Analyst Concall
See India aluminium output cost up 1.5% Oct-Dec - Hindalco
This story was originally published at 20:37 IST on 12 November 2024
Register to read our real-time news.Informist, Tuesday, Nov. 12, 2024
Please click here to read all liners published on this story
-- Hindalco: Lower input costs, favourable macros aided EBITDA Jul-Sept
-- CONTEXT: Hindalco management's comments in post-earnings analyst concall
-- Hindalco: Risks due to negative spill-over from China slowdown continue
-- Hindalco: See Oct-Dec India aluminium cost of production up 1.0-1.5% QoQ
-- Hindalco: Jul-Sept India aluminium cost of production down 1.6% QoQ
-- Hindalco: Tailwinds in macros aided copper EBITDA in Jul-Sept
-- Hindalco: China aluminium scrap creating price tightness in short term
-- Hindalco: China setting up a lot more aluminium scrap melting capacity
By Rajesh Gajra
MUMBAI – The cost of production of alumina and aluminium in Hindalco Industries Ltd.'s India business will likely go up by 1.0%-1.5% sequentially in the December quarter, the management of the aluminium and copper manufacturer said at a post-earnings conference call with investors Tuesday. The India aluminium cost of production was down 1.6% sequentially in the September quarter. The uptick in the cost of production in the December quarter will largely be on account of an increase in coal stock premiums.
Lower input costs and a favourable macroeconomic situation helped the operating profit, or earnings before interest, tax, depreciation, and amortisation to grow in the Jul-Sept quarter, the management said. Hindalco's consolidated EBITDA rose 13.9% on quarter to INR 91 billion in Jul-Sept.
Hindalco's sequential growth in aluminium upstream EBITDA in Jul-Sept trailed the overall consolidated operating profit of the company. The aluminium upstream EBITDA increased 6.2% on quarter to INR 37.09 billion, aided by a 1.6% decline in cost of production.
Asked why Jul-Sept EBITDA of the copper segment, which is a part of the company's India business, was up sharply despite revenue growth being subdued and shipment volume falling, the management said certain tailwinds were present during the quarter. "The copper chain is so wide... this quarter (Jul-Sept)... the government reduced the duty on gold (and) we had quite a lot of extra gold sales... we cleaned out the inventory in selling the gold," the management said.
The copper segment EBITDA was up 27% on year to INR 8.29 billion in Jul-Sept, an all-time high for the segment, even as revenue growth was only 5% and shipment volume fell 13%.
Hindalco imports most of its raw material as copper concentrate for the manufacture of copper cathodes and rods. "Apart from the copper content, the raw material also contains gold, silver and other precious elements like selenium, platinum and palladium due to their natural affinity towards copper ore," according to the company's website.
The profitability of the copper business was also aided by higher-than-expected sulphuric acid prices. Sulphuric acid is a by-product of copper rod manufacturing and sold separately by the company. The high profitability from these derivative products was in Hindalco's favour and was one-off in nature, according to the management.
On the US-based subsidiary Novelis, which contributes around 60% of the consolidated revenue of Hindalco, the management said rising aluminium scrap prices and an unfavorable product mix were behind the 5% on-year decline in the adjusted EBITDA to $462 million. The adjusted EBITDA did not include a $25 million hit from the flooding of its Sierre unit in Switzerland at the end of June, which disrupted operations for some time during the September quarter. Aluminium scrap is a key raw material for Novelis and higher scrap prices put pressure on the company's profitability.
Going forward, the management said, the scrap prices would remain elevated in the short term due to China setting up a lot more aluminium scrap melting capacities. According to the management, China appeared to be "quite serious" about the cap on new aluminium production and was importing aluminium from Russia to meet its internal deficit. The country was therefore setting up large capacities of scrap melting units. This means "price tightness" in scrap prices internationally would remain in the short term, the management said.
Shares of Hindalco ended Tuesday 0.6% lower at INR 651.65 on the National Stock Exchange. End
Edited by Saji George Titus
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
To read more please subscribe
Share this Story:
