Alcoa Q4 CY22 Results Review - Tepid Performance; Cautious Commentary: ICICI Securities

ICICI Securities Report

Alcoa Corp’s Q4 CY22 performance missed consensus estimates. Key highlights:

1. higher raw material cost amidst lower realisation impinged Ebitda;

2. aluminium shipments rose 2% YoY at 641 thousand tonne, following the restarting at Alumar (Brazil) and Portland (Australia) smelters; and

3. lower shipments of value-added products, sequentially lower London Metal Exchange prices and higher costs resulted in Al EBITDA/t declining 94% YoY (80% QoQ) to a mere US$48/te - lowest since Q2CY20.

Going ahead, management expects-

1. challenging market conditions though there is some respite in raw material costs;

2. automotive and packaging segments are the key demand drivers; and

3. Chinese primary aluminium exports might be restrained as operating capacity is expected to be up only 1.1 million tonnes per annum in CY23.

Taking cues from Alcoa’s Q4 CY22 result and commentary, we expect Hindalco Industries Ltd.’s performance to stay muted (Q3 FY23E Ebitda at Rs 48.8 billion- down 34% YoY; 9% QoQ); however, we believe Novelis’ shipments might not be impacted much owing to favorable traction in packaging and automotive sectors.

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