Addressing shareholders at Hindalco’s 56th Annual General Meeting last week, Kumar Mangalam Birla, Chairman, remarked that improved aluminium fundamentals, large scale smelting curtailment by global majors, supported the aluminium price recovery. Consequently the global primary aluminium industry moved back to a deficit position for the first time in seven years. The average aluminium LME price was around 6% higher than FY14. On the other hand, copper LME price was 8% lower than the previous year, driven by the slowdown in the Chinese demand growth and higher mining output. Aluminium realizations were strong on the back of supportive LME and high regional premium. The average premium at $ 390 (MJP) was almost 47% higher than FY14. However in the current fiscal, LME has fallen sharply and the premium has nosedived.
While the price of crude witnessed a sharp decline during the year, in India, coal prices increased substantially with rising demand and the shortage of coal. The acuteness of the shortage was accentuated by regulatory developments and infrastructure bottlenecks.
In the context of these developments, the Company attained a consolidated turnover of $ 17 billion (Rs.1.04 lakh crore) and an PBIDTA of $ 1.6 billion (Rs.10,049 crore), a growth of 8% and an PBIDTA margin of 9.6% in FY 14-15.
Birla said that, “the business set a new record both in terms of metal volumes and turnover, as our expansion projects stabilized and ramped up. Utkal Alumina refinery has achieved near-full capacity utilization and is already amongst one of the lower cost alumina refineries globally. Mahan has now ramped up fully. Aditya smelter has ramped up to nearly 55% of its capacity. It will reach full capacity levels this fiscal. On the back of these ambitious, new-age projects, aluminium volumes in India jumped 37% to 0.8 million tons and alumina output soared by 40% to 2.3 million tons. EBITDA from Aluminium Business in India, including Utkal, rose by 62% in FY15 to Rs.2,345 crore”.
The de-allocation of coal blocks by the Supreme Court last year, was a disruptive change in the business environment for its Aluminium business. “Our expansion strategy was closely hinged on to the coal blocks allocated by the government. In the changed scenario, Hindalco participated in the fiercely competitive auctions of coal blocks and managed to bag four coal blocks, securitising approx. ~25% of its total coal requirement”, remarked Birla.
Copper business’s performance has been noteworthy, recording the highest ever volumes of 386,000 tons. Its EBITDA of 258 million dollars (Rs.1,601 crore), reflected a growth of 45% over last year.
Referring to Novelis, Birla stated that, “Novelis came closer to the fruition of its strategic goals of realigning the product portfolio towards premium products, including auto; and increasing the recycled content in its input material. Novelis’ shipments grew in all regions, crossing the 3 million ton mark. Rolling expansions in Brazil and Korea played a key role. Its adjusted EBITDA increased 2% to 902 million dollars, despite several market headwinds”.
Summing up, Birla said “FY16 onwards, following the full ramp up of the projects, Hindalco’s financial performance will be significantly impacted as interest and depreciation flow through the P&L statement. It is in this context that the short term outlook for domestic aluminium business would be testing. In the coming years, the focus will continue to be on operational excellence and increasing the productivity of new assets. The Company has a strong business portfolio comprising of the de-risked copper business coupled with the technologically intensive portfolio of Novelis. Along with this, its focused approach, would go a long way in ensuring a robust future”. ……
“The commodity markets, and in particular the aluminium industry, are going through a challenging phase at present because of the sharp slide in realizations. This would impact Hindalco’s performance in the near term. Nevertheless, with the addition of world-class assets in the recent years, the Company is well poised to ride the structural growth trends such as increasing urbanization, light-weighting of vehicles and growth in emerging markets”.
— Kumar Mangalam Birla, Chairman