Higher Volumes
By looking at Hindlaco
results we see that Higher volumes boost topline by 5.8% yoy Standalone revenue
of `72.7bn was higher by 5.8% yoy and 15.4% qoq. Aluminium production increased
by 0.7% yoy and 6.1% qoq to 140,000ton.
Copper production too
was higher by 6% yoy and 15.6% qoq at 89,000 tons. The Mahan smelter managed to
increased its production from 7,400ton in Q2 FY14 to 18,100ton and that at
Utkal increased from 41,000ton to 87,000ton.
EBITDA impacted by
high power costs
Aluminium business
EBIT was lower due to high power cost. Reduction in spot premium qoq basis lead
to a 20bps decrease in EBIT margins. Aluminium business EBIT stood at 6.9%,
lowest in the last five years. A strong operatinal performance (at a 3Year
high) by the copper division arrested further slide on profitabilty. Power and
Fuel costs as a % of sales increased from 11% in Q3 FY13 to 13% due to lower
linkage coal.
Earnings growth to
resume
Hindalco has
underperformed over the last one year due to soft aluminium prices globally,
project delays and allocation of coal block to the Mahan smelter. As seen
downside for aluminium prices is limited as it is below the mean of the global
cost curve. Novelis would register strong earnings growth on the back of
increased capacity and change in product mix. This would drive the earnings of
the consolidated entity over the next one year.