Categories Concall Highlights, Earnings, Industrials

Hindalco Industries Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Hindalco Industries Ltd (HINDALCO) Q2 FY24 Earnings Concall

  • Financial Performance
    • Consolidated Q2 revenue rose 2% sequentially to INR54,169 crores.
    • Consolidated EBITDA increased 14% QoQ to INR6,896 crores.
    • Novelis, India aluminum downstream, and copper business recovered strongly.
    • Consolidated PAT declined 11% sequentially to INR 2,196 crores.
  • Novelis Performance
    • Novelis Q2 shipments rose 6% QoQ to 933 kt on higher beverage can volumes.
    • EBITDA increased 15% YoY to $484 million on higher volumes and scrap usage.
    • EBITDA per ton rose 8% sequentially to $519.
  • Copper Business Performance
    • Strong Q2 performance driven by higher volumes of copper cathodes and rods.
    • Also benefited from byproduct credits like gold, silver, sulfuric acid.
    • But will moderate to INR500-550 crores EBITDA per quarter going forward.
  • Aluminum Business Costs
    • Coal costs down 15% QoQ in Q2, costs of production down 6%.
    • Seeing some upward pressure in coal costs in Q3 but other costs trending down.
    • Guiding for flattish costs of production in Q3 versus Q2.
  • Aluminum Price Outlook
    • Demand in China remains steady, in significant deficit.
    • Macro environment sensitivity causing price volatility.
    • Sticking to price outlook of $2100-2300 per tonne, expect upside if macros improve.
  • Aluminum Hedging Strategy
    • Not taking forward positions given price outlook positivity.
    • Hedged 5% for FY25 using zero collar strategy.
    • Collar has floor at $2200 per tonne and ceiling at $2517 per tonne.
  • Alumina Sales
    • Sold 138 kt of alumina in Q2.
    • Will see higher 3rd party sales in coming quarters.
    • As 350 kt brownfield expansion at Dahej onstream.
  • New Alumina Refinery Project
    • Planning 2 mtpa alumina refinery in Odisha in two 1 mtpa phases.
    • First phase capex slightly below INR 6000 crores, to be completed in 36 months.
    • Secured bauxite supply from Odisha government, have land and clearances.
    • Plan to sell alumina in third party market currently.
  • Coal Sourcing
    • Linkage coal was 53% of mix in Q2, e-auction 40%, own mines 5%.
    • Good materialization of linkages at 90% enabled lower costs.
    • Power demand increased recently, impacting October costs.
    • Guiding for flat aluminum production costs in Q3 vs Q2.
  • Coal Mine Update
    • Chakla coal mine on track for October 2024 box cut.
    • Won adjacent Meenakshi West mine, awaiting clearances for Meenakshi.
    • If both secured, will take call on optimizing usage.
  • Alumina Strategy
    • Going long on alumina due to attractive regional market.
    • Focusing on Middle East smelters within regional proximity.
    • Securing bauxite supply to support refinery expansions.
    • Returns are healthy based on index-linked pricing to LME.
  • Utkal Alumina Refinery
    • Currently operating Utkal refinery at 2.5 mtpa capacity.
    • Expanding further would deplete Baphlimali bauxite mine reserves fast.
    • Therefore, new Odisha alumina project to preserve Baphlimali life and secure additional bauxite source for the long term.
  • Coal Linkage Auctions
    • Secured Tranche 2 & 3 of expired linkages in previous auctions.
    • Now focused on renewing Tranche 4 expiring in January 2023.
    • Tranche 4 is another 3 mt, auction process ongoing.
    • Managed to renew prior tranches at moderately higher prices
  • Mark-to-market Losses
    • MTM losses of INR 2272 crores on cash flow hedges.
    • For LME, currency and commodity hedges undertaken.
    • Includes hedges by both India and Novelis operations.
    • No P&L impact currently, can change next quarter.
  • Capex Spending
    • Novelis FY23 capex revised down to $1.5-1.8 billion, at lower end of range.
    • India FY23 capex INR4,000-4,500 crores. FY24 guidance will come in February.

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