Hindalco MD Satish Pai expects further reduction in costs, improvement in copper and Novelis performance

Input costs for aluminium and copper maker Hindalco dipped by 2 percent sequentially in the April to June period. A day after announcing results, MD Satish Pai told CNBC-TV18 the company expects input costs to cool off by another 3 percent in the July to September quarter. He also said the London Metal Exchange (LME) is going to remain range bound between $2,100 and $2,300 (per tonne).

“We continue to perform because the most important thing is that our costs are moderating… If the costs are coming down, the way we said, we should be able to maintain the $700 per tonne EBITDA level that we delivered in the first quarter as well,” he told CNBC-TV18.

Pai said copper demand in India is extremely strong because of the electrification drive, etc., which is why Hindalco imported a lot of copper cathodes and converted them to rods. “So, in the September quarter EBITDA should be much better than in Q1, more near Rs 600 crore because we are going to be using our own catalysts,” he said.

Talking about the US subsidiary Novelis, Hindalco said from the September quarter onwards EBITDA per tonne would move towards $500 per tonne.

“Last Q1 we ran at $479 per tonne. I am fairly confident that in the next quarter, we should be getting close to $500 per tonne, and that is going to constantly get better. We had guided that by the fourth quarter, we will reach $525. I would not be surprised if we reach it in the third quarter,” he said.

In the first quarter, the revenue from aluminium (India) downstream business was at Rs 2,435 crore, down from Rs 2,738 crore in the preceding quarter. The revenue from the copper business stood at Rs 11,502 crore, up 3 percent q-o-q, driven by higher sales volumes.

While brokerage firm CLSA pointed out that Hindalco’s debt increased due to a seasonal rise in working capital, Pai said the working capital requirement got blocked in the first quarter owing to copper imports.

He said the management remains committed to capex plans for Hindalco and Novelis.

Reflecting on merger and acquisition opportunities, he said, the company would be interested in Hindustan Copper but there has been no movement on divestment as yet. Also, we are not too keen on Vedanta's Tuticorin smelter, he said.

Aditya Birla group company Hindalco Industries is the world’s largest aluminum company by revenue, and a major player in copper serving more than half of India’s copper requirement.