Hindalco Industries Ltd beat analyst estimates in the September quarter on strong metals pricing, even as higher raw material and energy costs ate into the benefit of elevated aluminium prices. The company expects production costs to rise further in the December quarter before easing as coal availability improves.
The Aditya Birla Group’s metals flagship reported an almost 59% jump in consolidated net profit attributable to owners to ₹7,532 crore in the quarter from ₹4,741 crore a year earlier, according to its stock exchange filing. The profit figure beat a Bloomberg consensus estimate of ₹6,120.19 crore based on nine analyst estimates.
However, rising input costs, up 39% during the quarter, are emerging as a concern for the aluminium producer. Managing director Satish Pai said the cost of producing a tonne of aluminium rose 5% sequentially in the September quarter, largely because of higher coal and calcined petroleum coke costs.
Coal is used to generate electricity for Hindalco’s energy-intensive aluminium smelters, while calcined petroleum coke (CPC) is a key raw material used to make carbon anodes, which conduct electricity during the aluminium smelting process.
Hindalco expects its production costs to rise by another 5% in the first half of the third quarter (October-November) due to tight coal supplies in northern India, though cost pressures should ease after Q3 as supply normalizes, Pai told reporters after the earnings announcement.
Coal availability in northern India was particularly tight during the monsoon, with heavy rainfall disrupting production at mines and higher power demand in the region increasing competition for supplies. Hindalco had to rely more heavily on spot auctions, where premiums in northern coal auctions rose 150-200%.
The company’s coal linkage materialisation during the quarter was only 50-60%, forcing it to make up the shortfall through spot purchases, Pai said. Inventory at its Mahan and Renukoot smelters had fallen to 10-11 days, against the usual requirement of 20-25 days.
Consolidated revenue from operations rose to ₹91,708 crore from ₹66,058 crore a year earlier, while earnings before interest, taxes, depreciation and amortization (Ebitda) increased 42% year-on-year to ₹12,814 crore.
Metals outlook & deleveraging
On the metals outlook, Pai said aluminium prices were hovering around $3,000 a tonne and the company expected them to remain around current levels over the next two quarters. For fiscal year 2028 (FY28), market expectations point to prices moderating to $2,600-2,800 a tonne, assuming geopolitical tensions ease and additional supplies from Indonesia and the Middle East return to the market, Pai added.
Hindalco expects its diversified business portfolio to cushion the impact of softer aluminium prices. While lower London Metal Exchange (LME) rates could weigh on its upstream business, expanding downstream operations alongside its copper and specialty alumina segments is expected to support overall earnings.
The company expects to generate more than ₹2,000 crore in Ebitda from its downstream aluminium business over the next two years. Alongside copper and specialty alumina, nearly ₹6,000 crore of Ebitda is expected to come from businesses less directly linked to LME prices.
“We have four or five solid businesses, and the combination tends to keep our earnings on a very stable platform,” Pai said.
Hindalco also expects its debt to have peaked at around ₹80,000 crore. It plans to begin deleveraging from the fourth quarter, using stronger cash generation as the expansion cycle at its US subsidiary Novelis nears completion. The company aims to bring Novelis’s net-debt-to-Ebitda ratio down from 4.7 at present to about 2.5 by FY31, Pai said.
Hindalco shares closed 2.19% higher at ₹958.40 on Friday, while the benchmark Sensex rose 2.17%.
#Hindalco #beats #estimates #strong #metal #prices #offset #rising #input #costs
