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Informist, Tuesday, Nov. 4, 2025

 

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--Novelis: Net negative impact of US tariffs on Q2 EBITDA at $54 mln
--CONTEXT:Hindalco arm Novelis mgmt's comments in post-earnings analyst call
--Novelis: North America shipments down 7% YoY on lower specialty shipments
--Novelis: FY26 capex expected to be $1.9 billion-$2.2 billion
--Novelis: Expect to restart fire-hit Oswego hot mill in December
--Novelis: Bay Minette cold mill commissioning to start in Q4
--Novelis: Oswego unit fire to have short-term impact on EBITDA Q3 onwards
--Novelis: May see FY26 volume declining a tad due to Oswego unit fire
--Novelis: Overall scrap conditions are good
--Novelis:See lower aluminium adoption in China automotive market FY26-FY31
 

 

By Rajesh Gajra and Pallavi Singhal

 

NEW DELHI - The fire that hit Hindalco Industries Ltd.'s US-based subsidiary Novelis Inc.'s Oswego aluminium factory on Sept. 16 and disrupted production will have a short-term negative impact on the company's operating profit, starting from the December quarter, the management of the company said Tuesday in a post-earnings conference call with investors and analysts. It will also likely lead to a slight decline in volume for 2025-26 (Apr-Mar), as against an earlier expectation of increase, a senior official of the company said in the call.

 

This is notwithstanding the fact that the company expects to restart the Oswego hot mill in December. The company has pegged the impact of the fire on the adjusted earnings before interest, tax, depreciation, and amortisation for FY26 to be around $100 million-$150 million. It will also likely impact free cash flow negatively to the extent of around $550 million-$650 million, the management said.

 

Apart from the fire incident, in which no employee was injured, the US-based subsidiary of Hindalco faced other tough conditions in the September quarter. The US tariffs had a negative impact on the company's EBITDA, pulling it down by 9% on year to $422 million in the latest quarter. Novelis' management said the tariffs had a net negative impact of $54 million on the September quarter EBITDA.

 

The consolidated net sales of the company increased 10% on year to $4.7 billion in the latest quarter, but total rolled product shipments in the September quarter saw flattish growth at 940,000 tonnes. The volume was affected mainly due to a decline of 7% in North America shipments, the management said. This was due to "lower specialty and beverage packing shipments during Logan ramp up post-expansion, partially offset by higher automotive shipments," the company said.

 

The overall scrap conditions were favourable in the reporting quarter, and continue to be favourable, according to the company. Aluminium scrap is an important raw material for Novelis as it recycles them and manufactures the aluminium products it sells.

 

On the long-term trend in the company's end markets, the management said it now expects lower aluminium adoption in China over the next five years due to Chinese automotive manufacturers shifting to smaller vehicles, which do not need aluminium. Earlier, Novelis had expected that China's automotive market would see higher aluminium demand due to lightweighting, which uses aluminium, for the performance of bigger vehicles.

 

In beverage packaging, Novelis expects the product mix favouring aluminium due to sustainability preferences. The specialty aluminium segment will face near-term challenges due to suppressed building and construction demand, economic and tariff uncertainty, and slower roll-out of electric vehicles. These conditions will likely damped aluminium demand in some segments including batteries, trucks, trailers, and light gauge markets, the company said in an investor presentation.

 

Novelis expects the total capital expenditure in FY26 to be in a range of $1.9 billion to $2.2 billion. The management attributed the escalation in the total capex estimate to $5 billion for the Bay Minette greenfield rolling and recycling factory to inflation, tariffs, and higher costs due to competition for sub-contractors and labour. A cold mill, which is part of the overall project, will likely start commissioning in the March quarter, the management said.

 

On Tuesday, shares of parent company Hindalco closed 1.9% lower at INR 831.40 on the National Stock Exchange.  End

 

US$1 = INR 88.66

 

Edited by Tanima Banerjee

 

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