Hindalco Industries consolidated Q2 PAT down 60% YoY at Rs 387 cr

One-time loss due to Lewisport sale hit the bottomline even as sales were up 5%

With the Biden government taking over in the US, Hindalco Industries hopes to see some loosening of noose on trade front in terms of tariffs

Hindalco Industries reported a consolidated net profit of Rs 387 crore in the September quarter, down 60 per cent from same period last year as a one-time loss due to sale of Aleris’ Lewisport hit the bottom line.

The Aditya Birla Group company’s consolidated net sales in the quarter gone by stood at Rs 31,237 crore, up 5.3 per cent from same period last year, as Novelis shipments and domestic aluminium business witnessed strong performance.

With smelter utilisation at more than 90 per cent in Q2FY21, aluminium India Business achieved aluminium metal production of 307,000 tonne as against 291,000 tonne in the preceding quarter, said the company release.

Aluminium metal sales at 303,000 tonne in Q2 FY21, were flat sequentially and down from 328,000 tonne in the same period last year impacted by lower production. Value-added product (VAP) sales as a percentage of total metal sales have improved to 21 per cent in Q2 FY21 versus 11 per cent in Q1 FY21.

Novelis reported a revenue of $3 billion in Q2 FY21 on account of higher LME prices and premiums.

The company’s earnings before, interest, taxes, depreciation and ammortisation (EBITDA) in the September quarter stood at Rs 4,672 crore, up 25 per cent from same period last year. Novelis was biggest contributor to the earnings of the company with an EBITDA contribution of Rs 3,392 crore followed by Rs 1,066 crore from the aluminium business.

“It is heartening to see a sharp recovery of demand to near pre-Covid levels in India Aluminium and Copper businesses. Novelis too sees a similar rise across segments, except for aerospace," Satish Pai, managing director at Hindalco Industries Ltd was quoted as saying.  

Novelis recorded an all-time high quarterly shipments of 923,000 tonne, up 11 per cent YoY, due to the acquired business.It also recorded an all-time high adjusted EBITDA per tonne at $493 as against $448 per tonne in the same period last year.

"We are aiming at $480-500 per tonne EBITDA for Novelis for FY21," informed Pai in the earnings concall.In the period under review, Hindalco Industries’ completed divestment of Duffel plant to ALVANCE, and signed an agreement for sale of Lewisport to American Industrial Partners (AIP), a private equity firm, for estimated net cash proceeds of $171 million.

Meanwhile, the integration work continues at Aleris with $38 million run-rate acquisition cost synergies achieved to date, informed the company.

“We had to sell Lewisport at a much lower price due to the weak business climate amid the pandemic. To that extent, we feel we were not treated fairly. We are disappointed that the Department of Justice didn't give us some more time to sell this because, in a better market, you'd have gotten a more reflective price," said Pai.

Going ahead, Hindalco Industries sees strong demand from Novelis as well as India operations and expects Q3 and Q4 to be buoyant not just in terms of volumes and shipments but also in terms of realisations.

Meanwhile, the company's consolidated net debt/EBITDA ratio stood at 3.52x on September 30, 2020, as against 3.83x on June 30, 2020.

“We are expecting Novelis performance to remain strong going ahead but on the capex front the company will remain tight as the aim is to bring down the debt in coming quarters. So the cash generated from Novelis will be used to lower debt of the company,” informed Pai.

For FY21, the company’s capex stands at Rs 1,500 crore.

Regarding the impact on business as second wave of COVID-19 hits Europe, Pai said, “Right now, it is too early to say anything. Have not seen any impact yet but we are watching the situation closely.”

With the Biden government taking over in the US, Hindalco Industries hopes to see some loosening of noose on trade front in terms of tariffs and restrictions and is bullish on demand outlook for aluminium as support for green energy and electrical vehicles is expected to go up with the government lays more focus on environmental friendly measures.

“We are hoping that the Biden government will be a bit favourable towards its trading partners like India but how reasonable he (Biden) would be remains to be seen,” said Pai.