Hindalco Industries Limited's wholly-owned subsidiary, Novelis Inc., reported mixed results for the first quarter of fiscal year 2026, with revenue growth offset by a significant decline in net income.

Revenue and Shipments

The company saw a 13% year-over-year increase in net sales, reaching $4.70 billion. This growth was primarily driven by higher average aluminum prices and a modest 1% increase in total rolled product shipments, which rose to 963 kilotonnes. The increase in shipments was mainly attributed to higher demand for beverage packaging, partially offset by lower automotive and specialty shipments.

Profitability

Despite the revenue growth, Novelis experienced a substantial decline in profitability:

• Net income attributable to common shareholder decreased by 36% to $96 million
• Adjusted EBITDA fell by 17% to $416 million
• Adjusted EBITDA per tonne dropped 18% to $432

The company cited several factors for the decline in profitability:

1. Higher aluminum scrap prices
2. Unfavorable product mix
3. Net negative tariff impact of $28 million
4. Restructuring charges

These negative factors were partially offset by higher product pricing, lower SG&A costs, and favorable foreign exchange rates.

Cost Reduction Initiatives

In response to the challenging market conditions, Novelis has accelerated its cost reduction program:

• The company now expects to achieve over $100 million in run-rate cost savings by the end of fiscal year 2026, exceeding its previous target of $75 million
• Novelis aims to reach over $300 million in total savings by the end of FY28
• In Q1 FY26, the company recognized $83 million in restructuring costs related to these initiatives

Strategic Investments

Novelis continues to make progress on its strategic investments, including:

• The construction of a new greenfield rolling and recycling plant in Bay Minette, Alabama, with a 600kt capacity
• Ongoing ramp-up of recycling centers in Guthrie, Kentucky, and Ulsan, South Korea
• Commissioning of an 80kt hot mill expansion in Logan, Kentucky

Financial Position

As of June 30, 2025:

The company issued $400 million in tax-exempt bonds in June 2025.

Outlook

Steve Fisher, President and CEO of Novelis Inc., commented on the results: "We continue to see strong demand for aluminum beverage packaging sheet supporting top-line growth and the need for new capacity under construction at our plant in Bay Minette, Alabama. While market headwinds mainly from structurally higher scrap prices negatively impacted financial performance in the quarter, we are making solid progress on our comprehensive cost reduction program, which we expect will lower our cost base and improve our margins."

The company remains focused on streamlining its cost structure and investing in sustainable aluminum solutions to meet growing market demand, despite the current challenging external environment.

Hindalco Industries subsidiary Novelis Inc., a global leader in aluminum rolling and recycling, has released its financial results for the first quarter of fiscal year 2026, ending June 30, 2025. The company faced challenges due to market headwinds, primarily from higher scrap prices, but maintained strong demand in key sectors. Additionally, Novelis Corporation, an indirect subsidiary of Novelis Inc., has initiated a cash tender offer and plans a new note issuance.

Financial Highlights

• Net income attributable to common shareholder decreased by 36% year-over-year to $96.00 million.
• Net income excluding special items fell 43% to $116.00 million.
• Adjusted EBITDA declined 17% to $416.00 million.
• Net sales increased by 13% to $4.70 billion.
• Rolled product shipments rose 1% to 963 kilotonnes.
• Adjusted EBITDA per tonne shipped decreased 18% to $432.00.

Operational Performance

Novelis reported mixed results across its segments:

The company experienced strong demand for beverage packaging sheet across all regions, which partially offset lower shipments in automotive and specialty products.

Cost Reduction Initiatives

In response to market pressures, Novelis has accelerated its cost reduction program. Steve Fisher, President and CEO of Novelis Inc., stated, "We are making solid progress on our comprehensive cost reduction program, which we expect will lower our cost base and improve our margins." The company now anticipates run-rate cost savings to exceed $100.00 million by the end of fiscal year 2026, surpassing the previous target of $75.00 million.

Strategic Investments

Novelis continues to progress on key strategic projects:

• The greenfield rolling and recycling plant in Bay Minette, Alabama, remains on track, with a total planned capacity of 600 kilotonnes.
• In June 2025, the company issued $400.00 million in tax-exempt bonds to finance a portion of the Bay Minette construction costs.

Market Outlook

Despite challenges, Novelis remains optimistic about long-term growth prospects. The company cites continued strong demand for aluminum beverage packaging and expects the automotive sector to benefit from lightweighting trends in the long run.

Dev Ahuja, Executive Vice President and CFO, commented, "We are finding opportunities to streamline our cost structure in response to the challenging external environment, freeing up resources that can be invested to meet continued growing market demand for low-carbon, more sustainable aluminum products."

Financial Position

As of June 30, 2025, Novelis reported:

• Net leverage ratio of 3.2x
• Total liquidity of $3.00 billion
• Cash and cash equivalents of $1.10 billion

The company expects capital expenditures for fiscal year 2026 to range between $1.90 billion and $2.20 billion, primarily directed towards strategic investments in new rolling and recycling capacity.

Cash Tender Offer and New Note Issuance

Novelis Corporation has commenced a cash tender offer to purchase all outstanding 3.250% Senior Notes due November 2026. The company is offering $997.50 per $1,000 principal amount of notes, plus accrued interest. The tender offer expires August 15, 2025, with settlement expected August 18, 2025.

Simultaneously, Novelis Corporation plans to offer $750 million in new senior unsecured notes due 2033 through a private offering. The proceeds from the new note issuance will be used to purchase the 2026 notes through the tender offer and cover associated fees. Any remaining proceeds may be used to redeem 2026 notes not tendered.

The tender offer is conditional on receiving at least $750 million in gross proceeds from the new note offering. BNP Paribas Securities Corp. serves as dealer manager for the transaction.

Novelis continues to focus on operational efficiency and strategic investments to navigate current market challenges while positioning itself for future growth in sustainable aluminum solutions. The company reported net sales of $17.1 billion in fiscal year 2025.