Hindalco shares crash 15% despite strong show by Novelis; Q3 result in focus

Shares of Hindalco Industries, the flagship of the Aditya Birla Group, plummeted nearly 15% in early trade on Tuesday as investors turned jittery ahead of December quarter earnings slated to be released later today. The sentiment remained weak even after its overseas subsidiary Novelis reported year-over-year improvement in adjusted EBITDA and EBITDA per ton, driven by favourable metal benefit from recycling, higher pricing, and lower operating costs than the prior year, which was impacted by high inflation and geopolitical instability.

Extending losses for the third straight session, Hindalco shares opened lower at ₹541.85, down 6.95% against the previous closing price of ₹582.35 on the BSE. In the first hour of trade, the counter has nosedived as much as 14.7% to ₹496.8, while the market capitalisation dipped to ₹1.13 lakh crore.  

The largecap stock has fallen over 17% in the last three sessions, while it has lost over 15% in a week and 12% in the past one month. The stock has tumbled over 17% year-to-date after hitting a 52-week high of ₹620.60 on January 1, 2024. The counter slipped to its 52-week low of ₹381 on March 20, 2023.

Last evening, Atlanta-based Novelis Inc., a global aluminum recycler and product producer, released its December quarter earnings, reporting net income attributable to its common shareholder of $121 million, up significantly from the $12 million reported in the prior-year period. The company’s net income excluding special items was $174 million, up 81% year-on-year (YoY).

Net sales dropped 6% YoY to $3.9 billion for the third quarter of fiscal year 2024, weighed down by lower average aluminum prices. Total flat rolled product shipments were 910 kilotonnes compared to 908 kilotonnes in the prior year period. “Shipments were flat due to a decline in specialties product shipments from muted economic conditions in some markets, though more than offset by continued growth in automotive shipments and a return in demand for beverage packaging sheet,” Hindalco says in a release.

Novelis’ adjusted Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA) were $454 million, growing by 33% YoY. The adjusted EBITDA per tonne shipped was at $499, up 33% YoY.

"Novelis delivered a substantial year-over-year improvement in Adjusted EBITDA and Adjusted EBITDA per tonne margin, in line with our expectations of continued margin recovery this fiscal year,” said Steve Fisher, president and CEO, Novelis Inc.

As of December 31, 2023, the company had a strong total liquidity position of $2.1 billion, consisting of $787 million in cash and cash equivalents and $1.4 billion in availability under committed credit facilities.

Going ahead, Novelis expects adjusted EBITDA per tonne to return to $525 level beginning this fiscal fourth quarter as shipments seasonally improve and we drive more operating leverage, says Devinder Ahuja, executive vice president and CFO, Novelis Inc.

Meanwhile, Hindalco Industries is expected to report double-digit growth in profit and EBITDA in Q3 FY24, while revenue is likely to be flat. In Q2 FY24, the aluminium producer posted flat consolidated profit at ₹2,196 crore, while consolidated revenue from operations fell by 3.7% YoY to ₹54,169 crore, primarily due to a decline in global copper prices.

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