Hindalco shares tumble 7% as disappointing outlook from arm Novelis dents sentiment

Novelis Inc, the US-based aluminum producer, reported on Wednesday an 18% decline in net income to $128 million in the September quarter of 2024-25.

The company, which deals in aluminum-rolled products, had reported a net income of $157 million in the same period of the last financial year.

The decline comes as a result of a $61 million charge associated with the production interruptions at its Sierre plant, along with higher restructuring and impairment expenses and lower operating performance, Novelis said on November 6.

Net sales for the second quarter rose by 4.5% to $4,295 million over $4,107 million in the year-ago period.

The major reason behind the steep fall in the share price of Hindalco was the fact that Novelis withdrew its short-term EBITDA per tonne guidance of $525.

Novelis attributed the suspension of guidance to tight scrap spreads due to accelerated scrap purchases by China, as per news reports. 

"We were not convinced with its steep EBITDA/t improvement trajectory in the medium term. With the company now withdrawing its EBITDA/t guidance over concerns surrounding accelerating tightening of scrap spreads with the liberalization of scrap imports by China, we think it creates a near-term overhang for the stock," said Emkay Global.

As regards September quarter results, Steve Fisher, President and CEO of Novelis Inc. said."Our global footprint allowed us to achieve record beverage packaging shipments in the quarter and also mitigate the impact to customers from the flooding-related outage at Sierre," 

"We are more focused than ever on diligently managing the balance sheet as we continue to progress the growth investments we have underway and navigate shifting market dynamics," Devinder Ahuja, executive vice president and CFO of Novelis Inc. said.