Hindalco drops 5% as arm Novelis Q2 profit slides 23% YoY; Ebitda down 8%

As per reports, Novelis has also lowered its capital expenditure (capex) outlook for FY23 to a range of $900 million- $1 billion from the previously guided $1.3-1.6 billion

Shares of Hindalco Industries dropped nearly 5 per cent in Wednesday’s intra-day trade, staging their steepest decline since late September after the company’s subsidiary Novelis Inc posted weak July-September results (Q2). 

Investors rushed to exit Hindalco’s counter after Novelis Inc posted a 23 per cent yearly decline in its net income (net profit) to $183 million for Q2.

As per reports, the US-based arm has also lowered its capital expenditure (capex) outlook for FY23 to a range of $900 million- $1 billion from the previously guided $1.3-1.6 billion. This has been done to pace the strategic capital expenditure. 

The company reportedly expects to maintain its leverage and does not intend to raise debt for funding the capex projects. 

Novelis’ net sales rose 17 per cent to $4.8 billion for the quarter from a year ago primarily driven by a 2 per cent increase in total flat rolled product shipments, increased product pricing, favourable mix, and higher average aluminium prices, Hindalco said in a release. 

On the other hand, the arm’s adjusted Ebitda declined 8 per cent on-year to $506 million in Q2 due to higher energy and other operating costs as a result of geopolitical instability, supply chain disruptions, and unfavourable foreign exchange translation. 

On per tonne basis, the company posted adjusted Ebitda per tone of $514 in Q2 as compared to $583 in the June quarter. 

It has maintained its medium-term adjusted Ebitda per tonne guidance at $525/tonne, while high cost inventory and inflationary pressures will result in sub $450/tonne Ebitda in the near term, said JM Financial in a note. 

“The company continues to witness stable demand for sustainable aluminium solutions, given a positive demand outlook across end user segments. Given its 75 per cent plus strong Ebitda being non-LME linked, Hindalco remains our preferred play in the metal space. We re-iterate Buy,”’ it said.