NALCO’s edge in exports delivers a sharp jump in profits

Commodity cycles wield enormous influence on natural resources companies, with elevated prices boosting toplines and profits. Public sector enterprise National Aluminium Company Ltd (NALCO) was a standout gainer from the sharply higher aluminium prices in 2024-25 (FY25). Together with measures to make the production cycle more efficient and cost reduction, the government-owned enterprise reported vastly improved financial performance. Its profit after tax (PAT) jumped an unprecedented 167.8% to Rs 5,325 crore for the year ended March 31, 2025, even though its revenue from operations at Rs 16,788 crore grew at relatively moderate rate of 27.7%.

This sharp rise in PAT catapulted the fully integrated aluminium manufacturer into a league of listed companies reporting the quickest growth in profits that year. It is also among the top 100 most profitable companies in the listed universe analysed by Business Today.

The company’s strong performance continued into the first quarter of the current financial year, with PAT growth outpacing the rise in revenue from operations. PAT soared 77% in the Q1FY26 to Rs 1,064 crore from Rs 601 crore from a year ago. Revenue from operations climbed 33% to Rs 3,807 crore from Rs 2,856 crore, even though the price of alumina has normalised from the levels seen in the preceding two quarters.

Elevated Commodity Prices

Exports are a key driver of Nalco’s earnings. The PSU miner exports alumina and aluminium ingots. Prices of alumina and aluminium rose sharply during the last financial year, particularly in the third quarter when it rose to a peak of $690 per tonne. The company reported that it managed to fetch $595 per tonne of alumina it exported in 2024-25 against $380 in the preceding year.

The London Metal Exchange (LME) aluminium rates were also supportive. The management estimates that it earned additional revenue of Rs 2,000 crore due to higher alumina prices and Rs 1,700 crore due to elevated spot rates on the LME. Plans are afoot to increase wire rod manufacturing capacity and set up a facility for making foil products in the next 2-3 years.

Nalco chairman and managing director Brijendra Pratap Singh told analysts that the company was appointing a consultant for advice on entering the foil market. The foil making facility will require an investment of Rs 150-200 crore.

The company recognises that moving up the value chain is critical to grow its profits in future and expand its presence in the domestic market, especially when commodity cycles are not favourable.

It is also cognisant of increasing competition in the global market from new smelters in Indonesia and India. “Last year, we sent 36 shipments. This year we are planning 41-42 shipments,” Nalco’s CMD said about the PSU’s alumina exports.

Significant reduction in expenditure, by about Rs 1,000-1,200 crore, also contributed to faster growth in profits in 2024-25. Nalco has been the lowest cost producer of bauxite and alumina for about eight years now. Still, it was able to drive down costs further during the last financial year on two counts—power and caustic soda.

Outlook

About 70% of Nalco’s production is in the form of ingots. The company has a blueprint to reduce that over the years and increase production of value-added products. Its domestic competitors Hindalco and Vedanta are also focussed on value-added products. A new smelter with production capacity of 0.5 million tonne, expected to be commissioned in about four years, will increase the company’s ability to make value added products such as wire rods.

Axis Securities in a recent note said, “Nalco’s timely expansion and ramp-up of the 5th stream alumina refinery with a one million tonnes per annum (MTPA) capacity by 2026-27 will be crucial.”

A vision document on aluminium sector 2025, published recently by the Ministry of Mines estimates that domestic demand for the metal will rise from 4.9 million tonnes in 2023-24 to 8.5 million tonnes by 2029-30 and 28 million tonnes by 2046-47. Given that Nalco is looking to increase its presence in the domestic demand, these projections are promising for its growth.

@tinaedwin