Hindalco Q1 results a miss, but metals major sees a shiny future

New Delhi: Hindalco Industries Ltd put up an optimistic front predicting strong domestic demand for its core copper and aluminium products, even as its first-quarter results fell short of market expectations.

Profitability for the metals major going ahead can only be affected by lower aluminium prices on the London Metals Exchange, managing director Satish Pai said in a media interaction.

The metals subsidiary of the Aditya Birla Group also announced the induction of Ananya Birla and Aryaman Vikram Birla as directors in Hindalco.

“Hindalco is now in the midst of yet another transformational growth phase, co-creating solutions that will harness the potential of aluminium and copper to drive the global energy transition and support the shift to a low-carbon future,” Kumar Mangalam Birla, their father and Aditya Birla Group chairman, said in a statement. “This is, therefore, an appropriate moment for the board to induct Ananya and Aryaman as directors.”

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Hindalco’s consolidated net profit for the fiscal first quarter jumped 25.26% year-on-year to ₹3,074 crore, while revenue from operations improved 7.59% to ₹57,013 crore. Analysts polled by Bloomberg had on average expected a net profit of ₹3,428 crore on a revenue of ₹56,236.4 crore.

“Demand for both aluminium and copper remains very strong, both growing at double-digit YoY… we don’t see any slowdown going ahead,” Pai said. “We see the next quarter going well, with the only concern being the aluminium prices running a bit lower due to geopolitical concerns.”

The royalty impact

Referring to a recent Supreme Court judgement affirming states’ power to tax mineral rights, Pai said the decision could potentially increase costs for the company.

“We don’t see any impact retrospectively but will have to see if it is applied prospectively. Jharkhand has announced some levies on bauxite and coal. Although not a big exposure for us in Jharkhand, this hints at the possibility of more and more states implying taxes which can raise our costs,” Pai said.

Hindalco’s copper revenue in the June quarter rose 15.56% year-on-year to ₹13,292 crore.

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The company said it remains strongly interested in state-run Hindustan Copper Ltd’s mines in Jharkhand. Hindalco also plans to establish a copper foil plant for lithium-ion battery. 

For Hindalco’s aluminium upstream business, Ebitda stood at ₹3,493 crore, growing at 81% year-on-year with margins of 40%. Aluminium upstream revenue stood at ₹8,839 crore, a 9.61% growth, while that of the downstream business grew 17.78% to ₹2,898 crore.

“Looking ahead, the major capital formation phase of the downstream business is near completion, and from here on, we will explore growth opportunities in the upstream business given our strong cash position,” Pai said.

Novelis’ profit down

Hindalco’s IPO-bound overseas subsidiary, Novelis Inc., reported a 3.93% growth in revenue to ₹34,929 croreIts Ebitda per tonne improved 10% to $525, led by higher revenues and normalised beverage can shipments.

Net income, however, fell 3% year-on-year due to flooding of its Sierre plant in Switzerland. This caused the company a total net cash impact of about $80 million, after insurance, likely to occur in the second quarter.

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