Hindalco Q3 Results: Net Profit Falls 63% On Input Cost Pressure

Aditya Birla group flagship company, Hindalco, reported a 63 per cent year-on-year (YoY) decline in net profit to Rs 1,362 crore for the quarter ended December 31, 2022 (Q3FY23), on input cost pressures and a fall in aluminium prices. Net profit was below Street estimates, which had pegged the Q3 bottomline at Rs 1,841 crore, according to a poll of analysts by Bloomberg. The net profit last year stood at Rs 3,675 crore.

Benchmark London Metal Exchange aluminium has fallen off their record highs in early 2022, sliding over 15 per cent to levels of about $2,500-2,600 per tonne. This is due to factors such as the Russia-Ukraine conflict, recessionary fears in the US and Europe and China’s challenges around Covid-19.

Hindalco’s consolidated revenue for Q3 rose nearly six per cent YoY to Rs 53,151 crore. This compares favourably with Bloomberg consensus estimates, which had pegged the topline for the quarter at Rs 52,492 crore. But total expenses jumped 15 per cent YoY in Q3, with power and fuel prices jumping nearly 54 per cent versus last year in the quarter under review.

This surge in power and fuel prices reflected in earnings before interest tax depreciation and amortisation (Ebitda) for Q3, which declined 48 per cent versus last year to Rs 3,930 crore. Ebitda was also impacted due to weak operational performance in the aluminium upstream business, the company said. This business, which includes bauxite and coal mining, is the second biggest contributor to Hindalco’s profit after Novelis, the US-based subsidiary, which accounts for over 40 per cent of Hindalco’s total profit.

Ebitda for the aluminium upstream business was Rs 1,591 crore in Q3, compared with Rs 3,309 crore for Q3 FY22, down 52 per cent YoY. The downstream aluminium business reported a 24 per cent YoY growth in operating profit to Rs 157 crore for the quarter under review.

“Though the India aluminium upstream business Ebitda came under pressure from the surge in input costs and lower realisations, this was partially offset by higher volumes,” Hindalco’s Managing Director Satish Pai said in a media call.

The copper business reported a 40 per cent YoY growth in quarterly operating profit to Rs 546 crore. While copper rod sales hit an all-time high in the quarter under review.

Novelis’ total shipments of flat-rolled products were at 908 Kt (kilo tonnes) in the October-December period, declining 2 per cent from 930 Kt in the corresponding period a year ago.

Novelis reported an Ebitda of $341 million, down 33 per cent from the corresponding period a year ago, primarily due to lower shipments, higher inflationary pressures, and less favourable metal benefits from recycling.

“We are seeing core industries worldwide being buffeted by macro-economic and inflationary cost pressures,” Pai said. “But Q4 should be better than Q3 as the demand outlook will likely stabilise in China,” he said.

Shares of Hindalco closed trade on Thursday at Rs 444.35 a piece on the BSE, up 1.85 per cent versus the previous day’s close. In the last one year, Hindalco’s stock price is down 18 per cent even as the BSE Sensex has risen 4 per cent during the period.