Novelis, the US based aluminium producer, reported weaker earnings for the first quarter of fiscal 2026, which ended June 30, 2025, as higher scrap costs and tariff impacts offset volume gains.
Net income attributable to common shareholders dropped 36 per cent to USD 96 million from USD 151 million a year earlier, largely due to restructuring charges and softer operating performance, partially cushioned by favourable metal price lag.
Adjusted EBITDA fell 17 per cent year-on-year to USD 416 million from USD 500 million, while rolled product shipments edged up 1 PER CENT to 963 kilotonnes.
Adjusted EBITDA per tonne in Q1 FY26 fell 18 per cent to USD 432 million. Excluding special items, net income was USD 116 million, down 43 per cent. The decline was driven by higher aluminium scrap prices, an unfavourable product mix, and a net negative tariff impact of USD 28 million, partly offset by higher product pricing, lower SG&A costs, and favourable foreign exchange.
Net sales rose 13 per cent to USD 4.7 billion, supported by higher aluminium prices and a modest increase in shipments. Growth in beverage packaging volumes was partly offset by weaker automotive and specialty shipments.
Operating cash flow climbed 42 per cent to USD 105 million, though adjusted free cash flow remained negative at USD 295 million, mainly due to higher capital expenditures of USD 386 million, largely for the Bay Minette, Alabama greenfield rolling and recycling plant.
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Capacity expansion and cost savings in focus
Novelis president and CEO Steve Fisher said, “We continue to see strong demand for aluminium 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. We have already implemented a round of organisation redesign, footprint rationalization and process improvement actions to drive simplification and efficiencies. We believe these actions will accelerate anticipated run-rate cost savings to over USD 100 million by the end of this fiscal year, exceeding our previously estimated target of approximately USD 75 million.”
At quarter-end, Novelis had a net leverage ratio of 3.2x and total liquidity of USD 3 billion, including USD 1.1 billion in cash and USD 2 billion in committed credit lines. In June 2025, the company raised USD 400 million through tax-exempt bonds to help fund construction at Bay Minette.
Hindalco-owned Novelis targets USD 1.9–USD 2.2B FY26 capex
Novelis is a wholly owned subsidiary of Hindalco Industries. The company has projected fiscal 2026 capital expenditure of USD 1.9 billion to USD 2.2 billion, in line with ongoing projects, including the Bay Minette plant and other capacity expansions. Novelis plans to fund the investments through internally generated cash while pursuing cost-reduction initiatives to offset US tariff pressures and elevated scrap prices.
During an investor call, the company reaffirmed its long-term growth outlook, anchored by the Bay Minette plant, which will have a 600-kilotonne annual capacity upon completion. It also said it is implementing tariff mitigation strategies to protect volumes.
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