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Quarter-3 Results of Aditya Birla Group's Hindalco Industry: Profit Declined Sharply on Account of Elevated Input Costs

Hindalco Industry, Aditya Birla Group's principal company in the metals industry, reported a steep decline in quarterly profit in its Indian operations on account of the moderating aluminium prices and rising fuel costs that soared approximately 75% year on year on Thursday, 9th February.

The copper and aluminium manufacturer's Quarter 4 - 2022 profit was approximately 64% lower in comparison to the prior year. Meanwhile, the revenue increased by circa 5% to INR 18,983 crore.

The net profit for fiscal quarter 3 plunged 63% to INR 1,362 on a consolidated basis comprising numbers from associate companies and subsidiaries. Meanwhile, the revenue grew 6% to INR 53,151 crore. The earnings, excluding tax, interest, amortisation and depreciation, decreased by 50% to INR 3,930 crore.

Hindalco Industry's United States-based subsidiary Novelis reported bleak numbers on Monday, 6th February, as sales declined.

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As per the managing director, Satish Pai, the company is expected to witness an improvement in earnings in Q1-2023 as aluminium price increases, fuel prices stabilise, and fear of an American recession abate. Even though Q3-2022 was more challenging than expected, the demand for the copper industry stayed firm, and the worst was over for Novelis. Satish Pai expects Q4-2022 to be promising since coal prices are lower and the aluminium prices on the LME are above the 2500 USD/Tonne mark.

The aluminium prices were relatively lower during the quarter, averaging approximately 2,399 USD/Tonne on the LME in comparison to 2,700+ USD/Tonne in the prior year. Novelis was Hindalco Industry's worst-hit business as its Ebitda halved to circa INR 1,591 Crore in comparison to the previous year.

The business was negatively impacted since key aluminium can buyers in the United States destocked their inventories in anticipation of high consumption.

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The Indian upstream business's Ebitda declined by approximately 25% to INR 2,847 crore.

Hindalco Industry's downstream Indian aluminium business produces value-added products from metal, witnessing its Ebita increase by 24% to INR 157 crore. The company's copper business witnessed the most significant improvement, with Ebitda soaring by 40% to INR 546 crore.

Satish Pai stated the company is planning to make a capital expenditure of approximately INR 2,500 crore in 2023 in order to meet the lower end of the guidance the Hindalco Industry provided at the onset of the year. However, Novelis's capex has been lowered to USD 800 million from USD 1.35 billion.

Hindalco Industry expects FY 2024 to be promising as a result of the subsiding fear of recession in the United States. Furthermore, the demand and supply balance is expected to well with the optimistic outlook of the Chinese economy. Satish Pai expects Novelis to recover with the buyer's anticipated end of the destocking of aluminium cans by FY 2024.

On Thursday, 9th February, Hindalco Industry's stock stood 1.85% higher on the BSE.

The Quarter 3 Profits of Hindalco Industry dropped by 63% Year-On-Year To INR 1,362 Crore, and the Revenue Increases by 6% with Higher Volumes

The metal flagship of Aditya Birla Group, Hindalco Industries, reported a consolidated net profit for Q4-2022 of INR 1,362 crore, which is a 63% year-on-year decrease. The consolidated net profit in the corresponding quarter of the previous year was approximately INR 3,675.

Meanwhile, Hindalco Industries' operation revenue was approximately INR 53,151 crore, a 6% year-on-year increase in comparison to the INR 50,272 revenue in the corresponding quarter of last year. The revenue was propelled by stable operational performance and high volumes of the Indian business.

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The steep decline in the bottom line was caused by poor operational performance. As per Hindalco Industries' regulatory filing, The aluminium producer witnessed a 48% decline in operating profit at INR 3,930 crore.

As per the article by Procurement Resource, Hindalco Industries, a subsidiary of the Aditya Birla Group and a top aluminium and copper manufacturer, witnessed a 64% decrease in its Q4 2022 profit, owing to moderating aluminium prices and rising fuel costs. The revenue increased by approximately 5% to INR 18,983 crore. The American subsidiary Novelis also reported a decline in sales.

The managing director, Satish Pai, anticipates improvements in earnings in Q1 2023 as aluminium prices increase and fears of an American recession decrease. The Ebitda for Novelis halved to INR 1,591 crore, but the Ebitda for Hindalco's copper business witnessed a 40% increase to INR 546 crore. Hindalco Industries plans to spend INR 2,500 crore in 2023 and expects FY 2024 to be promising, with a positive outlook on the Chinese economy and the anticipated end of aluminium can destocking.