Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hindalco Industries Ltd (BOM:500440, Financial) achieved a 42% year-on-year increase in consolidated business segment EBITDA, reaching INR8,578 crores.
- The company reported a 31% year-on-year rise in overall EBITDA, amounting to INR7,992 crores.
- The copper business delivered its best-ever performance with an all-time high quarterly EBITDA of INR805 crores, up 52% year on year.
- Hindalco Industries Ltd (BOM:500440) has made significant progress in sustainability, achieving 97% recycling and reuse of total waste generated.
- The company maintains a strong balance sheet with a net debt to EBITDA ratio well below two times, at 1.24 as of June 2024.
Negative Points
- The company experienced a 4% year-on-year decline in upstream aluminum shipments.
- There was a recorded fatality of a contract worker in the Indian operations during the quarter.
- Downstream aluminum EBITDA was down 19% year on year, impacted by an unfavorable product mix and lower realization.
- The Novelis Europe plant in Sierre, Switzerland, faced significant flooding, halting production since June 30th.
- The company anticipates flat to a 1% increase in costs for Q2 due to higher spot auction prices of coal and increased caustic prices.
Q & A Highlights
Q: Can you guide us on the expected movement of various cost items for the aluminum business in the next quarter?
A: On a consumption basis, costs for Q1 compared to Q4 were down by 2%, mainly due to reduced coal and carbon costs. For Q2 versus Q1, costs are expected to be flat to 1% up due to seasonal increases in spot auction prices of coal and caustic prices.
Q: What is the mix of e-auction and linkage coal, and is there potential for further cost reduction from coal?
A: Currently, we have about 48% linkage and 49-50% e-auction. This mix is unlikely to change significantly in the coming year. Significant cost reduction is expected when our own Chakla mine starts operations.
Q: Can you elaborate on the upstream projects in the aluminum division and the expected CapEx for FY 25?
A: We are focusing on alumina expansion in Orissa, a new copper smelter, and the 180 pots expansion in aluminum. Each project is estimated to cost around INR8,000 crores. These projects will be executed based on statutory clearances and practical execution timelines.
Q: What prompted the strong performance in the copper division, and what should be the sustainable EBITDA number going forward?
A: The strong performance is due to increased sales of copper rods and better market realization. The baseline EBITDA for copper is expected to be around INR600 crores, with some fluctuations due to derivative accounting.
Q: What is the expected steady-state profitability for the downstream aluminum business?
A: Once fully commissioned, the downstream aluminum business is expected to achieve an EBITDA of around $200 per tonne.
Q: Can you provide an update on the commissioning of coal blocks?
A: We are working through the process of obtaining Stage 1 and Stage 2 forest clearances and other necessary approvals. The process is challenging, but we are actively seeking assistance from the ministry to expedite it.
Q: What is the total bauxite requirement, and how will it be sourced?
A: We are long in alumina by nearly 800,000 tonnes. We source 10-12% of our bauxite from Jharkhand and the rest from Odisha. We have signed an MOU with OMC for bauxite supply for our new alumina refinery project.
Q: What are the timelines for the alumina and copper smelter projects?
A: The alumina project will take 24-26 months from the point of breaking ground, which is expected soon. The copper smelter project is still under evaluation, and any such project typically takes a minimum of 36 months to complete.
Q: How will the company approach CapEx for these projects?
A: Execution risk and obtaining clearances are significant factors. Projects will likely not happen simultaneously due to these constraints. Financially, we are well-positioned with strong cash flows and treasury reserves to support the CapEx without stressing the balance sheet.
Q: What is the current status of the copper recycling project?
A: The public hearing for the copper recycling project was successfully concluded, and we expect to break ground by October. The project will have a capacity of 50 Kt and is located near our existing smelter in Dahej.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
