MOSL: ANNUAL REPORT THREADBARE (ART) | HINDALCO FY17-Inconsistent hedging-pension deficit remains high
ANNUAL REPORT THREADBARE (ART) | HINDALCO FY17: Inconsistent hedging; pension deficit remains high
Hindalco Industries’ (HNDL) FY17 annual report highlights muted revenue growth of 1.4% to INR1,026b. Yet, EBITDA increased significantly from INR88b in FY16 to INR124b due to higher gross margin (up from 41.3% in FY16 to 45.8%). HNDL hedging as a % of sales (for standalone business) has been varying over the years. Commodity hedges grew from 38% of standalone revenue in FY16 to 82%. In our view, this will contain the benefits accruing due to increase in metal prices in FY18. Effective tax rate was high at 43% due to non-recognition of DTA of tax losses. Against a net loss of INR5.4b in FY16, HNDL posted a PAT of INR19b. Improved operating performance and lower capex (at INR29.3b v/s INR40.5b in FY16) led to FCF post interest improving to INR36.8b (FY16: INR26.3b). Cash conversion cycle improved to 46 days (FY16: 54 days) primarily on increase in payables days to 74 (FY16: 66). The increase in payables days was partially on account of non-trade payables – liability for derivatives which increased by INR9.5b to INR19b. Underfunded status on Novelis pension fund remains high USD818m (FY16: USD842m). Adjusted for this, debt declined to INR705b (FY16: INR746b). Low PAT margin (at 1.9%) and asset turns (at 0.7x) have led to RoE remaining low at 4.4%.
Operating performance improves: Consolidated revenue grew a mere 1.4% to INR1,026b. Domestic aluminum volume grew 9%, but Novelis saw 2% volume decline. EBITDA grew 41% to INR124b (FY16: INR88b). PAT was INR19b (FY16: INR5.4b loss).​
Hindalco Industries is engaged in the production and sale of aluminum and copper in India and internationally. Co.'s aluminum products include rolled products, extrusions, foils, primary aluminum ingots, billets, wire rods, and aluminum slabs; and aluminum chemicals, such as standard alumina, standard hydrate and specialty aluminas and hydrates for use in refractories, ceramics, fire retardant plastics, alum, and zeolite applications. Co. also offers aluminum foil and packaging solutions to pharmaceuticals, healthcare, dairy, confectionery, processed foods, personal products, and tobacco industries, as well as to the heat, ventilation, and air conditioning industries.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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