Hindalco Apr-Jun PAT and sales rise strongly, but margin contracts

10 Aug 2022

Hindalco Industries Ltd reported a strong increase in its net profit and sales for the June quarter but high operating costs weighed on its operating margin.

The metal company's consolidated net profit in Apr-Jun rose 48% on year to 41.2 bln rupees, its highest ever, topping analyst estimates of 30-32.3 bln rupees. Its consolidated net sales were up sharply by 40% on year to 580.2 bln rupees which too topped analyst estimates of 524.4-534 bln rupees.

A substantial rise in energy costs and raw material expenses dashed any hope of operating margin expansion. But higher price realisations ensured that the consolidated operating profit, defined as earnings before interest, tax, depreciation and amortisation, was up 37% on year to 84.3 bln rupees.

The company's consolidated operating margin contracted to 14.5% in Apr-Jun from 14.9% a year ago.

The weak operating performance of Novelis Inc, a wholly-owned overseas subsidiary of Hindalco, weighed on the metal company's operating profit and margin. Novelis declared its June quarter results on Aug 3.

In Apr-Jun, flat shipment volume and high operating costs restricted Novelis' operating profit growth to just 1% on the year to $561 mln. In rupee terms, Novelis' operating profit went up to 43.3 bln rupees in the June quarter from 40.9 bln rupees a year ago.

Novelis' operating margin contracted sharply to 11% in Apr-Jun from 14.4% a year ago. The company attributed the sharp rise in operating costs to high energy costs.

Hindalco's consolidated power and fuel expenses were up 67% on year to 40.2 bln rupees while raw material expenses were up 36% on year to 353.1 bln rupees.

Segmentally, the aluminium upstream segment recorded a moderate increase in shipment volume in Apr-Jun to 333,000 tn from 325,000 tn a year ago. But aluminium downstream sales volume fell 5% on year to 78,000 tn.

Copper cathode rod sales jumped 73% on year to 80,000 tn while copper metal sales increased to 101,000 tn from 80,000 tn.

Sequentially, Hindalco's consolidated net profit was up only 7% and net sales were up by only 4%.

The consolidated net debt of the company went up to 421.9 bln rupees on Jun 30 from 391 bln rupees on Mar 31.