Hindalco reports Q2 & H1 FY19 results

02 November 2018

Key highlights of Q2 FY19

  • PAT at Rs.725 crore, up by 54 per cent, for Hindalco Standalone plus Utkal Alumina
  • EBITDA of Rs.1,922 crore, up by 5 per cent, for Hindalco Standalone plus Utkal Alumina
  • Hindalco Standalone plus Utkal Alumina Net Debt to EBITDA (on TTM Basis) improves to 2.47x as on 30 September 2018 from 2.67x as on 31 March 2018
  • Copper VAP (Rod) production was higher by 24 per cent in Q2 FY19 vs. Q2 FY18; Share of VAP (Rods) in total sales volume reached 70 per cent in Q2 FY19 vs. 43 per cent in Q2 FY18
  • Hindalco wins back Krishnashila Coal linkage of 3.1 million tonnes in auction conducted in September ’18
  • Deleveraging continues at Hindalco - prepaid long term loans of Rs.1,575 crore in October 2018
  • Novelis reported highest-ever quarterly adjusted EBITDA of US$355 million; highest-ever adjusted EBITDA of US$440 per tonne this quarter
  • Novelis breaks ground on automotive finishing line in Changzhou, China to double its capacity to 200 Kt
  • Novelis secures commitment from banks for financing Aleris acquisition

Key highlights of H1 FY19

  • PAT at Rs.1,458 crore, up 75 per cent (vs Rs.834 crore in H1 FY18) for Hindalco Standalone plus Utkal Alumina
  • EBITDA at Rs.3,873 crore up 11 per cent (vs Rs.3,486 crore in H1 FY18) for Hindalco Standalone plus Utkal Alumina
  • Copper VAP (Rod) production was higher by 38 per cent in H1 FY19 vs. H1 FY18; Share of VAP (Rods) in total sales volume reached 72 per cent in H1 FY19 vs. 39 per cent in H1 FY18
  • Novelis reported adjusted EBITDA of US$689 million, up by 17 per cent (vs US$591 million)

Financial Summary – Q2 & H1 FY19

Particulars (In Rs. crore)
HIL Standalone plus Utkal Alumina*
Q2 FY18 Q1 FY19 Q2 FY19 H1 FY18 H1 FY19
Revenue from Operations 10,313 10,670 10,833 20,727 21,503
EBITDA:          
Aluminium 1,204 1,531 1,364 2,337 2,895
Copper 467 335 388 789 723
Others 154 85 170 360 255
Total EBITDA 1,825 1,951 1,922 3,486 3,873
Profit before Exceptional Items and Tax 792 1,007 968 1,392 1,975
Exceptional Income/ (Expenses) (Net) (94) -   (198) -
Profit After Tax 470 734 725 834 1,458
Note:

*The above financials include the relevant numbers of Utkal Alumina International Ltd. (Utkal Alumina) from its unaudited accounts to present a comprehensive view of the business. For this purpose, standard principles of consolidation have been applied by elimination of inter-company transactions and unrealised profit or loss in the inventory. For comparison purposes, previous year’s numbers have also been presented in a similar manner. Post the applicability of GST with effect from 01 July 2017, Revenue is required to be disclosed net of GST as per requirement of Ind AS 18, ‘Revenue’. Accordingly, the Revenue figures for half year, are not comparable with those of the previous periods.

India Business (Hindalco Standalone Plus Utkal Alumina)

The company’s revenue (India operations) stood at Rs.10,833 crore for Q2 FY19 (vs. Rs.10,313 crore in Q2 FY18) up by 5 per cent. EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) at Rs.1,922 crore in Q2 FY19, up by 5 per cent compared to Q2 FY18. The performance rode on the back of supporting macros, improvement in operational efficiencies and better realisation. This was despite increase in input costs, mainly of coal and furnace oil. The interest expense was lower by 16 per cent at Rs.479 crore, mainly on account of re-pricing of long-term project loans and loan re-payments made last year. Profit After Tax was at Rs.725 crore in Q2 FY19, up by 54 per cent vs Rs.470 crore in Q2 FY18, driven by higher EBITDA and lower finance costs. Net Debt to EBITDA (on TTM Basis) at end September 2018 improved further to 2.47x from 2.67x at end March 2018. Under its continuous deleveraging programme, the company has prepaid another Rs.1,575 crore in the month of October 2018.

Business highlights – Q2 FY19
Aluminium (Hindalco Plus Utkal Alumina)

The Aluminium revenue for Q2 FY19 stood at Rs.6,135 crore (vs. Rs.5,218 crore in Q2 FY18) up by 18 per cent. EBITDA at Rs.1,364 crore in Q2 FY19, is up 13 per cent compared to Rs.1,204 crore in Q2 FY18, on the back of supporting macros, partially offset by increase in the input prices. The company has achieved consistent Aluminium metal production of 326 Kt in Q2 FY19, as its plants continued to operate at peak designed capacities. Alumina (including Utkal Alumina) production was marginally lower at 701 Kt vs 712 Kt in the corresponding period last year due to operational issues on account of heavy rains during the quarter. Aluminium Value Added Products (VAP, including Wire Rod) production was higher at 123 Kt in Q2 FY19 vs 119 kt in Q2 FY18, regardless of the continuous surge in imports, which is a major challenge.

Copper

The VAP (CC Rod) production was higher by 24 per cent in Q2 FY19 to 49 Kt compared to 39 Kt in Q2 FY18 on account of continuous ramp-up of the new CCR-3 facility. The share of VAP (CC Rods) in the total sales volume reached 70 per cent in Q2 FY19 vs. 43 per cent in Q2 FY18. The DAP production was higher by 73 per cent to 88 kt in Q2 FY19 vs 51 kt in Q2 FY18. The overall cathode production was 72 Kt in Q2 FY19 vs 96 Kt in Q2 FY18.

Revenues from Copper segment was at Rs.4,710 crore in Q2 FY19 vs Rs.5,097 crore in Q2 FY18. EBITDA stood at Rs.388 crore in Q2 FY19 down by 17 per cent, vs Rs.467 crore in Q2 FY18. This was mainly on account of lower volumes due to a planned maintenance shutdown at one of the smelters in the month of July 2018 and also due to lower copper realisations. This was partially offset by higher by-product realisations.

Novelis Inc

Novelis posted a strong performance on the back of increased asset optimisation, better product mix and favourable market conditions. Revenues grew 12 per cent to US$3.1 billion, given by higher average aluminium prices, higher shipments and favourable product mix. The total shipments of flat rolled products (FRP) was up by 1 per cent to 807 Kt in Q2 FY19. It has achieved highest-ever quarterly adjusted EBITDA of US$355 million in Q2 FY19, up 18 per cent, compared to US$302 million in Q2 FY18. This was mainly due to higher automotive sheet shipments, better operating efficiencies, with enhanced recycled contents and effective cost management. Novelis also achieved its highest ever quarterly adjusted EBITDA of US$440 per tonne in Q2 FY19 vs US$377 in Q2 FY18, up by 17 per cent. Novelis’ net income was at US$116 million in Q2 FY19.

Applications for regulatory approvals for Aleris acquisition filed with the concerned authorities are at various stages of approval. We expect the transaction to close in about 9-15 months from the date of the announcement of the transaction. Novelis has secured firm commitments from banks for financing the Aleris acquisition.

Key initiatives & project updates

  • Utkal Alumina’s brownfield capacity expansion of 500 Kt is on schedule and is expected to be operational by FY21.
  • Novelis breaks ground on the new automotive finishing line facility in Changzhou, China. This will double its capacity to 200 kt and is expected to be operational by CY20.

Management comments

“The company delivered yet another strong quarterly results, despite the challenging business environment, rising input costs and surge in imports. The company continues its focus on strengthening its balance sheet, resource securitisation and its strategy to grow in the downstream businesses to deliver long-term shareholder value. Novelis will continue to play a crucial role in supporting the next generation of automotive innovation and design, as the market demand for lighter and more fuel-efficient vehicles grows.”

Statements in this “Media Release” describing the company’s objectives, projections, estimates, expectations or predictions may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the company’s operations include global and Indian demand supply conditions, finished goods prices, feed stock availability and prices, cyclical demand and pricing in the company’s principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the company conducts business and other factors such as litigation and labour negotiations. The company assume no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent development, information or events, or otherwise.

About Hindalco Industries Limited:

Hindalco Industries Limited (HIL), the metals flagship company of the Aditya Birla Group, is a leading player in aluminium and copper manufacturing. It is the world’s largest aluminium rolling company and one of Asia’s biggest producers of primary aluminium. In India, the company’s aluminium units across the country encompass the gamut of operations from bauxite mining, alumina refining, coal mining, captive power generation and aluminium smelting to downstream value addition of aluminium rolling, extruding and foils. Birla Copper, the company’s copper facility comprises a world-class copper smelter, downstream facilities, a fertiliser plant and a captive jetty. The copper smelter is among the world’s largest custom smelters at a single location. Birla Copper produces copper cathodes and continuous cast copper rods along with other by-products. Novelis Inc., HIL’s wholly-owned subsidiary, is the global leader in aluminium rolled products and the world's largest recycler of aluminium. Novelis has 24 operating plants in 10 countries and across 4 continents.

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