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Novelis sees growth, constraints in Q1 financial report

The company has reported what it calls record financial performance, though shipments are down slightly.

Novelis Inc., Atlanta, has reported financial results for the first quarter of its 2023 fiscal year, saying net income and net sales have increased though shipments have decreased slightly. 

"Novelis once again delivered record financial performance in the first quarter, following our record performance last fiscal year," says Steve Fisher, president and CEO of Novelis Inc.   

According to the report, net income attributable to its common shareholder increased 28 percent compared with a record $307 million in the previous year. Net income from continuing operations increased 1 percent to $307 million. Excluding special items in both years, in the first quarter of fiscal year 2023, net income from continuing operations increased 18 percent compared with the previous year largely because of higher underlying adjusted earnings before interest, taxation, depreciation and amortization (EBITDA), unrealized derivative gains and a lower tax provision in the current year, partially offset by a tax litigation gain benefiting prior year net income.  

Net sales increased 32 percent to $5.1 billion for the first quarter of Novelis' 2023 fiscal year compared with $3.9 billion in the prior-year period. This was primarily driven by higher average aluminum prices and local market premiums. Total flat-rolled product shipments were 962,000 metric tons, 1 percent lower than prior-year shipments of 973,000 metric tons, mainly owing to supply chain constraints.  

Adjusted EBITDA increased 1 percent to a record $561 million in the first quarter of its fiscal 2023 compared with $555 million in the prior-year period, which included a $47 million gain related to a favorable decision in a Brazilian tax litigation. The underlying increase in adjusted EBITDA is primarily from higher product pricing, including some higher cost pass-through to customers, favorable product mix on improved automotive and aerospace shipments and lower metal costs arising from improved recycling performance, partially offset by high-cost inflation and unfavorable foreign exchange translation, according to the company.  

Adjusted free cash flow from continuing operations was an outflow of $72 million in the first quarter of its fiscal 2023, higher than the $30 million the previous year. This is primarily because of a less favorable metal price lag. Novelis reports that it had a net leverage ratio of 2.2x at the end of the first quarter of the fiscal year 2023 compared with 2.5x the prior year period.  

“In a strong demand but capacity-constrained environment, we continue to focus on delivering high-quality, high-recycled-content products to customers while continually optimizing our operations and portfolio,” says Devinder Ahuja, executive vice president and chief financial officer of Novelis Inc. “Given the growing market, we are vigorously allocating capital to continue to grow alongside our customers, with more than $4.5 billion of investment opportunities on our horizon.”

Earlier this year, Novelis broke ground on its $365 million investment in a highly advanced recycling center in Guthrie, Kentucky, that will be able to cast 240,000 tons of sheet ingot for its automotive customers per year. It also announced a strategic partnership with Sortera Alloys Inc. of Fort Wayne, Indiana, designed to help the company increase its use of prime and obsolete scrap. 

The company says it continues to maintain a strong total liquidity position of $2.4 billion as of June 30.