Hindalco announced an update from its subsidiary, Novelis, regarding the September and November 2025 fires at the Oswego, NY plant. Novelis estimates a total free cash flow impact of $1.3–$1.6 billion, with 70-80% potentially recoverable via insurance, and expects the hot mill restart by late Q2 CY2026. Financially, Q3FY26 saw Net Sales rise 3% YoY to $4.2 billion, though Adjusted EBITDA fell 5% YoY to $348 million due to the fire and tariff impacts. Underlying performance remains strong, with Adj. EBITDA/tonne up 6% YoY.
Oswego Fire Incident Update and Outlook
Hindalco provided an update concerning the two significant fires that occurred at its subsidiary Novelis’ Oswego, NY plant on September 16, 2025, and November 20, 2025. Both fires were contained to the hot mill area, leaving other critical assets operational. Novelis is working closely with customers to mitigate impact, and the plant is insured for property damage and business interruption losses.
Estimated Impact & Restart Timeline
The estimated impact from both fires includes:
- Total free cash flow impact before insurance is estimated at ~$1.3–$1.6 billion, which encompasses an Adjusted EBITDA impact of ~$150–$200 million and a shipments impact of ~150–200kt.
- Novelis estimates that 70-80% of the cash flow and Adjusted EBITDA impact is recoverable through insurance, though recovery is subject to ongoing insurer investigation.
- The estimated timeline to restart the Oswego hot mill is late Q2 calendar 2026.
Q3 Fiscal Year 2026 Financial Highlights
Despite the production disruption, underlying business performance was resilient:
- Net Sales increased 3% Year-over-Year (YoY) to $4.2 billion.
- Total FRP shipments declined 11% YoY to 809kt, reflecting an estimated 72kt reduction due to the Oswego fires.
- Adjusted EBITDA was $348 million (down 5% YoY), impacted by an estimated negative $54 million from the Oswego fires and $34 million from tariffs.
- Crucially, Adjusted EBITDA per tonne grew 6% YoY to $430. Excluding the fire and tariff impacts, Adj. EBITDA per tonne was $495.
- The company reported a Net loss attributable to common shareholder of $160 million, which includes pre-tax Oswego fire impacts of $54 million in Adjusted EBITDA and total losses of $327 million, net of recoveries.
Segment Performance Summary
Segment results highlight regional variances:
- North America: Shipments declined 21% and Adjusted EBITDA fell 23%, driven primarily by lower shipments across all end markets due to the Oswego fires.
- Europe: Shipments increased 16% and Adjusted EBITDA surged 59%, supported by higher beverage packaging, aerospace, and specialty shipments.
- Asia: Shipments were flat (+2%), but Adjusted EBITDA dropped 36% due to lower metal benefits from higher scrap prices.
- South America: Shipments rose 2%, and Adjusted EBITDA grew 7%, benefiting from higher exports and favorable metal prices.
Cash Flow and Leverage
Year-to-Date FY26 cash flow was impacted by the Oswego situation, resulting in an Adjusted Free Cash Flow of ($1,641 million), compared to ($915 million) in the prior year. This was significantly affected by negative $485 million across working capital, CapEx, and EBITDA related to the incident.
The Net leverage ratio stood at 3.7x at December 31, 2025, supported by $2.6 billion in liquidity and a strategic $750 million equity infusion received in December 2025.
Structural Cost Reduction Progress
Novelis updated its cost optimization outlook, now anticipating exiting FY26 with an upwardly revised run-rate savings over $150 million (up from the prior estimate of $125+ million). The total savings target by the end of FY28 remains over $300 million. Cumulative restructuring costs recognized through Q3FY26 reached $131 million.
Bay Minette Project on Track
Construction at the greenfield rolling and recycling facility in Bay Minette, Alabama, is progressing well. The project has an estimated total capital cost in the order of $5 billion. Novelis expects commissioning to begin in the second half of CY 2026, with the cold mill commissioning starting in March 2026. The facility is targeted to deliver 600kt of total finished goods capacity upon completion, with 420kt targeted for beverage packaging.
Source: BSE
