In April-June quarter, Nalco could manage only a Rs 97.78-crore net profit, as weak alumina prices crimped earnings. From the multi-year highs of around $600 last year, average international alumina prices were hovering around $300 in September 2019.
"For Nalco, Q2 is no less challenging. The company faces headwinds in the form of depressed alumina prices, sobering LME (London Metal Exchange) prices and soaring imports of aluminium into the country. Over the years, alumina has been driving Nalco's profitability and the PSU is still struggling to turn profit from its aluminium business," said a metals focused analyst.
Nalco's chairman & managing director T K Chand could not be reached for comments. Phone calls and text messages to him remained unanswered.
Indeed, alumina exports have kept the cash flows swelling for the aluminium major. Nalco ranks among the top three central public sector enterprises (CPSEs) in the country with earnings in excess of Rs 45 billion in FY19.
Though Nalco has charted a new business model to make the company immune to vagaries of metal sector business, the plans are expected to take two to three years to deliver outcomes.
Both in alumina and bauxite production, Nalco trumped global peers to rank as the lowest cost producer in calendar 2018, according to a study by global consultancy firm Wood Mackenzie.
Nalco has placed high stakes on backward integration to cut costs. In a joint venture with Gujarat Alkalies and Chemicals Ltd, the navratna company is putting up a caustic soda facility in Gujarat. Separately, Nalco is also aiming to commence mining from its captive coal mine in this fiscal -- a milestone that will help it prune aluminium making costs by 25 per cent.
The new business plan also has headroom for diversification, wherein Nalco is looking to enter lithium-ion cell manufacturing in Odisha. It has also forged a joint venture, Khanij Bidesh Nigam Ltd (KABIL), with Mineral Exploration Corporation Ltd (MECL) and Hindustan Copper Ltd (HCL). The JV is tasked with hunting and acquisition of strategic mineral assets abroad.