Hindalco Industries, the flagship Aditya Birla Group company, reported consolidated profit before tax of Rs 1,492 crore in the July-September quarter (second quarter, or Q2), down 31 per cent from the same period last year on the back of lower realisations and one-time exceptional loss of Rs 256 crore.
“Aluminium realisations (in domestic operations) declined 14 per cent year-on-year, while copper realisations have fallen 10 per cent, in turn hurting the revenue stream,” Satish Pai, managing director at Hindalco Industries, told reporters at the earnings conference in Mumbai.
The company’s consolidated net sales stood at Rs 29,657 crore in the period under review, down 9 per cent from the same period last year. Meanwhile, its consolidated net profit stood at Rs 974 crore in the period under review, down 33 per cent from the same period last year.
The company informed that the new lower corporate tax option cannot be availed for its India operations for at least five-seven years due to its existing minimum alternate tax credit.
According to Bloomberg estimates, the company’s consolidated top line was seen at Rs 30,279 crore in Q2, while the bottom line was expected to be at Rs 1,028 crore.
The one-time Rs 256-crore loss comprised closure of Germany-based aluminium foil (downstream) plant worth Rs 225 crore and final evacuation at the alumina plant in Muri, Jharkhand, of Rs 31 crore.
The company’s consolidated earnings before interest, tax, depreciation, and amortisation (Ebitda) fell to Rs 3,918 crore in the period under review, down 8 per cent from last year.
Among segment results, Novelis earned Rs 2,629 crore in the September quarter, against Rs 2,485 crore. Aluminium earnings were at Rs 849 crore, down 38 per cent from last year, while copper earnings nearly halved to Rs 263 crore, compared to last year.
Of the total revenue, Hindalco sold 60 per cent in the export market and the balance in the domestic as demand for the products remained weak due to slowdown.
Noting the dull demand scenario, the company’s capital expenditure (capex) of Rs 2,600 crore in 2019-20 has been brought down to Rs 2,000 crore for India operations. This capex will include expansion at Uktal plant (Rs 700 crore), about Rs 800 crore as maintenance capex, and the balance for aluminium downstream.
Similar to the April-June quarter, Hindalco’s US-based subsidiary Novelis held fort for consolidated performance as domestic operations continued to remain dismal, largely due to weak London Metal Exchange prices.
On the debt front, the company’s consolidated net debt stood at Rs 40,710 crore as on September 30, 2019, while consolidated gross debt was at Rs 54,154 crore.
The company’s net debt to Ebitda was at 2.83x.
Meanwhile, Hindalco said it is working speedily to sell the Duffel plant in Belgium (part of Aleris) after it received conditional approval from the European Union for the deal. “There are two interested European buyers for the Belgium plant. We are hopeful that we will be able to find a buyer soon,” said Pai.
Pertaining to the US Department of Justice having filed a lawsuit against Novelis where Hindalco has moved into arbitration, Pai said if the company loses arbitration, it will be selling the Louis plant in the US and still go ahead with the acquisition.
Sale of Duffel and Louis plant (if that happens), however, would lower the deal size of $2.25 billion (Aleris acquisition), of which $1.5 billion is a bridge loan.