Title: Hindalco Q3 net profit surges 47%, high domestic demand looks positive for company
The company prepaid loans worth Rs 1,575 crore in October last year.
The net debt now stands at Rs 17,000 crore, with a net debt to EBITDA ratio of 2.36.
Interest expense was lower by 12 per cent at Rs 477 crore.
Mumbai: Alumina sales boosted the December-quarter net profit expansion at Hindalco Industries, although declining global prices of non-ferrous metals in 2019 and a softening trend in alumina might cap immediate gains at the Aditya Birla Group metals company.
Alumina contributed 43 per cent to the EBIDTA at Hindalco Industries along with Utkal Alumina as net profit for the standalone domestic business climbed 47 per cent to Rs 713 crore. EBIDTA rose 3.5 per cent at Rs 1,926 crore in a quarter marked by rising input costs, mainly for coal and furnace oil. Net revenue stood at Rs 11,938 crore, an increase of 8 per cent.
Cost efficiencies helped counterbalance the impact of input cost inflation.
The cost of production for the business was flat compared with Q2, in spite of the LME going down by almost $100... which allowed us to maintain profitability,” Satish Pai, managing director at Hindalco, told ET.
Hindalco sources raw material from Utkal and hence the rise in alumina prices does not impact Hindalco’s overall performance. While EBIDTA from aluminium was down 46 per cent, the alumina business more than trebled.
Earnings could be tepid in the immediate future. Alumina prices, which averaged $450 per tonne, are down to an average of $384, similar to levels seen a year ago. Average aluminium prices for the December quarter were at 1,968 per tonne and are now trading at $1,874 per tonne. Average copper prices in the year are $6,021 per tonne against $6,172 in the December quarter.
The company prepaid loans worth Rs 1,575 crore in October last year, and the net debt now stands at Rs 17,000 crore, with a net debt to EBITDA ratio of 2.36. Interest expense was lower by 12 per cent at Rs 477 crore, mainly due to re-pricing of longterm project loans and loan repayments, a company statement said.
The acquisition of Aleris by US subsidiary Novelis will close in July, post which the company will start integration with Aleris.
Pai said that even with the “domestic demand story” looking positive due to improving demand for copper and aluminium, the local industry faces challenges in the shape of rising scrap imports from the US and finished metal shipments from China. Total aluminium imports rose 20 per cent.
Another worry for the company is the availability of coal. “The supply has been tight, with power demand rising, which is why coal prices haven’t come down,” Pai said.
Novelis, the US-based aluminium converter and a Hindalco subsidiary, reported a steady quarter with a 3 per cent jump in revenues and 6 per cent jump in EBIDTA, thanks to better product mix and higher shipments. EBIDTA for the quarter was $322 million, or about Rs 2,250 crore.
On Tuesday, Hindalco’s stock closed marginally lower at Rs 198.4. It is already down 10 per cent since the beginning of the year, reflecting the fall in the commodity prices.