Hindalco’s Apr-Jun consol net sales seen up but volume may fall

8 Aug 2022

Hindalco Industries is expected to report a consolidated net profit of 30 bln-32.3 bln rupees for the quarter ended June according to estimates by three brokerage houses. The company will declare its quarterly results on Wednesday.

The net profit estimates put it higher by 8%-16% than that a year ago.

Analysts see the bottomline getting propped up by higher selling prices of aluminium. However a one-time tax gains in the year ago period and elevated input costs during the quarter will be a drag on the net profit growth.

The estimates were made before Novelis Inc, a wholly-owned overseas subsidiary of Hindalco, declared its results for Apr-Jun on Wednesday.

Novelis reported a near-flat net profit of $307 mln due to high operating costs. This is likely to have a major impact on Hindalco’s consolidated net profit.

Novelis net profit contributed nearly 60% of Hindalco’s consolidated net profit in the year ago quarter, back of the book calculations show.

The estimates by three brokerage houses peg Hindalco’s consolidated net sales between 524.4 bln rupees and 534 bln rupees, 27%-29% higher than a year ago.

It seems very likely that Hindalco’s net sales growth will be above 20% in Apr-Jun since that of Novelis was 32%. But although the $5.1 bln net sales reported by Novelis represented a sharp rise the company’s sales volume was down by 1% to 962,000 tn.

Higher realisations, though, helped drive the overseas subsidiary’s sales

Hindalco’s domestic aluminium sales are unlikely to register high increase. According to Axis Securities, the company’s domestic aluminium production may stay at 322,000 tn, up only marginally from 319,000 tn a year ago.

Of Hindalco’s consolidated net sales in the year ago quarter Novelis’ share was nearly two-thirds.

Sequentially, the estimates for Hindalco’s consolidated net profit and net sales levels are both lower.

The Novelis figures for Apr-Jun indicate a mixed trend though. Novelis’ net profit jumped 38% on the quarter while its net sales were up by just 5% and sales volume was down 3%.

When the company details its earnings on Wednesday, comments on the aluminium and alumina price trend going forward and input cost pressures will be monitored by investors.