By Bhavik Nair & Shashank Dipankar
Hindalco posted a 28% fall in its consolidated net profit for the quarter-ended June. Satish Pai, MD, Hindalco Industries, tells FE’s Bhavik Nair & Shashank Dipankar that the second quarter will be better than the first. Pai also indicated that the Aleris acquisition will close in the third quarter of FY20. Excerpts:
How did the quarter go for the company?
Novelis had a fantastic quarter, but the Indian business was affected by the LME prices, going down. As a metals company, compared to any of our competitors, our results are much better because of our diversified business model. Our standalone profit is down because the LME was down.
Recently, there was a report which indicated that Novelis might have to make some concessions to the EU with regard to the Aleris acquisition. Your comments.
We have been publicly saying that we have been working with competition authorities in the EU to find remedies of whatever the issues are to close the transaction. That will probably happen in Q3FY20. Trade unions have come out publicly and supported us. We are confident that this issue will be resolved.
How much impact the trade wars will have on businesses, going forward?
I don’t know if this is already the worst impact, which we have seen. The LME has been down since January. It is down by about 21%. There are many who feel that this is a bottom for LME at least. The demand side in China has been badly hit. The Chinese economy is actually seeing quite a lot of negative impact of this trade war. The Chinese government is putting in a big stimulus package. We have to see if that can stimulate their economy.
What about cost pressures?
The cost pressure is actually down. Quarter-on-quarter, our cost of production was down 3%. Not only the LME, even all metal and commodities prices are down as well. Our input cost is heading down.
Could you give us a picture of your downstream expansion plans?
All our downstream expansion plans are still on track. Today, we have about 300 KT of downstream aluminium and we are looking to convert it to 600 KT of downstream in the next five years. We are working on two big projects – one of them is big extrusion plant in Gujarat for which we are starting the land acquisition. We are going to expand the Hirakud downstream by doubling it in Sambalpur area. Our brownfield alumina expansion is on progress and we will be finishing it by December of next year.
What is your outlook for FY20?
Q2 will be better than Q1. The copper maintenance shutdown, which we had, also affected our profits. Novelis will have a great year and continue with the type of results they have. Copper will also get better once the shutdown is finished. The LME is dependent on global macro economy like whether the US-China trade war gets sorted out or not. The downturn in commodities started in December of last year. If you look at any of these metal cycles, the downturn doesn’t last normally more than a year.
