Hindalco sees 10% drop in net profit on exceptional expense
Mumbai: Hindalco Industries Ltd on Friday reported a 10.6% year-on-year drop in stand-alone net profit to Rs392.9 crore for the September quarter, due to higher raw material cost and an exceptional expense of Rs105.5 crore.
Adjusted for the exceptional expense, the Aditya Birla Group company’s profit was largely in line with Bloomberg’s consensus estimate of Rs495.4 crore.
The company said the exceptional expense was primarily due to provisions made in view of two Supreme Court verdicts. While the judgements do not directly impose a fine on Hindalco, the company believes they would affect one of its ongoing cases and might lead to a fine in another.
Satish Pai, the company’s managing director, said cost of production rose 3% sequentially and 7% from the year-ago period due to a rise in raw material and other input costs. He said the average price of aluminium at the London Metal Exchange (LME) was up 24% from a year earlier at $2,011/tonne and led to higher realizations. Hence, Pai said, exports were higher during the quarter as domestic demand remained subdued due to the monsoon season. “We expect prices to remain firm as production continues to slow in China,” Pai added.
Pai said domestic demand was subdued during the first half of the current fiscal but was likely to rise sharply in the second half with issues such as goods and services tax implementation settling down.
Hindalco’s revenue rose 7.8% to Rs10,308.2 crore during the quarter but fell short of Bloomberg’s consensus analyst estimate of Rs10,716.3 crore.
Earnings before interest, taxes, depreciation and amortization (Ebitda), on the other hand, rose 20.1% from a year ago to Rs1,389.8 crore as Ebitda margin expanded by 138 basis points to 13.48%.
Boosting consolidated earnings, the company’s Atlanta-based fully owned subsidiary Novelis Inc. reported a net profit of $307 million for the September quarter from a net loss of $89 million in the year-ago period as revenue jumped 18.3% to $2.8 billion.
Novelis posted an 11.9% jump in Ebitda during the quarter to $302 million, boosted by its adjusted Ebitda/tonne rising to $377 during the quarter. “The year-over-year improvement in adjusted Ebitda is primarily a result of higher shipments, favourable metal costs and operational efficiencies, partially offset by lower beverage can pricing,” the company said in a statement. It said shipments rose 4% year-on-year to a record high of 802 kilo tonnes.
“Hindalco’s Ebitda was above our expectations. Its operational efficiency, too, was quite good during the quarter, although cost of production rose due to input cost going up. Overall, the stand-alone business has performed better than expected in the first half of the year. Novelis, too, had done well during the quarter and upped its guidance. So, we have seen earnings upgrades in our estimates for the company,” Abhisar Jain, an analyst at Centrum Broking Ltd, said.
Pai said the company will continue to deleverage its balance sheet, having already prepaid Rs7,966 crore in the first half of the year. “We are on track to reduce our interest expense by Rs800 crore for the full year,” he added.
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