America First gives an edge for Novelis in US | Company Business News

Mumbai: The election of Donald Trump as the next president of the US bodes well for aluminium maker Novelis Inc., a top executive of its parent Hindalco Industries Ltd said.

“This administration will be good for Novelis, because Novelis produces metal in the US for the US,” said Satish Pai, managing director of Hindalco Industries, the Aditya Birla Group flagship.

Novelis, which has been facing some headwinds lately, reported a 3% drop in its ebitda in the quarter to ₹3,872 crore, even as parent Hindalco’s consolidated ebitda rose 40% and net profit surged 78% year-on-year (y-o-y) in Q2. Ebitda is short for earnings before interest, tax, depreciation and amortization.

“There is a near-term headwind at Novelis due to high scrap costs and a slowdown in demand from auto and aviation sectors, but the company is well-placed in the long term to deliver $600 per tonne ebitda as demand recovers, and the Bay Minette plant becomes operational,” said Parthiv Jhonsa, lead analyst for metals and mining at stock brokerage Anand Rathi.

A statement from Hindalco said the construction of the $2.5-billion recycling and rolling plant was on track and expected to be completed by the second half of 2026. Once it crosses the 78% completion mark, it will reduce the project execution risk, further helping Novelis’s valuation.

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Novelis’s public market debut, which was postponed earlier this year, remains on the back burner for the next few quarters, Pai said. The company expects a premium valuation for its American unit whose aluminium finds its way into soft drink cans and aircraft alike.

“We will wait for the right market conditions (and) consistent performance from the Novelis side. We want a premium valuation; we are not trying to raise money,” Pai said.

Hindalco shines

Meanwhile, Hindalco beat street estimates to deliver more than a three-fourths surge in its consolidated net profit to ₹3,909 crore compared to ₹2,196 crore last year. Analysts polled by Bloomberg had given a consensus estimate of ₹3,255 crore profit.

“The advantage of Hindalco is that it has a diversified and integrated business model. So, even if you see a little bit of headwinds in one of the businesses, the other businesses cover up for it,” said Pai, adding that the company’s aluminium and copper units in India compensated for an “average quarter” by Novelis.

Consolidated revenue during the July-September period grew 7% y-o-y to ₹58,203 crore, and ebitda rose 40% y-o-y to ₹7,883 crore.

The performance was aided by a 79% ebitda growth in the company’s aluminium upstream business in India to ₹3,709 crore. The business delivered ebitda per tonne of $1,349, which the company said was the highest in 10 quarters and better than all its peers globally.

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“While the aluminium upstream business did well as per our expectations, the downstream business performed better, with good premiums over the LME. The copper business also did much better than expected, helping the company’s ebitda despite lower margins at Novelis,” said Anand Rathi’s Jhonsa. LME refers to London Metal Exchange, and premiums over LME refer to price differences of the company’s metal over prevailing prices at the exchange.

Upstream manufacturing includes processes involved in making refined aluminium. Downstream includes value-added activities on aluminium produced from the upstream activities.

While the company’s earnings beat the street estimates, all the key metrics of revenue, ebitda and profit were in line with his projections, Jhonsa said. “Every company which has a strong domestic presence performed relatively better during the September quarter given good domestic demand,” he added.

India Capex

Pai also said in the earnings call that Hindalco will invest $4-5 billion in India over three years starting FY26 in increasing its upstream manufacturing capacities. The investments are part of an earlier capex guidance given by the company.

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The investments will go towards setting up an aluminium smelter, an alumina refinery, a copper smelter, and a copper recycling unit at an approximate expense of $1 billion each, according to Pai.

“These last few years we invested in downstream aluminium and copper. Now, with a healthy balance sheet and looking at the Indian economic growth, for the next three years, we are going to invest in upstream aluminium and copper,” Pai said.