Novelis
Aluminum rolling and recycling company Novelis Inc., Atlanta, a part of the Mumbai-based Aditya Birla Group, has reported net income attributable to its common shareholder of $107 million for the third quarter of its 2020 fiscal year. In the prior-year period, that figure was $78 million. Excluding tax-effected special items in both years, the company reported net income of $132 million in the third quarter of fiscal 2020 compared with $101 million in the prior-year period. This 31 percent increase is primarily because of higher adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), according to the company.
Adjusted EBITDA increased 7 percent to $343 million in the third quarter of fiscal 2020 compared with $322 million in the prior year’s third quarter, primarily driven by portfolio optimization efforts, operating cost efficiencies and favorable foreign exchange, Novelis says, which was partially offset by less favorable recycling benefits because of lower aluminum prices. Adjusted EBITDA per ton reached $430 in the quarter as compared with $403 in the third quarter of fiscal 2019.
The company says its net sales decreased 10 percent from the third quarter of 2019 to $2.7 billion for the third quarter of fiscal 2020, driven by lower average London Metal Exchange (LME) aluminum prices and local market premiums. Flat-rolled product shipments were in line with the prior year, at 797,000 metric tons.
"Novelis continues to perform very well both operationally and financially, delivering another set of strong results in the third quarter," says Steve Fisher, the company’s president and CEO. "At the same time, we have made excellent progress advancing our major organic expansion projects in the U.S., China and Brazil, allowing us to continue to grow with our customers and better compete against steel and other materials."
Each of these projects continues to progress on time and on budget, according to the company. Notably, its greenfield automotive finishing plant in Guthrie, Kentucky, is in the commissioning process, with commercial shipments to customers expected to begin in the coming months.
Fiscal year-to-date free cash flow before capital expenditures improved 43 percent over the prior year to $483 million, driven primarily by higher adjusted EBITDA and favorable working capital combined with lower aluminum prices. Capital expenditures doubled year over year to $422 million for the first nine months of fiscal 2020, mainly to support strategic investments in incremental rolling, recycling and automotive finishing capacity. As a result of this increased capital spending, fiscal 2020 free cash flow of $61 million compares with $127 million in fiscal 2019, Novelis says.
"Our recent successful bond issuance in January is a reflection of the consistently strong financial performance Novelis has delivered quarter after quarter, as well as our ability to maintain disciplined net leverage levels despite a significant increase in capital expenditures to fuel future growth," says Devinder Ahuja, senior vice president and chief financial officer, Novelis.
As of Dec. 31, 2019, the company says its total liquidity position of $1.9 billion was strong while it also reduced its net leverage ratio to 2.3x as compared to 2.8x in the prior-year period.
Update on Aleris acquisition
On July 26, 2018, Novelis announced it signed a definitive agreement to acquire Aleris Corp., Cleveland. The company initially had said it expected to close the transaction by Jan. 20 of this year. While Novelis has received approval from antitrust regulators in China, the U.S., and the European Commission (EC) to close the transaction, the company must divest some operations to appease regulators. In the U.S., Novelis says its ability to acquire Aleris' automotive plant in Lewisport, Kentucky, will be resolved through an arbitration proceeding in the fourth quarter. The EC's approval is conditioned on Novelis agreeing to divest Aleris' Duffel plant to a buyer approved by the EC. The EC is currently reviewing the proposed buyer of the plant, Liberty House Group, a UK-based industrial conglomerate. Novelis says it remains fully committed to completing the transaction and continues to work with all relevant parties to do so as quickly as possible.