Hindalco Industries saw a drastic decline in its stock price, dropping by 10% in morning trades on Tuesday, following the performance report of its US subsidiary Novelis for the December quarter. While the financials were in line with expectations, analysts expressed disappointment with the Capex guidance and timeline.
Novelis’ 3QFY24 adjusted EBITDA met estimates, but the company revised its capex outlay for a key growth project, greenfield expansion in North America, by 65% to $4.1 billion and delayed the timeline by one year to end-FY2027. Additionally, the management downgraded the return guidance from the project to ‘double digits’.
The net income for Novelis attributable to the common shareholder was reported at $121 million, up from $12 million in the same period last year. Net sales for the third quarter of fiscal year 2024 declined 6% year-on-year to $3.9 billion, driven by lower average aluminum prices while shipments remained flat.
Furthermore, flat rolled product shipments were at 910 kilotonnes, and adjusted EBITDA per tonne for the company increased by 33% to $499 a tonne. However, analysts noted a decline in the adjusted EBITDA per tonne on a sequential basis. The decline in specialty product shipments was offset by the growth in automotive shipments and a return in demand for beverage packaging sheets.
The outlook for Novelis remains positive in America, despite pressure in Europe and Asia. However, the company’s poor guidance and delayed return have impacted its growth, earnings, and return prospects for the next five years. This steep decline in stock price reflects the market’s concern over Novelis’ future performance and profitability.
