Hindalco shares slump 13% after Novelis results

Hindalco Industries shares slumped 13% on Tuesday after its subsidiary, Novelis reported a project escalation cost for its Bay Minette plant.

Hindalco shares were trading at Rs 501.75, down 13.84% on BSE.

JM Financial Institutional Securities said in a report that Novelis has revised its capex guidance for its Bay Minette plant from $2.7-2.8 billion to $4.1 billion (up 52%) of which $750 million to be incurred till March'24 - plant is likely to be commissioned by 2HCY26 (versus earlier guidance of commissioning by FY26).

Significant escalation in projected cost for Bay Minette plant is likely to result in lower IRR, the report said.

However earnings trajectory is likely to benefit tracking plant commissioning, increased recycling, evenly spread capex (due to delay in Bay Minette plant commissioning) resulting in higher shipments and margins keeping its journey of sustainable EBITDA/t of $525/t intact.

Novelis Inc., a leading sustainable aluminum solutions provider and the world leader in aluminum rolling and recycling, reported results for the third quarter of fiscal year 2024.

"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," said Steve Fisher, president and CEO, Novelis Inc.

Net sales decreased 6% versus the prior year period to $3.9 billion for the third quarter of fiscal year 2024, driven by lower average aluminum prices as shipments were in line with prior year levels. 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.

Novelis is constructing a state-of-the-art, greenfield rolling and recycling plant in Bay Minette, Alabama, that is anticipated to 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 US. 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, the company said.