Novelis Navigates Fire Fallout, Stock Climbs

Hindalco Industries' stock price saw a 4% increase, reaching an intraday high of ₹1,089.60 on Wednesday, May 20. This surge followed its US subsidiary, Novelis, releasing its quarterly results and an operational update on its Oswego facility in New York. Novelis reported a net loss of $84 million for the fourth quarter, a sharp contrast to a $294 million net profit in the same period last year. This decline was largely attributed to pre-tax losses of $630 million stemming from fire incidents in September and November at the Oswego plant.

Despite the substantial losses, Novelis's quarterly net sales rose by 4% year-on-year, reaching $4.8 billion, primarily propelled by elevated aluminium prices. The company announced plans to expedite the restart of its hot mill at the Oswego facility. However, it also revised its projection for the cash flow impact from the fires upwards to $1.7 billion, citing increased repair costs and efforts to minimize customer disruption. Adjusted EBITDA experienced a 3% year-on-year decrease, settling at $459 million.

Analysts offered varied perspectives on Hindalco's outlook. Kotak Institutional Equities projected growth in Hindalco's India EBITDA, while Motilal Oswal anticipated a decline in EBITDA and net profit, suggesting strong Indian operations could mitigate Novelis's performance issues. Citi maintained a Neutral rating, expecting Novelis to achieve positive free cash flow by the end of FY27 and noting progress on the Oswego restart and the Bay Minette expansion. HSBC reiterated its Buy rating, highlighting Novelis's strong earnings and the positive impact of the Oswego restart and the ongoing Bay Minette project.