Hindalco Q3 results: Net profit jumps 77% YoY to Rs 1,877 crore

Mumbai: Aditya Birla group’s flagship company Hindalco Industries Ltd reported a 77% year-on-year jump in consolidated net profit for the December quarter at Rs 1,877 crore as against a net profit of Rs 1,062 crore during the same quarter last year, mainly on account better volumes from India operations and record-high shipments from Novelis.

“Novelis achieved record shipments, driven by strong demand across product end markets. The India Business delivered an excellent performance with Aluminium value-added products continuing to record higher volumes,” said Satish Pai, Managing Director, Hindalco Industries.

With growing profits and rising share of steady cash-generating aluminum conversion business, Hindalco has announced that it will come up with a capital allocation plan, which will also include regularly sharing profits with the shareholders.

This development is rare for metal companies which often find themselves at the mercy of metal cycles and could boost investor confidence. This could further lead to re-rating of the stock which has already more than tripled from its lows of last year.

“We are going to come out with a capital allocation strategy. In the next few years, the cash generation is going to be good. We will be deciding on how to invest in growth Capex, into reducing net debt as well as distribution to shareholders,” said Pai in a media interaction.

The company’s consolidated liquidity position is at $2.4 billion with cash and cash equivalents of $1.16 billion in Novelis and Hindalco India Business cash and cash equivalents at ?9,560 crore at the end of December 31, 2020.

The consolidated net debt to EBITDA ratio has improved significantly to 3.09x on December 31, 2020, from a peak of 3.83x on June 30, 2020

“Gross debt in India is Rs 24,000 crore and net debt Rs 14,800 crore. Novelis’ gross debt is around Rs 53,800 crore and net debt at Rs 47,500 crore which has gone down from repaying some levels. There will be further deleveraging going ahead,” Pai said.
With the recent acquisition of Aleris and further investment in the downstream business(of Rs 4000-5000 crore in the next three to five years), the contribution of conversion business is only going to go up and steadily lead to debt reduction Over the years, the conversion business has increased from less than 50% to over 75% now.

“Net debt to EBIDTA which is 3.1 currently will come down to 3 times by end of FY21 and around 2.7 times by the end of next fiscal,” said Pai.

Novelis completed the buyout of Aleris Corp at an enterprise value of $2.8 billion, or Rs 21,295 crore, in April.

“The inclusion of the Aleris business has positively impacted the overall top line and Ebitda, with the realisation of synergies at $54 million on a run-rate basis in Q3. And, the total potential can go up to $120 million vs out the previous target of $80 million,” said Pai.

The company’s earnings before interest, taxes, depreciation and amortisation for Q3 stood at Rs 5,242 crore as against Rs 3,733 crore up 40% year-on-year. Consolidated Revenue for the third quarter stood at ?34,958 crore as against Rs 29,197 crore, up 20% yoy. Novelis recorded quarterly adjusted Ebitda of $501 million as against $343 million, up 46% yoy.

Aluminium India Business recorded metal production of 315 Kt vs 328 Kt last year. Aluminium metal sales were at 315 Kt as against 328 Kt in Q3 FY20. Copper Cathode production at 51 Kt in Q3 FY21 vs 87 Kt in Q3 FY20. was lower YoY mainly due to planned maintenance shutdown in one of the smelters.

“Housing sector and auto is strong and packaging and pharma continue to be strong. Every sector’s demand has come to pre-covid levels. We are very bullish on the demand and Indian economy,” said Pai.