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Informist, Wednesday, Feb. 11, 2026

 

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--Novelis: Focussed on restoring fire-hit plant at Oswego in US 
--CONTEXT:Comments by mgmt of Novelis, a Hindalco arm, in post-result concall 
--Novelis: Scrap prices continue to improve 
--Novelis: Demand for aluminium products remains resilient 
--Novelis: See strength in beverage packaging market 
--Novelis: Impact from Oswego plant fire on cash flow seen $1.3 bln $1.6 bln 
--Novelis: Beverage packaging demand seen remaining strong across regions 
--Novelis: Oswego fire to hit automotive segment capacity 
--Novelis: Demand in automotive segment in Europe stable 
--Novelis: Working to minimise impact of Oswego accident on customers 
--Novelis: Tariff mitigation plan in US on track 
--Novelis: Cost efficiency programme yielding positive results 
--Novelis: Expect to commission Bay Minette plant in US in Jul-Dec 
--Novelis: Seeking additional equity of $200 mln from Hindalco 
--Novelis: Additional equity from Hindalco to fund Bay Minette plant capex 
--Novelis: 70-80% of damage to Oswego unit from fire recoverable via insurance 

 

By Gopika Balasubramanium and Narayana Krishna

 

MUMBAI – Novelis, Hindalco Industries Ltd.'s US-based subsidiary, is intensely focussed to restore its Oswego hot mill plant to return to full capacity and assured investors that 70-80% of the damage caused due to fire can be recovered through insurance, the arm's top executives said in a post-earnings analyst conference call on Wednesday. The company also said it is working closely with insurers to recover the payouts, and sees operations in the affected plant to be restored in the latter part of Apr-Jun. 

 

"However, given the process, the timing, and amount of recoveries from any insurance claims related to fires are uncertain, and they may be less than the full amount of our losses and take some time to materialise", the company's management said. If the insurance payouts come in while the company does the restoration and repairs in the fire-hit plant, those funds would be deployed to reduce cash flow impact, they said.

 

The total free cash flow impact, before insurance, due to the fire accident was between $1.3 billion and $1.6 billion, which includes the adjusted earnings before interest, tax, depreciation, and amortisation impact of $150 million-$200 million. Those payouts that would come after the repairs are done, it would be used to reduce operating leverage, the US company's management said. 

Novelis' Oswego plant was hit by fire accidents twice in 2025, once in September and then in November, which led to disruption in production and hindered supply to customers. The aluminium maker said it using all resources to mitigate the gap that the accident has caused in terms of material and supply chains. "...we are using third-party sources to supply as much as we can in order to keep customers whole", the company's management said.

  

Oswego fire incident primarily hit the earnings of the US-based arm in the quarter ended December, alongside US tariffs. The arm reported a net loss of $160 million against an income of $110 million a year ago, hit hard by $327 million in pre-tax losses related to the fires. The company's net sales increased marginally on year to $4.19 billion. 

Given the impact of the hot mills outage of its Oswego plant in its capacity constraints, especially the automotive segment in North American market, Novelis is counting on its upcoming plant in Bay Minette, US, to tackle. The aluminium company expects to commission the new US plant in Jul-Dec. The cold mill commissioning is seen in March while the hot mill installation continues, the company said. "As you can see, overall, this Oswego fire incident is pressuring capacities in the North America market space...," the company's executives said. "That is exactly what we're doing with the Bay Minette investment that we'll be commissioning in the second half of this calendar year, 2026," they said. 

 

For its third plant in the US, Novelis estimates a capital cost of $5 billion, the company said in its presentation. At the end of the December quarter, the company spent $2.7 billion as capital expenditure for this project. In addition, the company is in discussion with parent Hindalco Industries for another additional equity infusion of $200 million for capital expenditure for the upcoming plant, the management said. In December, Novelis had received $750 million as equity infusion from the parent company, as per the presentation.

 

In the long term, Novelis sees the equity infusion to help bridge the elevated capital expenditure for the new plant. And in the short-term, this infusion will help Novelis to "navigate through liquidity pressures that are going to be cost... between the time we incur the Oswego fire-related costs and the time we recover from insurance," the management said.

 

Novelis sees demand for aluminium products to remain "resilient", with particular strength in beverage packaging market. The company also said it sees prices for aluminium scraps to continue to improve. During the three months ended December, the demand in the beverage packaging segment was sustained, with the company shipping to Europe, Asia, and South America. However, shipments for beverage packaging market were lower in North American market, falling 21% on year, due to the fire incident in Oswego. Novelis also said it sees demand in the beverage packaging segment to sustain globally. In 2024-25 (Apr-Mar), this segment accounted for about 60% of total shipments of Novelis. 

 

In the European market, the company sees sustained demand for automotive shipments. This is mainly due to constrained economic conditions in the region, the company said. Automotive segment made 19% of the company's FY25 shipments.

 

Apart from the Oswego fire incident, unrealised losses on derivatives in the current year compared to gains in the prior year also affected Novelis' earnings in the December quarter. However, this was offset by favourable metal price lag resulting from rising average local market aluminium premiums, the company said in its press release. 

 

That said, the impact due to US tariffs on earnings was minimal for the company during this quarter, cushioned by its mitigation plans. While the total number for the impact due to tariffs is $34 million, the actual impact was just $7 million-$8 million, the company's management said in its concall. "In the short term, we did not produce as much in the plant because we were not able to feed our Kingston plant in Canada as a result of that we got a short term mitigation," the company's management said. The rest of the amount under tariff impact was mainly due to inventories.

 

For the next quarter, the company sees "minimal impact" due to tariffs. "...you know the fact that we're not particularly producing helps but then even if we were to produce we would do through a different supply chain," the management said. "We have access to more capacity on the (US) shore and even if we were to produce we would be able to do it without much of the tariff impact."    

 

The company's parent, Hindalco Industries, will declare its December quarter earnings on Thursday. The parent firm's shares closed at INR 965.95 on the National Stock Exchange, down 0.3%.  End 

 

US$1 = INR 90.70

 

Edited by Deepshikha Bhardwaj

 

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