Novelis profit rises 29% to $210 million in second quarter despite lower shipments
Key Facts
Novelis reported second-quarter fiscal 2027 results on Nov. 5 for the period ended Sept. 30, saying net income attributable to common shareholders rose 29% to $210 million. Net sales increased 25% year over year to $5.9 billion, while rolled product shipments fell 2% to 919 kilotonnes. The company attributed sales growth mainly to higher average aluminum prices, which partly offset lower shipments. Adjusted EBITDA also rose 20% to $508 million. The results show a divergence between growth in revenue and earnings on one hand and lower volumes on the other.
Shipments declined amid mixed performance across the company’s segments: beverage can and aerospace product shipments increased, but the gains were not enough to offset declines in automotive and specialty product shipments. Novelis said the average London Metal Exchange aluminum price rose 23% in the quarter ended Sept. 30 compared with the same period, while the average domestic market premium increased 61%. These price movements helped lift sales value despite lower shipment volumes. Chief Executive Steve Fisher said the quarterly results reflected "disciplined execution, resilient demand and favorable market conditions." The company also said improved operating earnings benefited from lower aluminum scrap prices, a better metal mix and business interruption insurance proceeds, while higher net tariffs, lower volume and a weaker product mix limited the improvement.
Net income excluding special items was $146 million, up 29% year over year, compared with reported net income of $210 million. Novelis attributed the increase in net income mainly to insurance proceeds related to fires at its Oswego plant in 2025 and higher adjusted EBITDA. It said the measure improved with $39 million in Oswego business interruption insurance proceeds, alongside metal benefits, including increased scrap consumption and lower aluminum scrap prices. Cumulative insurance proceeds related to the Oswego fires totaled $519 million through the end of the second quarter. The company restarted the Oswego hot mill in the first quarter of fiscal 2027, after two fires affected the plant in fiscal 2026.
On liquidity, operating activities used $418 million in the first six months of fiscal 2027, compared with an inflow of $411 million in the same period a year earlier. The company linked the shift to an outflow mainly to unfavorable working capital changes and the effects of the Oswego fires. Adjusted free cash flow outflow was $1.8 billion in the first half, compared with $499 million in the corresponding period. Novelis attributed the wider outflow to lower operating cash flow, as well as capital spending on the new rolling and recycling plant in Bay Minette, Alabama. Net leverage was 4.7 times on Sept. 30, compared with 4.1 times on March 31, 2026.
Novelis had total liquidity of $2.0 billion on Sept. 30, including $1.3 billion in cash and cash equivalents and $761 million available under committed credit facilities. A significant portion of capital spending is focused on the Bay Minette plant, an integrated rolling and recycling project valued at about $5 billion. The plant is intended to support North American demand for sustainable beverage cans and aluminum automotive sheet. The company plans capital spending of $2.1 billion to $2.4 billion in fiscal 2027, with most of it tied to building the plant, alongside about $350 million in maintenance spending. The company said the plant had entered commissioning, with commercial shipments targeted to begin in the first quarter of fiscal 2028.
Chief Financial Officer Dev Ahuja said lower capital spending, continued cost discipline and strong underlying business conditions are expected to support a return to positive free cash flow near the end of the fiscal year. He added that these factors are expected to mark the start of deleveraging in the same period. This follows an adjusted free cash flow outflow of $1.8 billion in the first half, alongside net leverage rising to 4.7 times at the end of September. The company also said a strike at its Yeongju facility in South Korea reduced production and shipments, and that fiscal 2027 beverage can shipments may be affected by the strike and by the normalization of supply chains and customer orders after the Oswego hot mill resumed operations. Against the backdrop of the period’s results, fiscal 2026 sales had risen 7% to $18.4 billion, while shipments fell 5% to 3,557 kilotonnes; the company attributed weaker volumes mainly to the Oswego fires.