Novelis Q2 adjusted EBITDA rises 20% despite lower shipments

Novelis Inc. increased adjusted EBITDA 20% year-on-year to Rs 50.8 crore in Q2 FY27 despite a 2% decline in flat-rolled product shipments to 919 kilotonnes, as an Rs 8.6 crore operating-cost contribution, price and mix gains, foreign exchange effects and an Oswego insurance recovery outweighed lower volume.

How did Novelis' Q2 FY27 earnings compare with last year?

Novelis reported Q2 FY27 adjusted EBITDA of Rs 50.8 crore, up from Rs 42.2 crore in Q2 FY26, while net sales increased 25% year-on-year to Rs 590 crore. Adjusted EBITDA means earnings before interest, tax, depreciation and amortisation, adjusted for specified items. Total flat-rolled product, or FRP, shipments fell to 919 kilotonnes, or kt, from 941 kt.

The increase in earnings exceeded the movement in volume because adjusted EBITDA per FRP tonne rose 23% to Rs 553 from Rs 448. Excluding Rs 3.9 crore of business-interruption insurance recoveries related to the 2025 Oswego fires, adjusted EBITDA per tonne was Rs 510. Net income attributable to Novelis' common shareholder increased 29% to Rs 21 crore, while net income excluding special items rose 29% to Rs 14.6 crore.

Sequentially, Q2 FY27 shipments of 919 kt were 3 kt above Q1 FY27's 916 kt, but adjusted EBITDA was Rs 0.8 crore below Q1 FY27's Rs 51.6 crore. Against Q4 FY26, when shipments were 844 kt and adjusted EBITDA was Rs 45.9 crore, Q2 FY27 had both higher shipments and higher adjusted EBITDA. The figures show that the year-on-year earnings advance occurred even without higher total FRP volume.

What offset Novelis' lower shipment volume in Q2 FY27?

Novelis' adjusted EBITDA bridge shows that an Rs 8.6 crore operating-cost contribution was the largest positive year-on-year factor, compared with an Rs 2.9 crore negative volume effect. Price and mix contributed Rs 1.4 crore, while foreign exchange and other items added Rs 1.8 crore. Selling, general and administrative expense, or SG&A, reduced adjusted EBITDA by Rs 0.3 crore.

The bridge reconciles adjusted EBITDA of Rs 42.2 crore in Q2 FY26 with Rs 50.8 crore in Q2 FY27. Its components total an Rs 8.6 crore increase, indicating that the disclosed operating-cost, price-and-mix, and foreign-exchange-and-other gains more than covered the volume and SG&A effects. The presentation does not break down the Rs 8.6 crore operating-cost contribution into individual initiatives.

Novelis also included Rs 3.9 crore of Oswego business-interruption insurance recovery in Q2 FY27 adjusted EBITDA. It received Rs 21.9 crore of Oswego-related insurance recoveries during the quarter and reported cumulative net recoveries of Rs 51.9 crore. The Q2 adjusted EBITDA measure includes the Rs 3.9 crore business-interruption item, while the presentation separately reports the larger amount received in the period.

Which Novelis regions delivered the largest EBITDA increases?

South America delivered Novelis' largest disclosed regional adjusted EBITDA increase, rising 48% to Rs 16 crore from Rs 10.8 crore while shipments were flat. Novelis said higher beverage-packaging shipments offset lower specialty shipments, and it cited favourable metal benefits and product mix. The Rs 5.2 crore increase was larger than the increases reported for North America, Europe and Asia.

Europe increased adjusted EBITDA 25% to Rs 10.1 crore from Rs 8.1 crore despite a 2% reduction in shipments. Lower beverage-packaging and specialty shipments were partly offset by higher automotive shipments. Novelis attributed the earnings increase to favourable product mix and metal benefits, partly offset by unfavourable foreign exchange.

North America raised adjusted EBITDA 9% to Rs 14.6 crore from Rs 13.4 crore as shipments increased 1%. Novelis said higher beverage-packaging shipments offset lower automotive and specialty shipments, while Oswego produced to demand and the business worked through supply-chain normalisation. The region also faced a net negative tariff impact and recorded favourable metal benefit and the Rs 3.9 crore Oswego business-interruption recovery.

Asia increased adjusted EBITDA 2% to Rs 10.1 crore from Rs 9.9 crore even as shipments fell 7%. A union strike at the Yeongju plant affected production and shipments, with an estimated negative Rs 2 crore impact on adjusted EBITDA. Lower beverage-packaging and automotive shipments were partly offset by higher specialty and aerospace shipments, while favourable metal benefits and foreign exchange supported the segment.

What should readers watch after Novelis' Q2 FY27 result?

Novelis' next results will show the duration and financial effect of the Yeongju labour disruption, the normalisation of Oswego supply-chain effects and any further insurance recovery. Asia absorbed an estimated Rs 2 crore strike impact in Q2 FY27, while North America's adjusted EBITDA included Rs 3.9 crore of Oswego business-interruption recovery. Novelis said Oswego production was at normal levels, but that it was still working through supply-chain effects after the fires.

Management reported more than Rs 24 crore in cost-efficiency run-rate savings through Q2 FY27 and anticipates about Rs 30 crore by the end of FY27. It targets Rs 35 crore to Rs 40 crore in total savings by the end of FY28, compared with its initial estimate of more than Rs 30 crore. These are management targets and anticipated run-rate outcomes rather than reported savings for one quarter.

Novelis reported adjusted free cash flow of negative Rs 67 crore in Q2 FY27 and negative Rs 180.4 crore year to date, compared with negative Rs 49.9 crore in the prior-year period. Capital expenditure was Rs 76.8 crore in Q2 and Rs 154.3 crore year to date. Net leverage, defined as adjusted net debt divided by trailing-12-month adjusted EBITDA, rose to 4.7 at Q2 FY27 from 4.5 at Q1 FY27 and 3.4 at Q2 FY26.

Conclusion

Novelis' Q2 FY27 result combined a 2% decline in FRP shipments with a 20% rise in adjusted EBITDA, led by the Rs 8.6 crore operating-cost bridge contribution and supported by price and mix, metal benefits, foreign exchange and insurance recovery. Regional outcomes differed: South America produced the largest EBITDA increase at 48% on flat shipments, while Asia's 7% shipment decline reflected the Yeongju strike.

Management expects to return to a positive free-cash-flow position by the end of FY27 and expects net-leverage reduction to begin in Q4 FY27. It expects FY27 capital expenditure at the top end of its Rs 210 crore to Rs 240 crore range, including about Rs 35 crore for maintenance capital expenditure, while targeting about Rs 30 crore of cost-efficiency run-rate savings by the end of FY27.