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Informist, Wednesday, Aug. 5, 2026

 

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--Novelis: Commissioning process underway for Bay Minette project
--CONTEXT:Comments by mgmt of Hindalco arm Novelis in earnings investor call
--Novelis: Net tariff impact to be mitigated when supply chain normalises
--Novelis: Aluminium scrap prices favourable in Q1
--Novelis: FY27 capex aim $2.1 bln-$2.4 bln
--Novelis: European market remains sluggish
--Novelis: FY27 capex target to include around $350 mln maintenance capex
--Novelis: Expect to turn free cash flow by end of FY27
--Novelis:Expect to commence commercial shipment from Bay Minette Q1 of FY28
--Novelis: Aiming to increase market share in South American markets
--Novelis: Wide spreads benefit will pull back if aluminium prices normalise
--Novelis: Aiming to get net leverage ratio below 4 times by end of FY27
--Novelis: May make forays into new areas in Asian markets
--Novelis: See meaningful insurance recoveries on Oswego fire losses ahead
--Novelis: Tariff impact Q1 high due to higher imports, to taper down ahead
--Novelis: Got $300 mln insurance recoveries in Q1, see more in future
--Novelis: Demand for aluminum products remains resilient
--Novelis: Bay Minette project estimated total cost remains near $5 bln

 

By Rajesh Gajra and Astha Oriel

 

MUMBAI/NEW DELHI – Novelis Inc.'s high rate of on-year growth in adjusted earnings before interest, tax, depreciation, and amortisation for the June quarter is likely to sustain going ahead in the current financial year and till such time as the elevated aluminium prices begin to normalise. Speaking to investors and analysts in a post-earnings conference call, the management of US-based Novelis, a major contributing subsidiary of Hindalco Industries Ltd., said the adjusted EBITDA of the company will keep growing strongly with cost optimisation improving further.

 

But "what will pull back is really, at some stage, as metal (aluminium) prices normalise, who knows when, we will see a bit of a pullback on the exceptional metal benefits we are getting as a result of the wider spreads," a senior official said. "The factors that will play up against each other are these two factors – (cost) savings going up, but the metal benefits pulling down," he said.

 

In the June quarter, higher aluminium prices helped the company's realisations from the sale of it end aluminium rolled products, with lower aluminium scrap prices also acting in the company's favour. The Novelis official said the company was not servicing the market fully due to factors such as the Oswego factory fire resulting in volume losses. "Given the fact that the market demand is there and we are not running our assets with the best possible mix that we can to optimise production and productivity, it means that there is all that potential that is not represented in the volumes, the efficiencies, and the EBITDA," he said. 

 

Novelis' EBITDA, adjusted for gains or losses from metal price lag, Oswego fire losses, and other items, rose 24% on year to $516 million in the June quarter from $416 million in the year ago quarter. The growth in adjusted EBITDA was partially offset by higher net tariffs, the company said in an earnings press release.

 

The company also said the estimated impact from the Oswego fires in the adjusted EBITDA was as an $18 million benefit, "as the favorable timing of insurance proceeds more than offset the estimated negative impact of production interruptions in the quarter." The Oswego fires impact for the June quarter included business interruption insurance proceeds of $47 million, the company said in an earnings investor presentation.

 

The company, which recycles aluminium scrap into aluminium rolled products, reported a jump of 71% on year in its consolidated net income to $164 million for the June quarter, on the back of a strong 23% on-year increase in net sales to $5.79 billion, even as volume declined 5%. 

 

The management of the company expects "meaningful" insurance recoveries "quarter after quarter" on the Oswego fire losses. "My estimate is that we will have another about $200 million of insurance recovery in this quarter (Jul-Sept)," a senior official said. This follows the $300 million of insurance recoveries recognised by the company through the end of the June quarter.

 

On the impact of high tariffs imposed by the US government, Novelis' management said it was quite high for the June quarter as the company had to "bring in more than the imports" that it would normally have done, in order to keep its "customers fully serviced." The tariff impact will taper "over time" as "supply chains normalise", a senior official said.

 

Providing an update on the Bay Minette project, the management said the commissioning process was underway, and it expects commercial shipments from the project to start in the June quarter of 2027-28 (Apr-Mar). The estimated total cost remains around $5 billion for the Bay Minette factory, which will have a 600,000 tonnes per year production capacity.

 

The management said the capital expenditure will be in the range of $2.1 billion to $2.4 billion for the whole of FY27, including around $350 million for maintenance capex. It expects the company to return to a free cash flow positive position by the end of FY27, and the net leverage ratio to go below 4 times at the end of FY27. Net leverage ratio is the number of times by which the adjusted net debt is more than the adjusted EBITDA for the trailing 12 months, according to Novelis.

 

The demand for aluminium products remains resilient, according to the management. The company has gained market share in the South America where it sees strong growth prospects going ahead. "However, the European market remains sluggish, reflecting weak economic conditions, while Asia aluminium demand softens due to continued automotive market share gains by Chinese EV (electric vehicle) manufacturers," a senior official said. For the Asian markets, the company is "going to make forays into new areas, which basically directly or indirectly caters to the high-growth segments," including energy and infrastructure markets, and also data centres," he said.

 

Wednesday, shares of Hindalco Industries ended at INR 1,040, up 2% from closing price Tuesday, on the National Stock Exchange.  End

 

US$1 = INR 95.117

 

Edited by Akul Nishant Akhoury

 

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