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Hindalco Industries: One-Time Provisioning Takes Toll on Profitability - Views on News from Equitymaster

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  • Nov 9, 2017 - Hindalco Industries: One-Time Provisioning Takes Toll on Profitability

Hindalco Industries: One-Time Provisioning Takes Toll on Profitability

Nov 9, 2017

Hindalco Industries has announced the second quarter results of the financial year 2017-2018 (2QFY18). While the topline increased by 14.4% YoY, the bottomline declined by 10.7% YoY. Here is our analysis of the results.

Performance summary:
  • Income from operations increased by 14.4% YoY during 2QFY18. This is on the back of aluminium volume and improved realization. The revenue from the aluminum segment grew by 5.7% YoY. Metal production increased by 2% YoY. On the other hand, alumina production declined during the quarter by 2%YoY. Value added products (VAP) declined by 2% YoY on the back of lower market demand. The revenue from the copper segment increased by 10% YoY on the back of better Copper realization despite fall in the copper sales volume which fell by 10% YoY.
  • Operating profit increased by 20.2% YoY on the back of higher aluminium volume, supportive macros and higher by-product realization, partly offset by higher input costs and lower copper volume. Both Aluminium and Copper segment contribution remained robust and grew by 19% YoY and 27% YoY respectively. During the quarter, operating margin stood at 13.5%.
  • Other income declined by 44.3% YoY during the quarter. Finance cost declined by 18.6% YoY. This is on the back of debt repayment of Rs 79.6 billion till date in FY18. Depreciation increased by 80.2% YoY.
  • The bottomline declined by 10.7%YoY primarily on the back of one-time provisioning of Rs 1.06 bn towards mining litigation case.

    Financial Snapshot (Standalone)
    (Rs m) 2QFY17 2QFY18 Change 1HFY17 1HFY18 Change
    Total Income 90,123 103,082 14.4% 165,970 200,783 21.0%
    Total Expenses 78,559 89,184 13.5% 143,159 175,407 22.5%
    Operating profit (EBITDA) 11,564 13,899 20.2% 22,811 25,376 11.2%
    Operating profit margin (%) 12.8% 13.5%   13.7% 12.6%  
    Other income 3,364 1,872 -44.3% 5,626 4,436 -21.2%
    Interest 5,943 4,836 -18.6% 11,938 9,714 -18.6%
    Depreciation 3,516 3,804 8.2% 6,898 7,595 10.1%
    Profit before tax & exceptional items 5,469 7,131 30.4% 9,600 12,503 30.2%
    exceptional items 849 -1055   849 -2099  
    Tax 1,929 2,146 11.3% 3,117 3,578 14.8%
    Net Profit before extraordinary Item 4,389 3,930 -10.5% 7,332 6,826 -6.9%
    Extraordinary Items 8 -1   6 -2  
    Net Profit 4,397 3,929 -10.7% 7,338 6,824 -7.0%
    Net profit margin (%) 4.9% 3.8%   4.4% 3.4%  
    No. of shares (m)         2,244  
    Basic diluted earnings per share (Rs) ^         6.7  
    P/E ratio (x) *         39.3  

    * On trailing 12 month basis

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