Hindalco’s Q3 Profit Misses Street Estimates For The First Time In Six Quarters
Hindalco’s net sales rises the most in eight quarters.
Indian billionaire Kumar Mangalam Birla-promoted Hindalco Industries Ltd. reported a net profit of Rs 320.6 crore in the third-quarter of financial year 2017, aided by lower costs and higher aluminium prices which is used in a whole host of products including beer cans to cars.
The company had posted a net loss in the same period last year. Sales rose 14.5 percent to Rs 9,827.3 crore, from Rs 8,587 crore in the same period, last financial year, largely driven by an increase in average realisations from both its aluminium and copper divisions, higher aluminium volumes and a weaker currency in the third quarter.
The 14.5 percent rise in revenue is the highest in last eight quarters.
Nineteen analysts polled by Bloomberg had expected Hindalco to report a net profit of Rs 396 crore and sales of Rs 9,401 crore.
This was also the first time over the last six quarter that the company has missed the street estimates on the bottom line.
The earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 1.8 times to Rs 1,185 crore, while the EBITDA margin expanded by 420 basis points to 12 percent on the back of benign energy prices and recovery in aluminium prices.
Finance cost rose marginally to Rs 588 crore in the third quarter, while long term borrowings rose 1 percent.
Segmental Performance
Aluminium production rose 8 percent, year-on-year during the third quarter to 320 kilo tonnes said the company.
Hindalco’s aluminium business contributed Rs 4,917 crore to revenue and Rs 876 crore to earnings before interest, tax and depreciation and amortisation (EBITDA) in the quarter ended December. EBITDA jumped 2.5 times compared to last year on the back of rising aluminium price on the London Metal Exchange (LME). Average LME aluminium prices have risen 14 percent year-on-year during the December quarter.
Revenue from Hindalco’s copper division rose 19 percent to Rs 5,000 crore, while EBITDA declined by 6 percent to Rs 330 crore, year-on-year. Production remained flat at 94 kilo tonnes. Revenue spiked on account of higher realisations, and was only marginally negated by lower by-product prices.
Novelis’ Performance
Hindalco’s subsidiary, Novelis, the world’s largest producer of aluminium sheets and recycler, reported a net profit of $63 million – a jump of 10.5 times on the back of stronger EBITDA, as well as lower interest and capital expenditure. Interest expenses reduced by 18 percent, year-on-year to $67 million after the company refinanced two senior note issuances during the second quarter of financial year 2017. EBITDA for the third quarter of financial year 2017 increased to $251 million from $212 million during the same period last year.
Novelis has also refinanced its floating rate term loan facility of $1.8 billion in January, 2017 which is due in June 2022. This will lead to a savings of $24 million in the fourth quarter of the current financial year. Refinancing of long term debt will result into annual cash interest savings of approximately $80 million.
Hindalco is the second top gainer after Vedanta Ltd. on the Nifty Metal Index, rising 206 percent in the last 12-months. It is also the second most preferred stock after Vedanta, amongst metal stocks with 75 percent of the analysts tracked by Bloomberg having a ‘buy’ rating on the stock.