Analyst Meet / AGM     18-May-19
Conference Call
Hindalco
Expects capex of Rs 2600 crore in FY2020 in the domestic business
Hindalco conducted conference call to discuss the results for the quarter ended March 2019. Mr. Satish Pai, Managing Director and Mr. Praveen Maheshwari, CFO of the company addressed the Concall.

Highlights of the Concall

  • The Indian Aluminium business delivered a strong revenue growth at Rs. 23,775 crore for FY19 compared to Rs. 21,090 crore a year ago, on the back of stronger realizations and supportive macros. EBITDA at Rs. 5,202 crore in FY19 grew 9% compared to Rs. 4,790 crore in FY18. This growth was driven by supporting macros, stable plant operations and improved efficiencies, offset by higher input costs in FY19.
  • The Company achieved record production of Aluminium at 1,295 Kt, with Alumina (including Utkal) at 2,893 Kt in FY19. Production of Aluminium Value Added Products (VAPs), excluding wire rods, grew 5% to reach an all-time high of 321 Kt.
  • VAP (Copper Rod) production increased by 47% to 245 Kt vs. 166 Kt in FY18, due to ramp up of the new Continuous Cast Rod-3 (CCR-3) facility. The CCR-3 plant achieved a production level of 117 Kt in FY19. DAP production jumped 48% to 303 Kt in FY19 vs. 205 Kt last year. The overall production volumes (Copper Cathode) at 347 Kt in FY19 were lower by 15%, due to reduced volumes on account of planned maintenance
  • Revenue from the Copper business stood at a steady Rs. 22,155 crore in FY19 vs. Rs. 22,382 crore in FY18. EBITDA was at Rs. 1,469 crore vs. Rs. 1,539 crore in FY18. Better by-product realisation for the year was offset by lower volumes due to planned maintenance and marginally lower Tc/Rc.
  • Q4FY19 was fraught with uncertainties due to escalation of US-China trade war, geopolitical issues, slowdown in China & Europe and Brexit. This impacted LME prices in the quarter.
  • Domestic industry continues to see robust demand. FY19 demand grew 9.7% YoY. However, domestic producers were not able to capture growth on account of high imports from China and FTA countries. Imports accounted for 58% of market share compared to 54% in FY18.
  • Hindalco Industries anticipates a deficit of 1.5-1.7 milion tonne (mt) globally in Aluminium markets with a marginal deficit in China. Total global inventories are expected to decline below 10 mt owing to sustained drawdown which could result in prices reviving H2FY20 onwards.
  • Indian Aluminium consumption is expected to be driven by construction and packaging sectors.
  • Global refined copper consumption growth is expected to slow down to 2.0% YoY compared to 2.8% YoY in CY18. CY19E global refined copper consumption is expected at 24mt. Concentrate market is expected to be in deficit of 100kt with demand likely to be in the 16.5-16.7mt range. This should pressurise TC/RC.
  • Domestic copper demand in FY19 grew 10% YoY to 729kt driven by electrical & electronics and consumer durables. However, imports from ASEAN and FTA countries continued to pressurise domestic producers. Rods and wire imports swelled in FY19. Going forward, while power generation equipment and renewable sector is expected to drive growth, an elevated level of low priced imports remains a concern.
  • Hindalco Industries Alumina refinery at Muri (capacity of 380ktpa) is currently shut due to the spilage in the red mud cake storage area. The refinery used to produce 350ktpa and the company expects the refinery to start by end of Q2FY20E. In the interim, the company has started importing alumina for the shortfall. However, the Muri refinery was a high cost refinery with alumina cost of production at ~$320/ton versus import cost of $360 per tonne.
  • Novelis revenue grew 8% to US$ 12.3 billion, driven by higher average aluminium prices, record shipments and an enriched product mix. Total shipments of flat rolled products (FRP) grew 3% to 3,274 Kt in FY19, with a 7% growth in Beverage Can shipments and a 2% growth in Automotive Body Sheet shipments YoY. Adjusted EBITDA grew 13% to US$ 1.368 billion, compared to US $1.215 billion in FY18, driven by higher shipments, operational efficiencies and a favourable product mix. Adjusted EBITDA per ton was higher by 10% at US$ 418 in FY19 vs. US$ 381 for the prior year. Novelis leveraged its extensive recycling footprint and increased its recycled contents from 57% to 61% in FY19.
  • The company expects a total capex of Rs 2600 crore in FY2020 in the domestic business primarily for its Utkal refinery expansion. This project is expected to be commissioned by FY2021.The company has capex plans of Rs 5000 crore in incremental downstream projects over the next five years.
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