Hindalco rides aluminium supply shock, US unit Novelis' rebound in first quarter

Synopsis

Hindalco Industries sees strong performance from rising aluminium prices and Novelis' recovery. Global aluminium prices increased significantly due to supply shocks and a widening deficit. Novelis, its US subsidiary, improved operations after restarting its Oswego hot mill. The company achieved substantial cost savings and targets further operational improvements. Hindalco's India aluminium business also benefited from higher realisations during the quarter.

Hindalco Industries sees strong performance from rising aluminium prices and Novelis' recovery

Hindalco Industries’ first-quarter print on Friday showed that higher aluminium prices and a recovery at Novelis, its US-based downstream aluminium subsidiary, emerged as key tailwinds for the company’s performance in the period.

The company’s India aluminium business benefited from higher realisations as aluminium prices climbed during the quarter, while Novelis’ performance improved with the restart of its Oswego hot mill and ongoing cost-cutting measures.

Hindalco’s consolidated revenue rose 32% year on year in the June quarter, while EBITDA jumped 73% and net profit increased 75%. The company’s aluminium upstream business recorded its highest-ever quarterly EBITDA.

Aluminium prices on the London Metal Exchange rose to $3,577 per tonne in Q1 FY27 from $2,447 a year earlier, according to its investor presentation. Hindalco attributed the rise to the impact of the West Asia conflict, which it described as the largest-ever supply shock.

That supply squeeze has provided a major boost to Hindalco’s upstream aluminium operations, which produce the metal and benefit directly from higher prices.

The other leg of the quarter’s performance came from Novelis. The Hindalco subsidiary makes rolled aluminium products used in sectors including beverage cans, automobiles and aerospace, and has been working to improve profitability through cost savings and operational recovery.

Novelis’ Oswego hot mill restarted in June, with production now ramping up. The company had achieved more than $225 million in run-rate cost savings by the end of the quarter and continues to target further savings, providing another potential earnings support for Hindalco, the company said.

The combination of stronger aluminium prices and improving performance at Novelis therefore gives Hindalco two distinct levers for growth: Higher upstream realisations in India and an improving downstream business overseas.

Hindalco is also progressing with its Bay Minette aluminium rolling and recycling facility in the US, which is expected to begin shipments in Q1 FY28. The company expects the facility to strengthen Novelis’ position in the market for recycled and low-carbon aluminium products.