Hindalco Inds.

Hindalco reported a robust Q2 FY25, with consolidated business segment EBITDA up 24% YoY to INR 8,564 crores and overall reported EBITDA surging 49% YoY to INR 9,100 crores. Consolidated net profit after tax increased by 78% YoY to INR 3,909 crores. The India business saw its overall reported EBITDA jump 100% YoY to INR 5,139 crores, with net profit after tax up 135% to INR 2,850 crores, reflecting strong operational performance.

Novelis achieved 945 Kt in shipments, a 1% increase YoY, driven by record beverage packaging. However, quarterly EBITDA was $462 million, down 5% YoY, and EBITDA per ton was $489, a 6% QoQ decline. This was primarily attributed to reduced metal benefits from rising aluminum scrap prices and an unfavorable product mix. Management acknowledged that scrap spreads are expected to remain elevated due to increased competition and China's policies, but maintained confidence in the long-term EBITDA target of $600/ton.

India's upstream aluminum business demonstrated strong performance, with EBITDA rising 79% YoY to INR 3,709 crores and EBITDA per ton increasing 80% YoY to $1,349, achieving 41% margins. This was largely due to lower input costs and favorable macros. Downstream aluminum shipments grew 10% YoY to 103 Kt, though EBITDA was down 1% YoY to INR 154 crores, with EBITDA per ton at $179, impacted by an unfavorable product mix.

The copper business delivered an all-time high quarterly EBITDA of INR 829 crores, up 27% YoY. This was supported by good operational efficiencies, higher realizations from byproducts like sulfuric acid, and increased precious metal sales, including a one-time^📎 favorable derivative accounting impact. Despite these tailwinds, management guided for a sustainable EBITDA of approximately INR 650 crores for Q3 and Q4 FY25.

Hindalco announced significant capex plans for upstream expansion, including a brownfield aluminum smelter in Aditya and a copper smelter in Dahej, each estimated at roughly $1 billion. The aluminum smelter is projected to be operational by October 2027, and the copper smelter by 2029. Additionally, a greenfield alumina refinery of 850 Kt, in partnership with OMC, is expected to come online in calendar year 2027, aiming to enhance cost savings and margins.

The company maintained its leadership in the S&P Corporate Sustainability Assessment ranking for the fifth consecutive year, achieving a score of 87/100. In Q2 FY25, 79% of total waste was recycled, and 9.34 million cubic meters of water (25% of total usage) was recycled and reused. Hindalco's total renewable capacity currently stands at 183 megawatts, with a target to reach 300 megawatts by H1 calendar year 2025, including a recently commissioned 10-megawatt solar project at Taloja.

Hindalco is expanding its downstream capabilities, with the Aditya FRP project set to commission in FY26, increasing total downstream capacity to 600 Kt. New facilities are being developed for high value-added aluminum products such as AC coated fins, battery foil (25 Kt capacity), and battery enclosures. In the copper segment, India's first 25 Kt greenfield Inner Grooved Tubes plant is slated for launch in January 2025, alongside a new 50 Kt e-waste and copper scrap recycling facility.

The company provided capex guidance of approximately INR 6,000 crores for FY25 and INR 8,000 crores for FY26. Management indicated an expectation to add INR 1 billion to INR 1.5 billion in debt over the next three years for these projects. Despite these investments, Hindalco maintains a strong balance sheet, with a consolidated net debt-to-EBITDA of 1.19x at the end of September 2024, which is lower than the corresponding period last year.