than expected 11.2 per cent from a year ago, to Rs 6,647 crore. Capitalising on the good results the company said its promoter billionaire Kumar Mangalam Birla, would buy offer 150 million warrants that can each be converted into a share. The preferential allotment of warrants that is subject to shareholder approval would help the company raise Rs 2,000 crore and help to fund expansion projects underway.

According to Bloomberg consensus estimates of analysts, Hindalco’s net profit was expected to be Rs 439 crore and sales Rs 6,130 crore. Bhavesh Chauhan, an analyst at Angel Broking said “Copper segment profitability has helped the company to maintain profits.” He added that since its new projects are coming up on time and with aluminium prices showing signs of revival, the company is expected to perform well in the coming quarter. “We have a buy rating on the share,” he said.

The price of aluminium averaged 11 per cent lower in the quarter ending December 2011, while copper fell 13 per cent on the London Metal Exchange.

Debashish Bhattacharya, chairman at Hindalco Industries said, “Spiralling energy costs and volatility in metal prices remain challenges in the short term.” The company said its portfolio of LME – neutral copper smelting operation and integrated aluminium operation is providing the strategic balance in a volatile commodity cycle. Profitability in aluminium division tanked despite higher metal production due to increase in input costs. Volumes and slightly improved realisations however resulted in 13 per cent improvement in aluminium revenues. The stand alone profit would have been lower but for a 51 per cent jump in profitability of its copper business, on the back of gains from higher processing charges, by-product credits and improved efficiency. The copper business contributes 60 per cent of Hindalco's stand alone revenue.

In the copper business revenues increased 10.4 per cent from a year ago to Rs 4418 crore on the back of higher LME and by-product credits. The company increased the long-term contract fees by 20 per cent and more than doubled the spot-market charges of refining and treating copper during the quarter ending December 2011.

Bhattacharya said he expects recent production cuts by some global producers to support prices. “Many non-profitable smelters have been shut down across the globe which will result in decline in production. Further with demand to be led by emerging economies like China and India, and the United States prices are expected to increase,” he said.