After the company's subsidiary, Novelis Inc. released disappointing July-September results, shares of Hindalco Industries had their worst decline since late September. Shares fell by about 5% in intraday trade on Wednesday (Q2). After Novelis Inc. reported a 23% annual decline in net income (net profit) to $183 million for Q2, investors swarmed out of Hindalco's counter.
According to reports, the US-based arm has reduced its capital expenditure (CAPEX) projection for FY23 from the previously indicated $1.3-1.6 billion to a range of $900 million-$1 billion. To pace the strategic capital spending, this has been done. According to reports, the corporation plans to keep the current level of indebtedness and has no intention of borrowing money to pay for its capital expenditures.
According to a press release from Hindalco, Novelis' net sales climbed by 17% to $4.8 billion for the quarter over the same period last year, principally due to a 2% rise in total flat rolled product shipments, higher product pricing, a favorable mix, and higher average aluminum prices.
However, due to higher energy and other operating costs brought on by geopolitical unrest, supply chain interruptions, and unfavorable currency translation, the arm's adjusted Ebitda fell 8% year over year to $506 million in Q2. The company reported adjusted Ebitda per tone of $514 in Q2 compared to $583 in the June quarter on a per-tonne basis.
It has kept its $525 per tonne adjusted Ebitda per tonne outlook for the medium term. Shortly, the Ebitda will be below $450 per tonne due to high-cost inventories and inflationary pressures, according to a note from JM Financial.
Given a favorable market forecast across end-user groups, the business continues to observe consistent demand for sustainable aluminum solutions. Since Hindalco is not linked to the LME and has an Ebitda of over 75%, it is still our top pick for the metal sector. We reiterate Buy," the message read.
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