Hindalco Inds drops on worries over Novelis' Bay Minette project costs

Hindalco Industries tumbled 14.27% to Rs 499.25 as concerns arise over cost overruns in Novelis Inc's Bay Minette project.

The company's wholly owned foreign subsidiary, Novelis, is constructing greenfield rolling and recycling plant in Bay Minette, Alabama, the company anticipate that it will be able to initially produce 600 kilotonnes of finished goods for the beverage packaging and automotive markets in North America. This is the first fully integrated aluminum plant built in the U.S. in nearly 40 years, and the largest project in company history. With a high level of project engineering complete, and all key equipment and the majority of materials contracted, the project capital cost is now expected to be $4.1 billion, and to commission in the second half of calendar year 2026.

Steve Fisher, president and CEO, Novelis Inc, said, "Novelis delivered a substantial year-over-year improvement in Adjusted EBITDA and Adjusted EBITDA per tonne margin, in line with our expectations of continued margin recovery this fiscal year, our unmatched global scale, diversified end market product portfolio and recycling leadership is evident in our strong third quarter results and makes us an essential partner of choice for our customers. These differentiators also allow us to execute our ongoing strategy to invest in growth and organically increase our rolling and recycling capacity to shape a more sustainable future."

 

Novelis announced its Q3 FY24 result. Its net income attributable to common shareholder significantly improved to $121 million in Q3 FY24 as compared with $12 million in Q3 FY23, due primarily to higher Adjusted EBITDA. Adjusted EBITDA increased 33% versus the prior year to $454 million in the third quarter of fiscal year 2024. This significant improvement was primarily driven by favorable metal benefit from recycling, higher pricing, and lower operating costs than the prior year, which was heavily impacted by high inflation and geopolitical instability.

Net sales declined 6% to $ 3,935 million in Q3 FY24 as compared with $3794 million posted in corresponding quarter last year, driven by lower average aluminum prices as shipments were in line with prior year levels.

Total flat rolled product shipments were 910 kilotonnes in the third quarter of fiscal year 2024 compared to 908 kilotonnes in the prior year period. Shipments were flat due to a decline in specialties product shipments from muted economic conditions in some markets, though more than offset by continued growth in automotive shipments and a return in demand for beverage packaging sheet.

The company had a net leverage ratio (Net Debt / trailing twelve months (TTM) Adjusted EBITDA) of 2.7x at the end of the third quarter of fiscal year 2024.

As of 31st December 2023, the company had total liquidity of $2.1 billion, consisting of $787 million in cash and cash equivalents and $1.4 billion in availability under committed credit facilities.

Devinder Ahuja, executive vice president and CFO, Novelis Inc, said, We continue to expect adjusted EBITDA per tonne to return to a sustainable $525 level beginning this fiscal fourth quarter as shipments seasonally improve and we drive more operating leverage, looking ahead, we believe there is opportunity for further margin expansion over time as we progress through our current period of disciplined, transformational capital investment to capture market growth.

Novelis Inc. is a leading global provider of sustainable aluminum solutions and the world leader in aluminum rolling and recycling.

Hindalco Industries, the metals flagship company of the Aditya Birla Group, is the world's largest aluminium company by revenues, and a major player in copper. It is also one of Asia's largest producers of primary aluminium. Hindalcos consolidated net profit rose marginally to Rs 2,196 crore in Q2 FY24 as against Rs 2,205 crore recorded in Q2 FY23. Revenue from operations declined 3.57% year on year to Rs 54,169 crore during the quarter.

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