The company's quarterly EBITDA (earnings before interest, tax, depreciation and amortisation) on a consolidated level at Rs. 3,918 crore, fell by 8% versus Q2FY19.
A sharp fall in aluminium realisations and an exceptional item on account of the shut-down of a German facility led to a steep decline in Hindalco Industries’ consolidated net profit, by 33% on a year-on-year basis, to Rs. 974 crore for the second quarter ended September 2019. The numbers include Utkal Alumina International’s financials as well.
During Q2FY20, the company shut down one of its German foil plants.
Consolidated revenue from operations fell 9% y-o-y to Rs. 29,657 crore. The company’s quarterly EBITDA (earnings before interest, tax, depreciation and amortisation) on a consolidated level at Rs. 3,918 crore, fell by 8% versus Q2FY19. Aluminium realisations were down 14% on a y-o-y basis in line with lower metal prices, while TC/RC charges in copper fell by 10% impacting the operating income.
However, while strong performance at Hindalco’s US-arm Novelis drove consolidated business, weak aluminium prices adversely affected domestic business. On a standalone level, including Utkal Alumina, the company’s net profit declined 77% y-o-y to Rs. 167 crore, while the EBITDA fell 35% y-o-y to Rs. 1,251 crore.
Commenting on the demand outlook, Satish Pai, managing director, said in India “demand is a worry”. While the government seems to be “seized of the matter”, and has announced various measures for the housing and construction and infrastructure sectors, momentum needs to start picking up on the ground.
Meanwhile, the company has cut its capex guidance from Rs. 2,700 crore announced at the beginning of the financial year to Rs. 2,000 crore.
“We are not going ahead with the projects that we had expected to start in the second half of the year due to weak alumina,” Pai said. The projects were in the downstream segment of aluminium.
On closing the Aleris transaction, Pai said the company is positive on closing the merger by January 21, 2020. The merger has received a conditional approval from the European Commission subject to divestment in the Duffel plant. Pai said the company has received interest from buyers in Europe and may sign a definitive agreement by November. The Duffel plant produces automotive body sheets and specialty in a 50-50 ratio approximately, analysts said. The company announced the transaction in middle of 2018.
On the approvals in the US, Pai said Novelis is undertaking arbitration with the Commission to determine the inclusion of Lewisport facility in the merger. While the company is confident of holding on to Lewisport facility, in the likelihood of it having to sell Lewisport, Pai said it will not impact the attractiveness of the transaction. As for China, Pai said he does not foresee any challenges there as there is no anti-trust issue.
Novelis has already secured commitment from banks for financing Aleris acquisition. Pai had said that the company has secured $775 million five-year term loan, while $1.5 billion will be by way of a bridge loan.
The acquisition has been financed by a consortium of Asian banks, which include State Bank of India and Axis Bank. The company announced the acquisition of Aleris for $2.58 billion in July. He added that while the company will have to pay $2.58 billion for the transaction, it will adjust sale value of the European asset and the US, if any, in the transaction value.