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.