Release Date: November 12, 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) retained its leadership position in the SMC Corporate Sustainability Assessment ranking for the fifth consecutive year with an improved score of 87 out of 100.
- The company achieved a significant milestone in recycling, with 79% of total waste generated being recycled and reused in Q2 FY25.
- Hindalco's consolidated business segment EBITDA increased by 24% year-on-year to INR8,564 crores, with overall reported EBITDA up 49% year-on-year at INR9,100 crores.
- The India aluminum business reported a 79% year-on-year increase in EBITDA, supported by lower input costs and favorable macroeconomic conditions.
- Hindalco's copper business delivered its best-ever performance with a quarterly EBITDA of INR829 crores, up 27% year-on-year due to operational efficiencies and higher byproduct realizations.
Negative Points
- Novelis' quarterly EBITDA decreased by 5% year-on-year due to reduced metal benefits from rising aluminum scrap prices and an unfavorable product mix.
- The aluminum specific GHG emissions remained flat compared to the same period last year, indicating a need for further improvement in emissions reduction.
- The LTIFR (Lost Time Injury Frequency Rate) was recorded at 0.29 in H1, higher compared to H1 of the last financial year, highlighting safety concerns.
- The India downstream aluminum EBITDA per tonne decreased by 11% year-on-year due to an unfavorable product mix.
- The global economic environment presents downside risks from increasing geopolitical tensions and financial market volatility, which could impact future performance.
Q & A Highlights
Q: Can you provide details on the CapEx for the alumina smelter and copper projects, and how the spending is scheduled over the next few years?
A: The aluminum smelter expansion at Aditya and the copper smelter will each require roughly INR1 billion. Including these, our declared projects will total between INR4 billion and INR5 billion. These projects will occur over the next 3 to 3.5 years, with potential debt addition of INR1 billion to INR1.5 billion in India, which should be manageable given our current financial position.
Q: What is the expected timeline for the completion of these projects?
A: The aluminum smelter is expected to come on stream in October 2027, and the copper smelter in 2029. The alumina refinery is anticipated to be operational in the 2027 calendar year.
Q: Regarding Novelis, can you quantify the impact of scrap price pressures on margins and EBITDA per tonne?
A: We are currently assessing the situation and prefer not to quantify the impact prematurely. We are implementing mitigation actions and will provide more information once we have clearer visibility.
Q: How does the increase in scrap prices affect your contracts, and is there a possibility of passing these costs to customers?
A: Our contracts typically pass through aluminum price costs and market premiums to customers. While energy inflation is included in contracts, scrap price differentials impact our P&L directly. We are working on mitigating these impacts through various strategies.
Q: Can you provide insights into the global alumina demand-supply balance and the factors keeping prices elevated?
A: Disruptions in bauxite supplies from Guinea and Alcoa's force majeure in Brazil have tightened the market, causing alumina prices to rise to $700 per tonne. Most of our alumina is priced on an N minus 1 basis, with about 20% on spot pricing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
