Hindalco Q2 profit jumps nine times, but not just due to high aluminium margins

Hindalco Industries Ltd on Friday reported a staggering jump of 783%, or 8.8 times, in second-quarter profit from a year earlier, thanks in part to higher sales and a decade-high margin on its India aluminium business.

The copper and aluminium arm of Aditya Birla Group posted a consolidated profit after tax of Rs 3,417 crore for the three months through September 2021, up from just Rs 387 crore during the same quarter last year. 

On a sequential basis, net profit was up 23% from Rs 2,787 crore in the April-June quarter.

The company said profit climbed because of favourable macroeconomic environment, improved product mix, higher sales volumes and better operational efficiencies. Higher margins in its aluminium business helped, too.

Hindalco’s North American aluminium unit Novelis achieved an adjusted EBITDA per ton of $571 in the second quarter, up 165 from $493 a year earlier. Its India aluminium division’s EBITDA margin reached more than a decade high of 42%, Hindalco said.

But these weren’t the only reasons for the sharp jump in net profit. The bottom line received a boost also because the year-earlier quarter had recorded a loss of Rs 1,398 crore on the sale of assets in the US.

Hindalco unit Novelist had sold its automotive aluminium body sheet plant in the US to private equity firm American Industrial Partners for net cash of about $171 million, roughly half the asset’s book value, to receive anti-trust approval for a $2.8 billion deal to acquire Aleris. This loss had dragged down Hindalco’s consolidated profit in the July-September quarter of 2020. And the absence of any such loss this year boosted the bottom line.

As a result, profit after tax from continuing operations rose 92% to Rs 3,427 crore from Rs 1,785 crore a year earlier.

Hindalco Q2: Other highlights

1) Consolidated revenue jumped 53% to Rs 47,665 crore from Rs 31,237 crore a year earlier.

2) Record quarterly EBITDA at Rs 8,048 crore, up 56% YoY from Rs 5,171 crore.

3) Adjusted EBITDA for Novelis was up 22% to $553 million on higher volume and favourable product mix.

4) EBITDA for India copper unit rose 45.4% to Rs 352 crore.

5) India aluminium unit records EBITDA of Rs 3,247 crore, up 173% YoY.

6) India aluminium revenue up 63% YoY to Rs 7,812 crore on higher global prices and sales.

7) Net debt falls to at Rs 48,011 crore from Rs 58,001 crore.

Hindalco management commentary

Hindalco managing director Satish Pai said that the company reported “standout performances” across all business segments and that the record-breaking numbers were “an affirmation of our fully integrated business model, which powers our performance in both upstream and downstream markets.”

Pai also said that the company’s Indian aluminium business achieved an EBITDA margin of 42%, which was close to the global record. 

He further said that the copper business “delivered the highest-ever quarterly sales in Q2, with both smelters running optimally” to meet robust market demand.

Novelis achieved a record EBITDA per ton “driven by higher volumes and favourable metal prices,” Pai said.