Hindalco drops over 4.3% intra-day, its steepest fall since 26 September

Hindalco Industries

Shares of Hindalco Industries suffered its steepest intra-day fall of 4.3 percent in the early hours of trade on Wednesday following reports of the company trimming the capex guidance for its US subsidiary Novelis.

Hindalco has lowered the capex outlook for Novelis for financial year 2022-23 to a range of $900 million to $1 billion from the previously guided $1.3-1.6 billion. This was done to pace the strategic capital expenditure. It also trimmed down its EBITDA/ tonne guidance over the concall.

For the quarter ended September 30, 2022, net income or profit after tax (PAT) decreased 23 percent on year-on-year (YoY) basis to $183 million.

For the quarter under review, the company reported an 8 percent decline in adjusted earnings before interest, taxes, depreciation and amortisation (EDITDA) to $506 million, compared to $553 million in the prior year period, primarily due to higher energy and other operating costs driven by geopolitical instability, inflation, and global supply chain disruptions, as well as unfavourable foreign exchange translation.

“We delivered a solid second quarter, despite challenging headwinds from inflation, stronger US dollar, and reduced metal benefits, with good operational performance that allowed us to capture robust end-market demand in the quarter and increase the total shipments,” said Steve Fisher, President and CEO, Novelis Inc. "Although the current macro-economic environment is uncertain, we believe long-term demand for sustainable, lightweight, infinitely recyclable aluminum remains intact,” he added.

The company’s net sales increased 17 percent to $4.8 billion for the second quarter of the fiscal year 2023, compared to $4.1 billion in the prior year period, primarily driven by a 2 percent increase in total flat rolled product shipments to 984 kilotonnes, increased product pricing, favourable mix, and higher average aluminum prices, said the press release.

Concall Highlights:

1. See near-term cost headwinds of $75-125/t on EBITDA (from $525/t levels). Sustainable EBITDA guidance unchanged at USD525/t

2. Key elements of cost headwind: Energy inflation, high cost inventory and unfavorable metal price lag.

·3. EBITDA/t likely to spring back to the guidance level once the re-negotiated contracts (from QYFY23) take effect. Pass through will start happening in Jan. Full impact visible in two quarters.

4. Expect significant working capital unlocking in H2FY23. FY23 free cashflow guidance at $500 million

6. Trimmed FY23 capex to USD0.9-1bn (earlier USD1.3-1.6bn) in line with cash generation

7. Strong USD led to currency headwind of $ 22 million in Q2FY23