Hindalco Ltd announced its standalone Q1FY14 results on 13th August, 2013.
The company misses the consensus estimates by a huge margin. The net sales arrived at INR5766.69 crore, which was down by 3.31% and 16.61% on YoY and QoQ basis. On Yoy basis, the copper sales fell by 8% due to shutdown of Hirakund plant, but aluminium sales were up by 7%. On QoQ basis, the sales of copper and aluminium both fell by 8% and 21%, respectively. The EBITDA for the quarter was INR478.45 crore, which was marginally up by 3.31% on YoY basis, but down by 25.62% on QoQ basis. The company posted net profit (excluding non-recurring item of INR203 crore in current quarter) of INR271.09 crore, which was down by 8.03%on YoY basis and also down by 43.8% on QoQ basis.
Please find below the result analysis for Novelis Inc, which contributes 67% in terms of revenue to the consolidated results.
Novelis Inc, a flagship company of Hindalco Ltd announced its Q1FY14 results on 12th August, 2013.
Novelis’ performance in the first quarter of fiscal 2014 was negatively impacted by lower can shipments in North America due partly to unseasonably cooler and wet weather in the region, continued pricing pressures in North America, Europe, and Asia, and higher employee incentive costs due to a modification of its long term incentive plan, partially offset by an increase in the benefits it received from utilizing scrap metal. The decline in can volumes in North America were partially offset by continued strong demand for its automotive products globally and higher can shipments in Asia.
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“Net sales” for the three months ended June 30, 2013 was $2.4 billion, a decrease of 6% compared to the $2.6 billion reported in the same period a year ago. "Cost of goods sold (exclusive of depreciation and amortization)" for the three months ended June 30, 2013 was $2.1 billion, a decrease of 4% compared to the $2.2 billion we reported in the same period a year ago. These decreases were primarily the result of lower third party shipments and lower conversion premiums due to competitive market pressures. "Cost of goods sold (exclusive of depreciation and amortization)" was also lower due to higher benefits we received from using scrap metal.
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It reported "Net income" of $14 million in the three months ended June 30, 2013, which is down compared to $91 million in the three months ended June 30, 2012, due primarily to the items mentioned above.
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Management’s Comments:
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· All of company’s strategic expansion projects are progressing well. It has spent $181 million on capital expenditures globally for the three months ended June 30, 2013, which primarily relates to its strategic expansion projects in Oswego, New York; Yeongju, South Korea; Ulsan, South Korea; Changzhou, China; Pinda, Brazil, and Nachterstedt, Germany, as well as expenditures on implementing a new ERP system.
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Novelis is experiencing pricing pressures and increased competition, which are negatively impacting its profitability. The pricing pressures and competition are most notable in North America, Europe, and Asia regions, which resulted in unfavorable reductions in conversion premiums with the renewals of can supply contracts. One factor contributing to the competitive landscape in Asia is the significantly higher local market premium that it must pay for the purchases of aluminum in Asia. It experienced a reduction in demand for its can products in North America partly due to an cooler, wet weather in the region, which has reduced beverage can consumption levels. Benefits from the utilization of scrap increased due to favorable discounts it received on the procurement of scrap and higher usage of scrap, partially offset by the decline in average aluminum prices to $1,834 per metric tonne during the three months ended June 30, 2013 compared to $1,977 per metric tonne during the three months ended June 30, 2012. Demand for its automotive industry products continues to be strong globally, which is driven by an increase in the use of aluminum in vehicles.
Regards,
Team Microsec Research
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