Hindalco reported a 24 per cent decline in its consolidated net profit in the third quarter ending December 2019, but a better-than-expected performance by aluminium converter Novelis cushioned the fall at Aditya Birla Groups flagship metals business that now generates two-thirds of its sales and profits beyond home.Hindalco reported a consolidated net profit of 1,062 crore for the quarter, compared with 1,394 crore during the same period last year.
Consolidated revenue declined 12 per cent to 29,197 crore from 33,213 crore.Excluding Novelis, Hindalcos Ebitda fell 30 per cent on year, but consolidated Ebitda was down only 10 per cent, against expectations of a 13-15 per cent decline.
Incidentally, Novelis Ebitda climbed 6.5 per cent on year, marking the 18th consecutive profitability growth quarter for the company.
Its December quarter earnings expanded 31 per cent, while sales of the two main product categories beverage cans and automotive body sheets rose 4 per cent and 3 per cent, respectively, despite tepid global demand.In the near to medium term, Novelis should continue to limit any downside to the stock, but Hindalcos domestic aluminium business is crucial to ensure a revival in its stock price.
On a standalone basis, the company reported a 64 per cent drop in profit to 262 crore, while revenue was down 14 per cent to 9,977 crore, with lower aluminium prices globally denting profitability.The London Metal Exchange was down 15 per cent-16 per cent over last year, and 90 per cent of the decline in profit can be attributed to lower LME (London Metal Exchange) prices.
In aluminium, it was purely due to (declining) LME while in copper, it was due to lower volumes because we had production issues, Hindalco managing director Satish Pai told ET.The cost of production in aluminum has fallen 5 per cent due to the coal linkages received in 2019, Pai said.
He also said that the cost of production will further come down by 2 per cent for the upcoming quarter.Profit in the copper vertical declined 48 per cent on-year, with Hindalco taking an unplanned shutdown in a weak market.
The demand for aluminium in Q3 was the lowest we have seen; it went down 14 per cent YoY.
Aluminium grows 7 per cent YoY.
Even copper demand grew by only 2 per cent, said Pai.