National Aluminium Co. sees profit drop on delayed orders

National Aluminium Co. will post its smallest quarterly profit in almost five years after customers delayed orders expecting further price cuts.

Fourth-quarter profit will fall from 2.19 billion rupees ($44 million) in the third quarter ended Dec. 31 and 4.09 billion rupees a year earlier, Chairman C.R. Pradhan said today. Still, output will be maintained because the cost of restarting production is higher than storing inventory, he said.

Stockpiles are rising at Nalco, as the company is called, as India grapples with the slowest pace of economic growth since 2003. The nation's industrial production fell the most in almost 16 years in December and exports declined for a second straight month in November as the global recession damped demand.

"Metal consumption has been crippled after the downturn in China and the U.S.," said Hitesh Agrawal, head of research at Angel Broking Pvt. "It may take at least a year for demand to normalize." Agrawal has a "sell" recommendation on the stock.

Nalco shares fell as much as 5.9 percent to 191.1 rupees in Mumbai and traded at 195 rupees at 12:01 p.m. The key Sensitive Index fell 2.2 percent.

The company sells most of its annual 345,000 metric tons of aluminum locally at prices linked to the London Metal Exchange. Almost two-thirds of its annual 1.6 million tons of alumina production is sold overseas. Aluminum is smelted from alumina, a semi-processed material made from bauxite ore.

Lowest Profit

Any profit less than the earnings in the third quarter would be Nalco's lowest profit since the three months ended June 30, 2004, according data on the Bloomberg.

"Clearly profit will be lower as aluminum prices have fallen sharply," Pradhan said in a phone interview. "In the current scenario, no one can predict the bottom for aluminum."

Aluminum prices have fallen 13 percent this year as stockpiles monitored by the London Metal Exchange surged to the highest since 1978. Aluminum for three-month delivery traded at $1,350 a ton as of 8: a.m. local time on the exchange.

Global aluminum demand may fall 2 percent this year after dropping 3 percent to about 36 million tons in 2008, Klaus Kleinfeld, the chief executive officer of the world's largest aluminum maker Alcoa Inc., said on Jan. 13.

Bhubaneswar-based Nalco is in talks with the Indonesian government to acquire a coal mine in the country to secure fuel supplies and lower production costs.

India's government said last month it may impose import curbs on items like aluminum to aid and protect the domestic industry. India has also started an investigation into aluminum imports from China after shipments increased on request from the Aluminum Association of India.

"The government's plan to impose an import duty on aluminum may also help producers like us to an extent," Pradhan said.