Aluminum rolling and recycling company Novelis, Atlanta, has reported net income of $307 million for the second quarter of fiscal 2018. In the second quarter of fiscal 2017, the company recorded a net loss of $89 million. Excluding tax-affected special items in both years, Novelis reported net income of $78 million in the second quarter of fiscal 2018, up from $60 million in the second quarter of fiscal 2017.
The increase in net income, excluding special items, is mainly because of a 12 percent increase in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to a record high $302 million for the second quarter of fiscal 2018. The year-over-year improvement in adjusted EBITDA is primarily a result of higher shipments, favorable metal costs and operational efficiencies, partially offset by lower beverage can pricing, Novelis says. Adjusted EBITDA reached $377 per ton in the quarter.
Net sales increased 18 percent over the prior year to $2.8 billion for the second quarter of fiscal 2018, driven by higher average aluminum prices and higher total shipments. Shipments of flat-rolled products increased 4 percent to an all-time quarterly record 802 kilotonnes, the company says. All regions reported higher total shipments year over year. Automotive sheet shipments increased 12 percent as production has continued to ramp to meet strong customer demand in this market.
"As an industry, we are seeing increasing demand for lightweight, high-strength aluminum from global automotive customers based on aluminum's ability to provide equal or better quality, strength and safety compared to other materials," says Steve Fisher, president and chief executive officer for Novelis. "At Novelis, our strategy to grow alongside our customers who are adopting innovative aluminum solutions to meet their design, performance and sustainability needs has resulted in a strong balance sheet and the ability to raise our full year guidance. With this increased strategic flexibility, we are now actively seeking organic investment opportunities to further expand our leadership position in the growing automotive aluminum sector."
Novelis reported free cash flow of $101 million for the second quarter of fiscal 2018, despite a significant rise in aluminum prices during the quarter. The company says the $57 million improvement in free cash flow over fiscal 2017 is primarily a result of higher adjusted EBITDA and lower cash interest payments because of refinancing savings and timing. Capital expenditures in the second quarter of fiscal 2018 were $43 million, $3 million less than in the prior year.
"Our continued strong financial performance and proceeds from the Ulsan joint venture transaction further improved our net leverage position in the quarter, and we remain on track to generate record free cash flow this fiscal year," says Devinder Ahuja, senior vice president and chief financial officer, Novelis.
As of Sept. 30, 2017, the company reported a very strong liquidity position of $1.6 billion.
In light of its strong first half performance and positive momentum going into the second half of the fiscal year, Novelis says it has raised its fiscal 2018 adjusted EBITDA guidance to be between $1,150 million to $1,200 million for the full year. The guidance for fiscal 2018 free cash flow to be between $400 million to 450 million is unchanged, as the company balances working capital headwinds related to higher average aluminum prices with a stronger adjusted EBITDA outlook.
Novelis operates in 10 countries, has approximately 11,000 employees and reported $10 billion in revenue for its 2017 fiscal year. Novelis supplies aluminum sheet and foil products to transportation, packaging, construction, industrial and consumer electronics markets throughout North America, Europe, Asia and South America. The company is a subsidiary of Hindalco Industries Ltd., an industry leader in aluminum and copper, and metals flagship company of the Aditya Birla Group, a multinational conglomerate based in Mumbai.