Novelis sees decrease in net sales in Q2 of fiscal 2017

Atlanta-based Novelis, an aluminum rolling and recycling company, has reported a net loss of $89 million for the second quarter of fiscal year 2017 compared to a net loss of $13 million in for the same quarter in fiscal 2016. Current quarter results include a $112 million loss on extinguishment of debt related to the refinancing of $2.5 billion of senior notes during the quarter, which will drive significant interest savings, and $27 million related to the sale of Novelis’ equity interest in Aluminum Co. of Malaysia, a noncore operation in Malaysia, the company says. Excluding these and other tax-effected special items, the company reported net income of $60 million in the second quarter of fiscal 2017, up from $25 million reported in the second quarter of fiscal 2016.

"We continued driving the positive momentum achieved over the last several quarters into the second quarter," says Steve Fisher, president and chief executive officer, Novelis. "Our recurring strong EBITDA (earnings before interest, taxes, depreciation and amortization) performance is a result of strategic investments in new capacity, driving positive portfolio mix and efficiency gains through metal input optimization. We are confident this strategy, coupled with plant productivity and asset efficiency, will continue to drive enhanced operational performance and a stronger product portfolio."

Adjusted EBITDA for the second quarter of fiscal 2017 increased to $256 million from $182 million in the prior-year period. Excluding metal price lag in both periods, adjusted EBITDA increased 14 percent to $270 million. The increase was primarily driven by productivity gains, better metal mix and favorable foreign exchange gains, partially offset by higher employment costs, Novelis says.

Net sales decreased 5 percent to $2.4 billion for the second quarter of fiscal 2017. This was driven by lower average aluminum prices and a 2 percent decline in total shipments of rolled aluminum products to 773 kilotonnes, Novelis says, partially offset by the favorable impact from our strategic shift to higher conversion premium products including a 12 percent increase in automotive sheet shipments to record levels.

The company reported free cash flow of $44 million for the second quarter of fiscal 2017 as compared with $140 million in the prior year, with the reduction primarily in light of the timing of working capital and interest payments. These factors are offset partially by stronger EBITDA performance in the current year and reduced capital expenditures of $46 million as compared with $75 million in the prior year period.

"As a result of our successful bond refinancing, we will generate $55 million in interest savings annually going forward," says Devinder Ahuja, Novelis senior vice president and chief financial officer. "We now expect to generate free cash flow in the range of $300 million to $350 million for the full fiscal year 2017."

As of Sept. 30, 2016, Novelis reported a liquidity position of $1 billion.