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Financial Snapshot:
Concall KTA's
1. Financial Highlights Consolidated PBT (Before Exceptional Items) almost doubled at Rs. 6,508 Cr ( up 94% vs FY17) with Novelis reporting highest ever shipment at 3.2 mn tons in FY18. This robust performance was supported by stable operations and improving efficiencies across businesses. Hindalco has strengthened its Balance Sheet by prepaying Rs. 7,966 Cr. of long term project loan at Hindalco (including Utkal) in FY18 thereby bringing down the interest expense by 21% on standalone basis .
2. Novelis (Overseas subsidiary of Hindalco) Novelis accounted for 62.17% of the topline while it contributes 52.59% of the EBITDA in FY18. It is a producer of rolled aluminium products and delivers solutions for global applications such as beverage cans, automobiles, architecture and consumer electronics. Novelis has reported an increase of 4% in product shipments at 3.2 mn tons in FY18, Auto shipments up 11% FY18 vs FY17. Share of Auto shipments increase from 18% in FY17 to 20% in FY18. Novelis has completed JV to establish Ulsan Aluminum by selling approximately 50% of its ownership of the Ulsan, South Korea plant, to Kobe Steel.
3. Hindalco + Utkal Production Cost of Aluminium was at its peak in Q4FY18 surpassing management’s expectations of 2-3%. However, HIL’s coal costs were flat on account of higher production of linkages. In the first half of FY19, these production costs are expected to be sustained with higher production levels.
4. Copper Business Cathode and CC Rod production at 410 Kt and 156 Kt in FY18 v/s 376 Kt and 150 Kt in FY17 up by 9% and 4% respectively. Copper EBITDA declined to Rs. 329 Cr in Q4 FY18 vs Rs. 421 Cr in Q3 FY18 primarily due to two reason - DAP production was half of what it should have been in Q4 and to fix this company had taken a planned shut down - High imports in Indian market forced Hindalco to cut down premiums charged on TCRC basis. Q1FY19 will be impacted by smelter-3 shutdown in June-July but they will recover strongly for the remaining financial year. EBITDA projections for Q4 FY19 can be moderately be better than the current quarter at the Rs. 350-370 cr range when the ramp-up of CC3 becomes effective.
5. Aluminum Industry LME aluminum prices and premiums have increased drastically in the international market on account of robust demand, fear of trade war and disruption emerged from sanction on Rusal. However, due to duties imposed on Chinese imports in the US certain amount of dumping is being witnessed in India. The premiums in Korean and Japanese markets have jumped up due to low stock availability however, on the Indian side there is lot of oversupply in the market due to imports. The international premiums are not being realized in the Indian domestic market.
6. Key initiatives and updates - Hindalco has commissioned CCR-3 in Q4 FY18 and the copper plant smelter will be shut down for 30 – 40 days in Q1 FY19 for the same. This plant increases capacity by 200 ktpa of copper rod which should aid volumes in FY19 by approximately 90,000 tons. Hindalco will make ~200 $/ton more by selling copper rod then cathodes on the additional capacity. - Utkal Alumina expansion project of 500 Kt is expected to be completed in 30 months with capital outlay of around Rs. 1300 Cr. Alumina prices have increased exorbitantly to ~ 500 $/ton and are expected to remain tight because AluNorte (Brazil) has not been allowed to come to its full capacity. For Hindalco alumina produced is for the captive usage and therefore going forward results will be posted of Hindalco + Utkal.
7. Hedge Position Hindalco does not hedge more than 30% of its position for the entire year. At present Hindalco has hedged 28% at a rupee LME of US$2100/ton and 12% of volumes hedged because of Rusal at US$ 2270/ton (commodity hedge only). Hindalco believes no more hedges will be done Q-o-Q because there is strength in upside of aluminum prices overall.
Disclaimer
This document has been prepared and compiled from reliable sources. While utmost care has been taken to ensure that the facts stated are accurate and opinions given are fair and reasonable, neither the Company nor any of its Directors, Officers or Employees shall in any way be responsible for the contents. The Company, its Directors, Officers or Employees may have a position or may otherwise be interested in the investment referred in this document. This is not an offer or solicitation to buy, sell or dispose off any securities mentioned in this document. Copyright © 2017 Pankaj Mangaldas Securities pvt. ltd. , All rights reserved. Registered Office 701, PJ Tower, Dalal Street, Mumbai - 400023 Corporate Office 411 Atlantic Commercial Tower, R.B Mehta road, Ghatkopar (E), Mumbai – 400077 Get in touch: +91 (22) 2501-2333 | info@pmsec.in | www.pmsec.in
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