Hindalco reports Q3 FY19 results

12 February 2019

Key highlights of Q3 FY19 (vs Q3 FY18)

  • PAT at Rs.713 crore, up by 47 per cent, for Hindalco standalone plus Utkal Alumina
  • EBITDA of Rs.1,926 crore, up by 4 per cent, for Hindalco standalone plus Utkal Alumina
  • Prepaid long term loans of Rs.1,575 crore in October 2018 towards Hindalco’s continuous focus on deleveraging
  • Hindalco standalone plus Utkal Alumina net debt to EBITDA (on TTM basis) improves to 2.36x as on 31 December 2018 from 2.67x as on 31 March 2018
  • Copper VAP (CC rod) production higher by 59 per cent - Share of VAP (rods) in total sales volume reached 58 per cent in Q3 FY19 vs. 40 per cent in Q3 FY18
  • Novelis reported adjusted EBITDA of US$322 million up 6 per cent Y-o-Y; adjusted EBITDA per tonne rises to US$403 in Q3 FY19 vs. US$383 in Q3 last year

Financial Summary – Q3 & 9M FY19

Particulars   (Rs. crore)
HIL Standalone plus Utkal Alumina*
  Q3 FY18 Q2 FY19 Q3 FY19 9M FY18 9M FY19
Revenue from Operations 11,044 10,833 11,938 31,727 33,441
EBITDA:          
Aluminium 1,188 1,349 1,286 3,525 4,159
Copper 421 388 431 1,210 1,154
Others 252 186 209 612 486
Total EBITDA 1,861 1,922 1,926 5,347 5,799
Profit before Exceptional Items and Tax 858 968 944 2,250 2,919
Exceptional Income/ (Expenses) (Net) (115) - - (313) -
Profit After Tax 484 725 713 1,318 2,171

Note: *The above financials include relevant numbers of Utkal Alumina International Ltd. (100 per cent subsidiary of Hindalco), from its 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 period numbers have also been presented in a similar manner.

India business (Hindalco standalone plus Utkal Alumina)

The company’s revenue stood at Rs.11,938 crore (vs. Rs.11,044 crore in Q3 FY18), up 8 per cent. EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) at Rs.1,926 crore in Q3 FY19, rose by 4 per cent compared to Q3 FY18. This is on the back of supporting macros, improvement in operational efficiencies and better realisations. This was despite increase in input costs, mainly of coal and furnace oil. Interest expense was lower by 12 per cent at Rs.477 crore, mainly due to re-pricing of long term project loans and loan re-payments. Profit After Tax stood at Rs.713 crore in Q3 FY19, up 47 per cent vs Rs.484 crore in Q3 FY18, driven by higher EBITDA and lower finance costs. Net debt to EBITDA (on TTM basis) at end December 2018 improved to 2.36x from 2.67x at end March 2018. Under its continuous deleveraging focus, the company has prepaid another Rs.1,575 crore in the month of October 2018.

Business highlights – Q3 FY19

Aluminium (Hindalco plus Utkal Alumina)

The revenue from the Aluminium business for Q3 FY19 stood at Rs.6,018 crore (vs. Rs.5,345 crore in Q3 FY18) up by 13 per cent. EBITDA at Rs.1,286 crore in Q3 FY19, rose 8 per cent, compared to Rs.1,188 crore in Q3 FY18, on the back of supporting macros, partially offset by increase in the input prices. The company achieved consistent Aluminium metal production of 324 Kt in Q3 FY19, as its plants continued to operate at peak designed capacities. Alumina (including Utkal Alumina) production was higher at 749 Kt vs 734 Kt in the corresponding period last year on account of better operational performance. Aluminium Value Added Products (VAP, including wire rod) production was 120 Kt in Q3 FY19 vs 123 kt in Q3 FY18. This was lower on account of lower wire rod production during the quarter.

Copper

VAP (CC rod) production was higher by 59 per cent in Q3 FY19 to 66 Kt vis-a-vis to 41 Kt in Q3 FY18 given the continuous ramp-up of the new CCR-3 facility. The share of VAP (CC rod) in the total sales volume reached 58 per cent in Q3 FY19 vs. 40 per cent in Q3 FY18. DAP production increased by 34 per cent to 76 kt in Q3 FY19 vs 57 kt in Q3 FY18. Overall cathode production was higher at 105 Kt in Q3 FY19 vs 101 Kt in Q3 FY18. Revenues from the Copper segment was at Rs.5,925 crore in Q3 FY19 vs Rs.5,701 crore in Q3 FY18. EBITDA was higher at Rs.431 crore in Q3 FY19, marginally up vs Rs.421 crore in Q3 FY18. This was mainly on account of better by-product realisation and volume.

Novelis Inc

Novelis posted a strong quarterly performance on the back of increased asset optimisation, better product mix and favourable market conditions. Revenues grew 3 per cent to US$3.0 billion, driven by higher average aluminium prices, higher shipments and a favourable product mix. The total shipments of flat rolled products (FRP) was up 1 per cent to 800 Kt in Q3 FY19. It reported adjusted EBITDA of US$322 million in Q3 FY19, up 6 per cent, compared to US$305 million in Q3 FY18. This was mainly due to, higher shipments, better operating efficiencies, with enhanced recycled contents and effective cost management. Novelis reported quarterly adjusted EBITDA of US$403 per tonne vs US$383 per tonne in Q3 FY18, up by 5 per cent. Novelis’ net income was at US$78 million in Q3 FY19 vs US$121 million in Q3 FY18, inclusive of a non-cash income tax benefit of $34 million in the prior year from the U.S. Tax Cut and Jobs Act of 2017. Various regulatory approvals for the Aleris acquisition are in progress. It is expected to close in Q2 FY20.

Key initiatives and project updates

  • Utkal Alumina’s brownfield capacity expansion of 500 Kt is expected to be operational by FY21
  • Novelis’ automotive expansion projects in US and China are on track
  • Novelis has announced an expansion plan in Brazil with a $175 million investment for 100kt of additional rolling capacity and 60kt of recycling capacity. This is expected to be commissioned in FY22.

Management comments

“Hindalco (including Novelis) delivered a very robust quarterly performance across all its businesses despite the challenging environment and rising inputs cost. It remained focussed on deleveraging, operational excellence, customer centricity and resource securitisation to deliver long term shareholder value. However, rising Aluminium and Copper imports in India continue to impact the domestic market. Given its integrated business model with the focus on customer centricity and downstream strategy, Hindalco is well poised to cater to the entire spectrum of market requirements. Novelis’ diverse global footprint and product portfolio and emphasis on recycling, positions it well to navigate near-term global economic uncertainties and growth in demand.”

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 four continents.

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.

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