Novelis Inc., a wholly-owned subsidiary of Hindalco Industries, has released its Q2 FY26 earnings. Key highlights include adjusted EBITDA improving sequentially and strong demand for aluminum beverage packaging. The company is actively mitigating tariff impacts and progressing with a three-year cost efficiency program targeting over $125 million in savings. The Oswego plant fire is being addressed with operations expected to restart next month.
Q2 FY26 Financial Performance
Novelis reported a 10% increase in net sales, reaching $4.7 billion, primarily driven by higher average aluminum prices. Total rolled product shipments were in line with the prior year at 941 kilotons. Adjusted EBITDA was down 9% year-over-year to $422 million, which includes a $54 million net negative tariff impact.
Segment Performance
In North America, shipments decreased by 7% year-over-year. Europe saw a 12% improvement in shipments and a 29% increase in adjusted EBITDA. Asia experienced a 12% year-over-year growth in shipments. South America reported a 2% decrease in beverage packaging shipments.
Strategic Initiatives and Outlook
Novelis is implementing a $300 million three-year cost efficiency program, now expected to exceed $125 million in run rate savings by fiscal ’26. The company is progressing with the construction of a state-of-the-art plant in Bay Minette, Alabama, with commissioning expected in the second half of 2026. The total project capital cost is now estimated at $5 billion.
Oswego Plant Fire Impact
The unexpected Oswego plant fire in mid-September is being addressed with a focus on safe and quick recovery of operations. The hot mill is expected to restart next month. The estimated negative free cash flow impact in the second half of fiscal 2026 is approximately $550 million to $650 million, including an adjusted EBITDA impact of $100 million to $150 million. Insurance is expected to cover 70% to 80% of these impacts.
Tariff Mitigation
Novelis is actively mitigating tariff impacts through various strategies, including accessing more U.S. capacity and customer pass-throughs. Actions are underway to reduce the net tariff impact starting in Q3. Net tariffs are approximately $60 million per quarter.
Guidance and Financial Position
The company continues to expect total capital expenditures to be in the range of $1.9 billion to $2.2 billion for fiscal 2026. Net leverage ended the second quarter at 3.5x with liquidity of $2.9 billion.
Source: BSE
