Hindalco net falls 89% to Rs 40 cr in Dec quarter

Lower realisations, coupled with a surge in depreciation and interest charges, impacted bottom line

Hindalco Industries reported a standalone net profit of Rs 40 crore for the quarter ended December 2015, down 89 per cent a year ago. However, the profit was significantly better than the consensus estimate of a loss of Rs 175 crore, as per analysts’ poll by Bloomberg.

Although lower base metal realisations and premiums did impact the company’s performance, it managed to remain in the green, thanks to cost savings and higher volumes. Compared to the consensus estimate of Rs 504 crore, Ebidta (earnings before interest, tax, depreciation and amortisation) came in at Rs 922 crore, down 18 per cent year-on-year (y-o-y). Some support from other income also helped the bottom line. Thus, the stock ended 0.25 per cent higher at Rs 69.5 on Tuesday on a day the Sensex was down 1.1 per cent.

Interest and depreciation expenses, which jumped 30 per cent and 43 per cent on a y-o-y basis, to Rs 582 crore and Rs 308 crore, respectively, took away the gains from a better-than-expected operating performance.

Net sales of the Aditya Birla Group company were at Rs 8,021 crore in the period under review, down 5.3 per cent from last year due to sharp fall in aluminium and copper realisations. The per tonne aluminium and copper average prices on the London Metal Exchange at $1,493 and $4,905 during the quarter have declined 24 and 26 per cent year-on-year, respectively. Further, aluminium premium (over an above the LME price) have also declined sharply by 76 per cent y-o-y and 10 per cent sequentially. According to the Bloomberg estimates, the company’s revenue was seen at Rs 8,337 crore while actuals came way lower.

“Strong increase in aluminium volumes and thrust on value addition partially offset the impact of severe fall in realisations,” said the company in its release. “Operating results for the quarter were severely impacted by the sharp drop in LME prices and regional aluminium premium, the macro economic factors beyond the company’s control,” said Hindalco.

Due to this, the combined decline in realisations on year-on-year basis was over $700 per tonne in aluminium, it said.

Though 35 per cent jump in aluminium volumes led by capacity expansions boosted revenues from aluminium segment, which were up 17 per cent, the segment’s earnings before interest and tax (EBIT) at Rs 81 crore was fifth of the year ago period. The segment contributes slightly more than half to company’s revenues. Comparatively the copper segment’s EBIT declined just 12.1 per cent as profitability is dependent on treatment and refining charges (Tc/Rc). The segment’s revenues declined 21.5 per cent year-on-year to Rs 3,905 crore.

The company did manage to marginally lower its expenses to Rs 7,786 crore in the December quarter as against Rs 7,895 crore in the same period last year. Hindalco Industries’ other income stood at Rs 250 crore, up 17 per cent from last year.

During the quarter, the company has made provision of Rs 31.50 crore towards diminution of value of investment of the joint venture (JV) company Hydromine Global Minerals as a result of its decision to sell of its stake in the JV.

The entire amount has been adjusted against Business Reconstruction Reserve (BRR) as enjoined in the scheme of financial restructuring approved by the Honourable High Court of Bombay (the Scheme) under Sections 391 to 394 of the Companies Act, 1956 during the year 2008-09, said the company in its notes.

Meanwhile, Hindalco Industries’ two new smelters Mahan and Aditya and Utkal refinery are almost on their feet. The Mahan smelter is now operating at full capacity, while the Aditya smelter is well on course for full ramp-up, said the company.

The company also said that metal prices seem to be bottoming out.

For Novelis, Q3’FY16 Shipments at 779,000 tonnes were up 3% year-on-year. EBITDA before MPL of $238 million, up 4% year-on-year was the highest ever EBITDA before MPL performance for a third quarter. The strong performance was driven by shipment growth and improved product mix.