Informist, Monday, Aug. 11, 2025

By Rajesh Gajra

NEW DELHI – Due to the challenging macroeconomic conditions, US-based Novelis Inc.--a major contributing subsidiary of aluminium major Hindalco Industries Ltd.--is seeing dilution and pullback of its aluminium product mix from automotive sector and specialties segment, the company's management said in a post-June quarter earnings call with investors Monday. "Right now," the mix of beverage packaging is higher in the overall product mix, it said.

Analysts believe Novelis' products other than beverage packaging typically have higher realisations. The management said the company has seen the effect of better prices in beverage cans started to kick in but it is getting partly negated by the unfavourable product mix.

Novelis, which recycles aluminium scrap and sells aluminium rolled products, reported weak shipment volume growth of 1% on year in the June quarter. The net sales of the company increased 13% on year to $4.72 billion but the adjusted earnings before interest, tax, depreciation, and amortisation fell by 17% to $416 million. As per the company's consolidated statement of operations for the June quarter, the cost of goods sold, excluding depreciation and amortisation, jumped 17% on year to $4.08 billion.

Novelis' product mix negatively impacted its adjusted EBITDA on-year growth. The adjusted EBITDA growth was also hit by elevated scrap prices and net negative tariffs. The June quarter adjusted EBITDA of $416 million included a net negative tariff impact of $28 million, according to the company's management.

"Right now, we are seeing some headwinds coming from the overall tariff environment, conservatism on investing and spending, given the market uncertainties," the management said. On the tariff front, the company is working through mitigation strategies "including advocacy for fair exemptions, customer pass-throughs, and opportunities to produce more in the US to begin offsetting tariff impacts in the second half of this fiscal year," according to the management.

In the September quarter, there will likely be an unmitigated tariff impact of $60 million in the EBITDA, the management said. Starting from the December quarter the company will see impact of its tariff mitigation strategies along with cost takeout actions, it said.

The full impact of tariff mitigation actions will be visible in the March quarter, according to Novelis' management. The company will defend its volumes through the tariff mitigation strategies "versus going to customers and asking them to bear the impact," the management said.

Higher scrap prices had a negative impact on Novelis' adjusted EBITDA in the June quarter. A top executive of the company said currently "scrap prices have stabilised somewhat... (but) prices remain elevated compared to historically favourable levels of the recent past."

The spot scrap prices in the US have declined fairly sharply very recently and the company was getting "some benefit of that," he said. But the company will not receive the entire benefit from the fall in scrap prices as it also has contracted sharp prices earlier which are higher than the current spot prices, he said.

The bottom line performance of the overseas subsidiary of Hindalco in the June quarter was not only hit by the fall in EBITDA but also by other expense items. The management said the company had recognised restructuring costs of $83 million in the June quarter. The consolidated statement of operations showed net restructuring and impairment expenses of $85 million in the June quarter as against $19 million in the year ago quarter. The net income fell 36% on year to $96 million in the June quarter.

In terms of its capital expenditure plans for the current financial year 2025-26 (Apr-Mar), the management said it expects capital expenditures for the year to be in a range of $1.9 billion to $2.2 billion. In the June quarter, the capital expenditure incurred by the company was $386 million.

Novelis announced its June quarter earnings Monday. Hindalco is scheduled to detail its June quarter earnings Tuesday. Shares of Hindalco closed flat at INR 672.85 Monday on the National Stock Exchange. End

Edited by Akul Nishant Akhoury

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