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Business News/ Markets / Stock Markets/  Hindalco share price up about 2% on sequential improvement in volumes and profitability reported by Novelis Q2 result

Hindalco share price up about 2% on sequential improvement in volumes and profitability reported by Novelis Q2 result

Q2 Result Review- Hindalco's US subsidiary Novelis reported net profit at $157 million though 14% lower yoy, however improved from $156 million in previous quarter. Ebitda per tonne at $519 improved from $479 in the previous quarter and sales volume at 933 Kilotonne improved 6.14% sequentially.

Hindalco Industries US subsidiary NovelisPremium
Hindalco Industries US subsidiary Novelis



Hindalco Industries Ltd’s share prices gained up to 1.81%  in the opening trades on Wednesday as its US subsidiary Novelis Inc. performance for the quarter ending September encouraged with per tonne profitability improving for third quarter in a row. The volume recovery also remains a key positive and adds confidence to Hindalco's forward outlook. Novelis contributes more than half to operating profits for Hindalco.

Novelis had seen a significant drop in profitability during the third quarter of FY23 led by destocking of cans in the US market. The performance has continued to improve ever since though on year-on-year basis the impact still is being felt.

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Novelis Earnings before Interest Tax depreciation and amortization (Ebitda) per tonne at $519 improved from $ 479 in the previous quarter. Notably this is now closer to Novelis guidance Ebitda per tonne of $525 by Q4.

Novelis net sales at $4,107 million ($4.1 billion) decreased 4% versus the prior year period for the second quarter of fiscal year 2024, primarily driven by lower average aluminum prices and a 5% decrease in total flat rolled product shipments to 933 kilotonnes, partially offset by increased product pricing and favorable product mix. However, on a sequential basis the volumes grew 6.1% while the net sales were up 0.4%.

The performance has encouraged the analysts. Analysts at Motilal Oswal Finacial Services said that they believe Ebitda per tonne improvement in Novelis is a positive development and Ebitda per tonne could be more than $500 ahead on a sustainable basis. They have increased our FY24 and FY25 Ebitda estimates by 4.8% and 4.2% respectively.

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Novelis Net income attributable to our common shareholder decreased 14% versus the prior year to $157 million in the second quarter of fiscal year 2024.However adjusted for one-offs and as per analysts calculations net profit at $223 million though were lower than $246 million in the year-ago quarter, however improved from$166 million in the previous quarter

Analysts attribute the improvement in profitability to rebound in sales volumes providing benefits of operating leverage and better pricing. End of destocking in beverage cans led to an overall volume increase and sales volume.

Analysts at Jefferies India Pvt Ltd in their first cut post results said that Novelis delivered the third consecutive quarter of sequential improvement in Ebitda which rose 15% sequentially in Q2 and was 12% above Jefferies estimates). Volumes grew 6% sequentially while Ebitda per tonne t rose 8% sequentially to $519 led by operating leverage. Novelis believes the destocking in cans is largely behind, while auto and aero demand remains strong.

Analysts at Nuvama Institutional Equities also are positively surprised by the earlier-than-expected recovery in Novelis’s profitability, which re-emphasizes the robustness of its business model. With the end of destocking in beverage cans and firm auto demand, Novelis’s Ebitda per tonne  should sustain at $525 in FY25 and beyond.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions





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Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 08 Nov 2023, 10:25 AM IST
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