Hindalco Industries experienced a significant drop in its share price, falling over six percent during early trading, following a report from its U.S.-based subsidiary, Novelis Inc., revealing a decline in quarterly earnings. Novelis posted an 18% year-on-year decrease in net income, amounting to $128 million for Q2 of FY 2024-25.
The decline stemmed from a $61 million expense linked to production disruptions at the Sierre plant, as well as increased restructuring and impairment costs, and lower operating performance, according to Novelis’ statement on November 6.
Despite these challenges, Novelis saw a 4.5% increase in net sales, reaching $4.29 billion, compared to $4.1 billion in the same period last year. However, adjusted EBITDA, impacted by higher aluminum scrap costs, a less favorable product mix, and flood-related setbacks at Sierre, declined to $462 million, with EBITDA per tonne at $489.
At 9:20 am, Hindalco shares on the NSE were trading at Rs 663.75, down by 6.3% as investors reacted to Novelis’ cautious outlook.
Following the report, domestic brokerage Emkay Global downgraded Hindalco to ‘sell’ from ‘reduce,’ citing uncertainty surrounding the EBITDA/t growth trajectory. Emkay highlighted concerns over widening scrap spreads, attributed to China’s liberalized scrap import policy, which could weigh on the stock in the short term. Emkay set a price target of Rs 600 per share, projecting a potential downside of 15% from the previous closing.
In the past year, Hindalco shares have outperformed, rising around 37% compared to a 26% gain in the Nifty 50 index.
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Source: Moneycontrol
