Hindalco posts lower-than-expected Q1 net at Rs 290 cr on higher provision

Hindalco Industries, the country's largest aluminium producer, on Friday reported a lower-than-expected stand-alone net profit of Rs 290 crore, down 2 per cent year-on-year for the June quarter.
 
Bloomberg consensus estimate for the net profit was Rs 389 crore. However, this was on the back of provisioning of Rs 104 crore made by the company following recent Supreme Court judgment in a matter pertaining to mining regulations.
 
In the period under review, total income of the Aditya Birla Group company rose 27 per cent on an year-on-year basis to Rs 10,663 crore and was ahead of consensus estimates of Rs 10,223 crore. Higher sales and better realisation in aluminium, coupled with higher volumes and stronger copper realisations on the London Metal Exchange (LME), lent firm support to the revenue stream.

 

“The overall demand from user industries remained subdued due to apprehensions of the GST roll-out. However, with the smooth implementation of the GST, in the long-run, the economy is expected to grow at a faster pace,” said the company release.
 
Revenues from the aluminium business were up nine per cent on year-on-year at Rs 5,008 crore, while that of copper jumped 51 per cent in the quarter gone by to Rs 5,403 crore, against the corresponding period last year. Improved coal security also helped aluminium business to report better profitability. The company saw its coal security improve further with new coal linkages of 2.9 million tonnes in Q1 FY18.

 
“Higher level of aluminium and copper imports and an increase in domestic aluminium production continue to impact domestic sales volumes. Hindalco remains focused on accelerated deleveraging, operational excellence, higher value addition, customer centricity and cash conservation to deliver stake holder value,” said the release. The company's earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at Rs 1,404 crore (up four per cent year-on-year) in the June quarter.  This was much higher than Rs 1,245 crore indicated by consensus estimates.
 
 While the aluminium business (contributing majority 62 per cent of profits) saw marginally better profitability, copper segment EBITDA grew 22 per cent year-on-year.

 
In the alumina segment, Ebitda of Utkal Alumina, the lowest cost producer globally, increased 207 per cent year-on-year to Rs 291 crore on the back of higher realisation.
 
The refinery produced 384,000 tonnes of alumina in the June quarter, up 3 per cent from last year.
 
The company has also prepaid a portion of its loans with to-date total prepayment standing at Rs 5,399 crore in FY18, said Hindalco in its release.
 
With net profit missing estimates, the shares of Hindalco fell 7 per cent from the previous close to Rs 222 on the BSE on Friday. The decline was largely due to nervousness on account of geopolitical issues. Vedanta stock was also down 6.7 per cent on Friday.