Hindalco net profit sinks 60% with one-time loss of Aleris plant sale

Hindalco Industries reported a year-on-year decline of 60% in the consolidated net profit at Rs 387 crore for the quarter ended September 30 due to a loss of Rs 1,398 crore in the sale of Aleris’s Lewisport plant.

The company’s net profit from continuing operations stood at Rs 1,785 crore, up 83% on a y-o-y basis. According to Bloomberg’s consensus estimates, the company was expected to report a net profit of nearly Rs 958 crore. Hindalco had reported a consolidated net loss of Rs 709 crore in the preceding June quarter, which was its highest quarterly loss. Consolidated revenue increased 5% y-o-y to Rs 31,237 crore with Novelis, and the aluminium and copper business seeing a comeback in demand.

Satish Pai, managing director, Hindalco Industries said the company had to sell the Lewisport plant at 50% below the fair value as it was under pressure from the US Department of Justice. “We had to take a one-time loss on account of the sale of Lewisport, which was $170 million, and we are quite disappointed on what we think was not the fair treatment given to Hindalco and Novelis by the Department of Justice. We were hoping that we will get more time, but suddenly in October heading up to now they pushed very hard to close it. Honestly, we are very disappointed that we were not treated very fairly,” Pai said.

He said the company is committed to its plan of meeting the $368 million Ebitda (earnings before interest, tax, depreciation and amortisation) from Aleris even without Lewisport. The company has also increased its synergy guidance from Aleris to $180-185 million compared to $150 million guided at the time of acquisition two years ago. “Half of that was traditional and half was to come from China. The traditional part we are increasing the guidance and instead of $75 million we will get $120 million. So the overall synergy will go up from $150 million to $180-185 million. At the end of Q2, we already have a $38 million run rate,” he said.

The company’s Ebitda increased 32% y-o-y to Rs 5,171 crore with aluminium Ebitda increasing 32% y-o-y to Rs 1,066 crore, while copper Ebitda fell 32% during the quarter. Consequently, the Ebitda margins came in at 16.5%, registering a rise of 330 basis points on a y-o-y basis.

Novelis recorded an all-time high quarterly adjusted Ebitda of $455 million, up 80% sequentially, on the back of higher volumes, good cost control, better product mix and Ebitda contribution from the acquired Aleris business. Adjusted Ebitda per tonne was at a record high of $493 in Q2FY21. Novelis reported a net income (excluding tax-effected special items) of $158 million in Q2FY21. Revenue was at $3 billion on account of higher LME and premiums. The company has guided Ebitda per tonne for Novelis at $480-500 per tonne and shipments next year will be around four million tonne.

Pai said demand from all sectors — both for Novelis and domestic business — has come back strongly. “Can, speciality and auto demand internationally is more or less back to pre-Covid levels. It is only the aerospace demand which is yet to come back. In India, too, the demand has come back quite strong.”

He further said the demand is not pent-up in nature and will sustain. “Maybe in July and August it was pent-up demand. However, you cannot have six months of pent-up demand. We are seeing that the forward orders are very strong so we are expecting Q3 and Q4 to be very strong as well.”

The consolidated net debt to Ebitda ratio was 3.52x on September 30 as against 3.83x on June 30.