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Last Updated : Aug 14, 2020 05:54 PM IST | Source: Moneycontrol.com

Hindalco MD says cautiously optimistic about demand rebound

The continued recovery in demand in the coming quarters will be critical, said Satish Pai

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Hindalco Industries is cautiously optimistic of a demand rebound for its products as the economy begins to find its foot post the COVID-19 led lockdown.

While the second quarter has seen many of its customers resuming production, demand from auto and construction - excluding those driven by government spending - continue to lag, said Managing Director Satish Pai.


"Demand has picked up well in sectors such as packaging, industrials and pharmaceuticals. In auto, the two-wheeler segment is doing well," Pai said, during the conference on August 14.

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Better demand will help the aluminium major improve upon its first-quarter performance. Hindalco reported a net loss of Rs 40 crore on a standalone basis for June quarter as revenue was hit by COVID-19-led lockdown. The company had reported profit at Rs 23 crore for June quarter 2019.

Standalone revenue in Q1 FY21 declined 26.2 percent to Rs 7,420 crore compared to the same period last year.

Weak domestic demand had seen the company exporting 80 percent of its production in the first quarter. This should come down to 60 percent in the second quarter, said Pai.

The company had continued to operate its smelters at 90 percent capacity during the lockdown, helping it to ship products overseas. At the same time,  the inventory remains high and a better domestic demand will be critical to bringing it down.

Globally, a sharp rebound in China - the largest consumer of the metal - has helped prices trend higher. A Reuters report said Fitch Solutions has revised its three-month LME aluminium average price forecast for 2020 to $1,690 a tonne from $1,600 earlier.

Pai noted that the prices were moving up because of better sentiment, especially driven by the demand from the Chinese market, where auto sales have recovered smartly. "The prices are right now driven by sentiment, and not by fundamentals of aluminium demand and supply," Pai said.

Capex plans

On a consolidated basis, Hindalco reported a loss of Rs 709 crore, as compared to a profit of Rs 1,063 crore in the same period last year. This was because of exceptional expenses including those related to the Aleris acquisition by Novelis, the North American unit of Hindalco.

Novelis completed the acquisition of Aleris on April 14, 2020, and the integration process has begun, Hindalco said.

" Q1 consolidated PAT for continuing businesses before tax-effected exceptional and special items stood at Rs 139 crore. On account of certain special items — including charitable contributions towards COVID relief, ex-gratia paid to employees for their contribution during COVID, and Aleris acquisition costs — the reported PAT was impacted. The company, as a consequence, reported a loss of Rs. 709 crore for the quarter. This also includes Rs 140 crore loss attributed to operations of Novelis (Lewisport and Duffel) that are in the process of divestiture," the company said in a statement.

On capital expenditure for the year, Pai said while Hindalco's outlay of Rs 1,500 crore for the year will continue, Novelis has reduced it by $50 million. "Novelis had earlier planned a capex of $500 million. Now, along with Aleris, the capex has been revised to $450 million," Pai said.
First Published on Aug 14, 2020 04:46 pm