The market could be relieved that the US aluminium market may have gained from the trade war, though domestically, things are getting seemingly worse.

Hindalco Industries Ltd’s stand-alone domestic revenue fell 8% in Q2 FY20 from a year ago, while net profit declined a whopping 75%. These numbers, though, were just about in line with the stand-alone consensus estimates and so may not ruffle investors too much.

Subdued consumption and investment led to a moderation in growth, which impacted revenue growth. The slowdown in the automotive, building and construction, and electrical sectors has added to the contraction.

Overall, Hindalco’s domestic demand in Q2 registered a decline by about 6% to 967,000 tonnes. Imports, including scrap, declined by about 8% in Q2 FY20 against a growth of 25% in the year-ago quarter. Market watchers see the slowdown continuing, which could further impact operating performance.

Expenses were higher, too. Raw material prices appreciated marginally, leading to a contraction in operating metrics domestically. Power and fuel costs were also higher by about 9% year-on-year in Q2. As a result, Ebitda margins in its stand-alone numbers shrank to 7.8% year- on-year from 10.1% in the year-ago period. Ebitda is earnings before interest, tax, depreciation and amortization.

A saving grace has come in the form of the improved performance of its US-based subsidiary Novelis Inc. In fact, the company reported higher-than-expected Q2 FY20 numbers as growth in the US remained strong. The American business seems to be gaining from the US-China trade war. But there are concerns on whether the higher realizations in the US will sustain.

“Favourable speciality pricing (impact of the anti-dumping duty imposed by the US on China) and surplus scrap in the US led to an increase in profitability. Nevertheless, the management also highlighted that increased prices in the speciality side may not be sustainable," said analysts at ICICI Securities Ltd in a note to clients.

Still, the Novelis business has improved the consolidated numbers. While revenue was lower in Q2 by about 9% year-on-year, Ebitda margins stood at 12.2% in Q2, which is similar to last year’s 12.4%. In fact, these numbers are also in line with what analysts have estimated for Q2, which will be seen as a positive.

Analysts have noted that globally there is an increase in demand for cans, which can be attributed to a shift from PET and plastic bottles. New generation energy drinks are also said to be driving the demand for beverage cans. On the domestic front, the government’s initiatives to improve investments in infrastructure and the housing sector, and the decline in interest rates may be supportive of demand going forward. However, the recovery continues to be elusive.

As such, Hindalco Industries may still have a long uphill climb in the domestic market until demand recovers. This could keep a check on the stock.