Hindalco Q2 profit dips 21% to Rs 3 bn as rising input costs hit expenses

Hindalco's bottomline including earnings from Utkal Alumina stood at Rs 7.25 bn, up 54% from last year

Hindalco Industries Friday reported a lower-than-expected net profit of Rs 3.08 billion, down 21.4 per cent from the same period last year as increased power and fuel costs pushed up total expenses even as net sales jumped in the period under review.

Net sales of the Aditya Birla Group company stood at Rs 108.33 billion, up 5 per cent from the same period last year.

As per a Bloomberg estimate, the company’s topline was seen at Rs 106.85 billion while the bottomline was expected to be at Rs 4.75 billion.

The power and fuel cost for the company rose 13 per cent on a year-on-year basis to Rs 17.05 billion as the availability of coal became an issue due to monsoon and lack of rail rakes to transport the commodity.

“We had to import one million tonnes of coal during the quarter due to lack of availability of domestic coal,” explained managing director Satish Pai.

Hindalco’s bottomline including earnings from Utkal Alumina stood at Rs 7.25 billion, up 54 per cent from last year, said the company in its release. The reported EBITDA (including Utkal Alumina) stood at Rs 19.22 billion as against Rs 18.25 billion in the corresponding period last year and Rs 19.51 billion in the preceding quarter.

“The performance rode on the back of supporting macros, improvement in operational efficiencies and better realisation. This was despite an increase in input costs, mainly of coal and furnace oil,” said the Hindalco release.

The company's US-based subsidiary Novelis posted a strong performance in the quarter gone by, on the back of increased asset optimisation, better product mix and favourable market conditions. Revenues grew 12 per cent to $3.1 billion, given by higher average aluminium prices, increased shipments and favourable product mix.

On Aleris deal, the company informed that the applications for regulatory approvals for Aleris acquisition filed with the concerned authorities are at various stages of approval. “We expect the deal to close by February next year,” said Pai.

Regarding the company’s loan burden, the interest expense was lower by 16 per cent at Rs 4.79 billion, mainly on account of re-pricing of long-term project loans and loan re-payments made last year.

"The company continues its focus on strengthening its balance sheet, resource securitisation and its strategy to grow in the downstream businesses to deliver long-term shareholder value. Novelis will continue to play a crucial role in supporting the next generation of automotive innovation and design, as the market demand for lighter and more fuel-efficient vehicles grows," said the management.

Hindalco continued its deleveraging strategy as it prepaid loans worth Rs 15.75 billion in October 2018.