Analyst Concall
Arm Novelis faces capacity constraints in US, says Hindalco
This story was originally published at 20:31 IST on 12 August 2025
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--Hindalco: On track to exceed over $100-mln cost savings this year
--CONTEXT: Comments by Hindalco management in post-earnings analyst call
--Hindalco: Aluminium demand remains strong across regions
--Hindalco: See downstream aluminium volumes rising in next few quarters
--Hindalco: Currently facing capacity constraints in US
--Hindalco: Coal costs expected to be 30% lower than linkage prices
--Hindalco: Novelis South American ops performance steady in Apr-Jun
--Hindalco: Incurred INR 12.73 billion capex in Apr-Jun
--Hindalco: FY26 capex guidance INR 75 bln-INR 80 bln
By Arya S. Biju and Anjana Therese Antony
MUMBAI – Hindalco Industries Ltd.'s US-based subsidiary Novelis Inc. is currently facing capacity constraints in the US, in addition to the US tariff-related headwinds, the parent company's management said at a post-earnings call with analysts Tuesday. "At this moment, we are capacity-constrained in the US, which is forcing us to have more inter-region movement of products in a tariff regime," the management said.
The company said it is working on implementing tariff mitigation plans that would enable it to have more access to manufacturing capacity in the US. This will be separate from the cost of take-out actions, the management said. Earlier on Monday, the company's management had said that the impact of its tariff mitigation strategies, along with cost takeout actions, would be visible from the December quarter.
Hindalco expects a tariff impact of $60 million in the earnings before interest, taxes, depreciation, and amortisation of Novelis in the September quarter, given the cumulative tariff on Indian imports to the US. Last week, US President Donald Trump issued an executive order imposing an additional 25% tariff on India, effective Aug. 27, due to its purchases of Russian oil. With this, the cumulative additional tariff on Indian exports to the US will be 50%.
During the Apr-Jun quarter, the adjusted EBITDA of Novelis declined 17% on year to $416 million, impacted by higher aluminium scrap prices, unfavourable product mix, and a net negative tariff impact, the parent company said. Hindalco expects strong beverage packaging demand, improving scrap spreads, and accelerated cost-reduction benefits to flow through the second half of 2025-26 (Apr-Mar) to help mitigate the impacts of tariffs and hence improve margins, the management said.
On Novelis' business in Asia, Hindalco said it saw a steady EBITDA performance in the region, led by better scale and volumes. Further, the company's business in Asia has benefited from demand in North America, which is met using its "Asian capacities," the management said. Novelis reported a steady performance in its South America business, reflected in its steady EBITDA growth during the quarter, Hindalco said.
The company said aluminium demand remains strong across regions, underscoring the metal's growing relevance as the preferred sustainable packaging solution. Further, in the automotive sector, the focus on lightweight vehicles and innovation to enhance vehicle performance remains a key growth lever for aluminium, the management said. It also expects downstream aluminium volumes to rise in the next few quarters.
The company said it is on track to exceed the target of $100 million of cost savings with Novelis' cost-reduction initiatives. "We have completed the first round of organisational redesign, footprint optimisation, and process improvements, and are on track to exceed over $100 million of cost-savings target for this year," the management said. It aims for a $300-million run-rate savings by FY28, Hindalco said in a post-earnings media release.
Regarding updates on its upstream expansion projects, Hindalco said its key projects, including the development of captive coal mines such as Chakla and Meenakshi, the expansion of Aditya alumina refinery, the aluminium smelter expansion, and the copper smelter, are progressing well and remain on schedule. "... with our own coal mines coming in (starting production), we expect our coal costs to be about 30% lower than linkage prices," the management said.
Earlier in the day, the company announced consolidated net profit of INR 40.04 billion for Apr-Jun, up over 30% on year. Its consolidated revenue for the quarter rose around 13% on year to INR 642.32 billion. During the quarter, the company incurred a capital expenditure of INR 12.73 billion, the company's management said in the call. It also reiterated its capital expenditure guidance of INR 75 billion-INR 80 billion for FY26.
Tuesday, shares of the company ended at INR 667.05 on the National Stock Exchange, down 0.9% from the previous close. The company announced its June quarter earnings during market hours. End
US$1 = INR 87.71
Edited by Saji George Titus
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