Hindalco earnings to stay steady even if aluminium prices fall, says MD Satish Pai; Q2 profit rises 59%

Mumbai: Hindalco Industries' earnings are likely to remain steady even if aluminium prices come down from current levels, managing director Satish Pai said after the company announced record profits for the September quarter.

For the September quarter, Hindalco's consolidated profit surged 59% on year to an all-time high of ₹7,533 crore, underpinned by a 39% jump in the consolidated revenue to ₹ 91,708 crore. Consolidated earnings before interest, tax, depreciation and amortization jumped 42% on year to ₹13,757 crore.

"The advantage of a company like Hindalco is that you have four or five pillars on which the company runs. If you see the September quarter for instance, LME (aluminium prices) were down, and the EBITDA of the aluminium business was lower (quarter-on-quarter). But then copper had a great quarter and balanced it out," Pai said on a call after the company's quarterly earnings.


He also expects the downstream and speciality business of aluminium to pick up in the March quarter, which could offset any weakness in aluminium prices, which impacts the upstream business.

"Because we have four-five solid businesses, the combination tends to keep our earnings on a very stable platform," Pai said.

Novelis was the largest contributor to Hindalco's revenue during the quarter, followed by the copper segment. The upstream business of aluminium operations in India, meanwhile, was third in terms of contribution to the revenue; the segment though, accounted for more than half of the company's consolidated EBITDA, with EBITDA having grown 55% from the previous year.

The aluminium upstream business had an EBITDA margin of 52% during the quarter, which Pai said was the best in the industry. Hindalco made an EBITDA of $2,125 per tonne of aluminium, up 40% compared to the previous year. Prices of aluminium on the London Metal Exchange (LME) surged to more than $3,800 per tonne earlier this year amid the escalation of the West Asian crisis, as the region which accounts for about 7-9% of the global output suffered supply constraints.

Prices have seen a correction since then, weighed down by the rapid expansion of smelting capacities in Indonesia. LME prices of aluminium are currently around $3,000 per tonne, and Pai said that he expects prices of aluminium to remain in this range for the remaining two quarters of this fiscal.

"The more interesting point is what happens in FY28 when all the geopolitical events either quieten down or not. The general thinking in the market is that aluminium prices will be in the $2,600 to $2,800 range in FY28," he said.

Hindalco reported its earnings during market hours on Friday, and its shares closed at ₹957.70 rupees on the BSE, up nearly 2% from the previous close.