Photo courtesy Dreamstime
Novelis Inc., Atlanta, has released its second-quarter financial results, showing a rebound in net income from the previous fiscal year's second quarter. The company also reports increased earnings before interest, taxes, depreciation and amortization (EBITDA).
Novelis reported net income attributable to its common shareholder of $237 million in the second quarter of its 2022 fiscal year compared with a net loss of $37 million in the prior-year period. Net income from continuing operations increased 66 percent year over year to $239 million in the quarter compared with $144 million in the prior-year second quarter. Excluding special items in both years, the second-quarter net income from continuing operations increased by 54 percent to $244 million, driven mainly by a higher EBITDA.
Net sales increased 38 percent to $4.1 billion for the second quarter of its 2022 fiscal year compared with $3 billion in the prior-year period, primarily driven by a 5 percent increase in shipments and higher average aluminum prices.
Adjusted EBITDA increased 22 percent to $553 million in the second quarter compared with $455 million in the prior-year period. The company says the increase in adjusted EBITDA is primarily because of higher volume and favorable metal benefits, partially offset by inflationary cost pressures. Novelis says it achieved a record adjusted EBITDA per ton shipped of $571 in the second quarter of the fiscal year compared with $493 in the prior-year period.
“Our diverse portfolio of high-recycled-content products allowed us to capture strong market demand and deliver another record quarter of EBITDA,” says Steve Fisher, president and chief executive officer of Novelis Inc. “While we navigate near-term supply chain challenges, we are actively seeking and implementing new investment opportunities to capture growing customer demand for sustainable, low-carbon aluminum solutions.”
Novelis recently announced plans to invest approximately $500 million in growth capital projects. This includes a $375 million investment to expand its rolling and recycling capabilities in Zhenjiang, China. It also includes a $130 million investment at its Oswego plant in the U.S. to increase hot-mill capacity and enhance automotive sheet finishing capabilities.
According to Novelis’ latest earnings report, fiscal year-to-date free cash flow from continuing operations was $158 million compared with $169 million in the prior-year period. The company says the main driver for this reduction was higher working capital requirements from rising aluminum prices.
“Since announcing Novelis’ long-term capital allocation framework earlier this year, we have reduced gross debt, improved net leverage to below our targeted 2.5x level, and returned $100 million of capital to our common shareholder,” says Devinder Ahuja, executive vice president and chief financial officer at Novelis. “At the same time, we have maintained adequate liquidity to effectively manage the business’ working capital needs while also remaining strongly positioned to reinvest capital in new capacity and capabilities.”
The company says it continues to have a strong total liquidity position of $2.1 billion as of September.