Hindalco’s profit fell 35% on cost pressures, but revenues up 18%

Average aluminium prices on the London Metal Exchange, at $2,395 a tonne, have fallen 11% from the year ago and by 18% sequentially. Rising energy costs led by high coal prices further dented its operating performance significantly.

The company’s quarterly consolidated earnings before interest tax depreciation and amortization (Ebitda) fell 29% from the year ago to ₹5,743 crore. Its aluminium upstream business Ebitda in Q2FY23, fell 57% to ₹1,347 crore from ₹3,128 crore during the period.

However, some support was provided by aluminium downstream operations, which saw Ebitda at ₹200 crore in Q2 , up 163% y-o-y, primarily due to better pricing of the downstream products. Value-added products did not see much impact of volatility in LME or coal prices. The copper segment did well and its Ebitda rose 55% to ₹544 crore year-on-year on the back of higher domestic sales and improved by-product realizations. But it was not sufficient to push up the overall performance.

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The company’s US subsidiary Novelis Inc., which contributes more than half to its operating profits, too, saw pressure on Ebitda, which was down 8% to $506 million. But Novelis delivered with adjusted Ebitda per tonne of $514 despite challenges in Q2. Analysts said the contracts will get reset from 1 January when Novelis will try and cover most of the increased costs and push for higher ebitda of $525 a tonne on a normalized basis.

“Hindalco has transitioned to a resilient and integrated business model… Despite a rise in input costs, the company produced the highest-ever aluminium metal volumes”, said Satish Pai, managing director, Hindalco.