Novelis Q2 earnings dip amid challenges, parent company plans $750m infusion

Novelis Inc. reported Q2 FY26 adjusted EBITDA of $422 million, a 9% year-over-year decrease, impacted by a $54 million net negative tariff. Excluding tariffs, adjusted EBITDA per ton was $506. Total rolled product shipments remained in line with the prior year at 941 kilotons, driven by strong demand for aluminum beverage packaging sheet despite regional market softness.

The company is addressing challenges, including a fire at its Oswego, New York plant, which is expected to result in a negative free cash flow impact of approximately $550 million to $650 million in H2 FY26, including an estimated adjusted EBITDA impact of $100 million to $150 million. Novelis anticipates recovering 70% to 80% of these impacts through insurance. Additionally, the Bay Minette, Alabama plant's total project capital cost is now estimated at $5 billion, up from initial projections, due to inflation and increased construction costs.

Despite these hurdles, Novelis is confident in its strategic initiatives, including a $300 million three-year cost efficiency program, now expected to reach a run rate saving level above $125 million by the end of fiscal year 2026. The company also anticipates an equity infusion of $750 million from its parent to support the Bay Minette project and mitigate debt concerns.