Atlanta-based Novelis Inc. has reported for its fourth quarter and 2017 fiscal year, noting year-over-year increases in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), net income, free cash flow and automotive sheet shipments. The company says its performance was driven by Novelis’ strategy to improve operational efficiencies and increase shipments of premium products, resulting in fiscal 2017 net income attributable to its common shareholder of $47 million for the fourth quarter and $45 million for the full year.
Excluding tax-effected special items in all periods, Novelis grew its fourth quarter fiscal 2017 net income 46 percent to $73 million and increased full year net income by 78 percent to $233 million. The increase in fourth quarter and full year net income reflects the significant improvement in adjusted EBITDA, as well as lower interest expense, a result of the company's long-term debt refinancing actions during fiscal 2017, Novelis says.
“By consistently executing our strategy and staying focused on business fundamentals, we have driven value for our stakeholders and are able to better serve our customers,” says Steve Fisher, president and chief executive officer for Novelis. “This year’s record performance provides us with a blueprint for sustainable results and the strategic flexibility to enhance our leadership position in the industry."
For its fourth fiscal quarter, Novelis says net sales increased 9 percent to $2.6 billion, driven by higher average aluminum prices and increased shipments of higher conversion premium products, including a 26 percent increase in automotive shipments. Total shipments of rolled aluminum products were flat year over year at 789,000 metric tons.
Adjusted EBITDA for the fourth quarter of fiscal 2017 increased to $292 million from $270 million. The current year period saw no metal price lag, according to the company. Excluding $7 million of negative metal price lag in the prior year, adjusted EBITDA increased 5 percent. Higher automotive sheet shipments, operating efficiencies, lower metal cost and favorable currency partially were offset by higher employment cost and lower prices on some can and specialty products, the company says.
For the full 2017 fiscal year, Novelis says revenue decreased 3 percent to $9.6 billion in fiscal 2017. A 2 percent decline in shipments to 3.07 million metric tons partially was offset by an increased level of higher conversion premium products, including a record level of automotive shipments. For fiscal 2017, the percentage of the company's shipment portfolio stemming from automotive sheet grew to 18 percent, up from 15 percent in the prior year.
Adjusted EBITDA grew 33 percent to $1.05 billion in fiscal 2017 partly because of the reduced negative impact of metal price lag during fiscal 2017 as local market premium volatility has moderated. Metal price lag reduced to -$31 million in fiscal 2017 compared with -$172 million in fiscal 2016.
Excluding the impact of metal price lag in both years, adjusted EBITDA was $1.09 billion in fiscal 2017, up 13 percent compared with $963 million in fiscal 2016. The increase was driven by strong operational efficiencies, favorable product mix and favorable currency, partially offset by lower shipments, Novelis says.
The company more than doubled its full year free cash flow to a record $361 million in fiscal 2017 driven by stronger adjusted EBITDA and by lower interest and capital expenditures. Capital expenditures declined to $224 million as compared with $370 million in the prior year.
The company says it has made a number of key achievements in fiscal 2017:
- increased adjusted EBITDA per ton, excluding metal price lag, by $45 to $354 per ton;
- refinanced $2.5 billion of senior notes and a $1.8 billion term loan, reducing annual cash interest by $79 million and extending debt maturity profile;
- improved metal mix by increasing recycled inputs from 53 percent to 55 percent for the full year;
- achieved record automotive sheet shipment levels as a result of the seamless ramp-up of all new finishing lines to support the new Ford F-Series Super Duty line of trucks in North America, the success of Jaguar Land Rover's new aluminum-intensive vehicles in Europe and the Cadillac CT6 and Jaguar XFL in China; and
- signed an agreement with car company NIO to provide aluminum solutions for its fleet of aluminum-intensive electric vehicles to be launched over the next five years.
“We exceeded our expectations for delivering strong free cash flow as a result of excellent EBITDA performance and significant interest savings generated by our debt refinancing actions,” says Devinder Ahuja, senior vice president and chief financial officer. “Not only have we strengthened our balance sheet and driven our net debt leverage ratio below 4x, our continued focus on driving operational excellence and positive portfolio shift will allow us to sustain our current levels of performance.”
As of March 31, 2017, Novelils reported strong liquidity of $1.3 billion.