The Aditya Birla Group company, Hindalco Industries on Friday reported a 35 percent decline year-on-year in profit after tax at Rs 2,205 crore, primarily due to elevated input costs and inflationary impacts. The company's revenue came at Rs 56,176 crore, up 18 percent from the year-ago period, driven by higher volumes and better realisations.

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The company reported an EBITDA of Rs 5,743 crore in the quarter, down 29 percent from the corresponding period in the previous year, impacted by rising input costs and unfavourable macros, partially offset by the better operational performance of copper and downstream businesses.

Also read: Hindalco reports 35% decline in profit on elevated input costs

Satish Pai, Managing Director, Hindalco told CNBC-TV18 that cost of production is expected to cool off by 2 to 5 percent in the third quarter of financial year 2023.

“Single biggest thing that has impacted our cost of production is the availability and price of coal. We have started to see, post monsoons, the coal availability and the pricing situation starting to ease and we are cautiously saying that 2-5 percent reduction in cost of production will be seen in Q3.” he added.

The company's copper business and aluminium downstream reported year-on-year growth in EBITDA of 55 percent and 163 percent respectively, driven by better pricing and recovery in domestic demand. For the upcoming quarters the Pai expects that the Copper EBIDTA per quarter will hover around Rs 450-500 crore.

On Novelis

The company's wholly-owned subsidiary Novelis reported revenue at $4.8 billion in the quarter under review, an increase of 17 percent from the year-ago period, due to recovery in demand of automotive and aerospace segments, supported by higher volumes, increased product pricing, favourable mix and higher average aluminium prices.

Pai mentioned that Novelis EBIDTA per tonne can face headwinds of $75-123 in the upcoming wharters in the year.

“ We still remain committed to our USD 525 per tonne guidance that we gave. So we think that many of these sort of macroeconomic headwinds that everybody is facing, should get resolved over the coming few quarters – that is our expectation,” he added.

Novelis' total shipments of flat rolled products were at 984 Kt in the second quarter against 968 Kt in the year-ago period, up two period year-on-year, driven by recovery in automotive and aerospace shipments.

Although chip shortage issues did not effect the companies automotive shipments in H1FY23 but Pai is watchful for FY24 on growing concerns of recessions. He is also expecting a possibility of a slowdown in the building and construction business owing to the hike in interest rates.

On debt

For the company at the end of H1FY23, the net debt stands at Rs. 4,812 crores and for Novelis, it is at Rs. 37,251 crores. Pai said that the net debt for will remain at this level for the second half of this year, because all the repayments that the company has promised to do have been completed in India. In India the net debt is only Rs 4,800 crore now.”

The net debt to EBITDA in India, it's 0.47. So the Indian operations has delivered in a very big way, said Pai.

On Novelis debt he said that it is at the same level because it's largely bonds,

“The bonds were refinanced when the coupon rates were very low. So, overall the finance costs of Novelis and Hindalco, we are in a very strong position going into an environment where interest rates are going up,” he added.

Also read: Hindalco stock rallies 5% as subsidiary Novelis posts best ever profitability