Aluminum sheet, plate and extrusions provider Arconic Corp., headquartered in Pittsburgh, has announced third-quarter 2020 results, reporting revenue of $1.4 billion, which is a 19 percent increase from the prior quarter owing to strength in automotive end-market volumes, which the company says recovered fully from the second quarter and exceeded third quarter 2019 levels. Year over year, the company’s revenue was down 22 percent, reflecting weaker volumes across all end markets other than automotive primarily because of the impact of the pandemic, according to Arconic. The company reports net income of $5 million, or 5 cents per share, for the quarter compared with a net loss of $24 million, or 22 cents per share in the third quarter of 2019.

Arconic reports third-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $165 million, which the company says was affected by the pandemic and partly mitigated by cost reduction actions. Adjusted EBITDA margin was 11.7 percent primarily because of its proactive cost reduction actions. Cash provided from operations totaled $240 million, resulting in quarter-end cash on hand of $802 million. Arconic says it ended the quarter with total available liquidity of approximately $1.5 billion.

“This quarter demonstrated the positive impact our strategic and financial actions made in response to ongoing macro challenges,” says Arconic Chief Executive Officer Tim Myers of the third quarter ended Sept. 30. “Our continued execution on cash conservation and productivity measures instituted earlier in the year combined with recovery in North American automotive production resulted in the large sequential increase in adjusted EBITDA and operating cash flow compared to the prior quarter.”

Myers adds that the steps Arconic took to strengthen its financial position combined with the recovery of automotive demand and its employees’ hard work allowed the company to end temporary salary reductions and reinstate the 401(k) match for those employees affected by these measures. “While there is uncertainty in the global economy, we demonstrated our agility in responding to challenges quickly and effectively. I appreciate the sacrifices made by our employees, and I’m grateful for their continued commitment during these last two quarters to strengthen our company,” he says.

Performance by segment

Revenue

Rolled Products

Q3 2020: $1,092 million

Q3 2019: $1,397 million

Building and Construction Systems

Q3 2020: $241 million

Q3 2019: $282 million

Extrusions

Q3 2020: $82 million

Q3 2019: $126 million

Adjusted EBITDA

Rolled Products

Q3 2020: $138 million

Q3 2019: $160 million

Building and Construction Systems

Q3 2020: $40 million

Q3 2019: $39 million

Extrusions

Q3 2020: ($6) million

Q3 2019: ($8) million

Subtotal

Q3 2020: $172 million

Q3 2019: $191 million

Corporate

Q3 2020: ($7) million

Q3 2019: ($9) million

Total adjusted EBITDA

Q3 2020: $165 million

Q3 2019: $182 million

Outlook

In a news release announcing its third-quarter financials, Arconic says it expects full-year 2020 revenue to range from $5.6 billion to $5.7 billion (assuming  London Metal Exchange aluminum price of $1,660 per metric ton and a Midwest Premium of $270 per ton for the full year). The company says it expects adjusted EBITDA for the full-year 2020 to range from $610 million to $630 million. Cumulative free cash flow for Q2 2020 through Q4 2020 is expected to range from $150 million to $200 million.

During the third quarter, Arconic says it changed its inventory cost method to average cost for all U.S. inventories previously carried at last-in, first-out (LIFO) cost to better reflect its aluminum converting operations. The company says its management believes the average cost method more closely reflects the physical flow of inventories, improves the comparability of its operating results with its industry peers and provides an increased level of consistency in the measurement of inventories in its consolidated financial statements. The effect of this change in accounting principle as reported under average cost in third-quarter 2020 compared with the amount had it continued to be reported under LIFO was a decrease of $14 million to cost of goods sold, comprised of a $26 million benefit for the elimination of the incremental LIFO cost associated with inventory sold during the period and a $12 million charge to establish the incremental cost on an average cost basis for inventory sold during the period, Arconic says. Accordingly, effective in the third quarter of 2020, management refined the company’s adjusted EBITDA measure and segment adjusted EBITDA measure to remove the impact of metal price lag, which was negative $16 million in the third quarter. This change was made to further enhance the transparency and visibility of the underlying operating performance of each segment by removing the volatility associated with metal prices, Arconic says.

Romeo Systems Inc., the Los Angeles-based company doing business as Romeo Power, announced Nov. 10 that Phoenix-based Republic Services Inc. has exercised its option to acquire additional shares of Class A common stock in RMG Acquisition Corp. (RMG).

Romeo Power specializes in designing and manufacturing lithium-ion battery modules and packs for commercial electric vehicles. RMG, a special purpose acquisition company, previously announced a definitive agreement for a business merger that would result in Romeo Power becoming a publicly listed company.

According to Romeo Power, Republic’s investment represents less than 5 percent of the currently outstanding shares of RMG.

According to a news release from Romeo Power, “Romeo Power and Republic Services continue to actively work on establishing a strategic alliance to support Republic’s comprehensive electrification and sustainability goals and strategy.”

In addition, Republic Services COO Tim Stuart will join the board of directors of Romeo Power upon Romeo Power’s planned business merger with RMG.

“Republic Services is excited to increase our investment in, and strengthen our partnership with, Romeo Power,” Stuart says. “The establishment of a strategic alliance is an important component of our fleet electrification strategy and will help drive responsible growth and value creation.”

“We are thrilled to further strengthen our relationship with Republic Services. The company is an incredibly well-respected organization with a bold sustainability platform, and we appreciate their vote of confidence in our business,” Romeo Power CEO Lionel Selwood Jr. says. “Tim Stuart’s expertise in corporate strategy and operations will help Romeo Power expand its electrification technology into waste disposal and other markets.”

Hyundai Construction Equipment Americas (HCEA), Norcross, Georgia, announced Nov. 9 that the company has named J.Y. Kim as president.

A 28-year Hyundai veteran, Kim began his career as part of an overseas sales team to support North American operations, and later worked at HCEA’s Chicago office from 2004 to 2008.

He was instrumental in establishing a foundation for a Brazilian factory and sales company before managing operations for Indian manufacturing, sales and marketing. During his tenure in India, he brought Hyundai’s market share to 19 percent. After his two major overseas stays, he worked with emerging countries that included Russia, Australia, New Zealand, Latin America and many in Southeast Asia.

“We are excited to have J.Y. bring his passion, market knowledge, and support, as well as his understanding of worldwide trade operations to... North America, especially when understanding import/export policies has become a critical part of successful management,” said Stan Park, HCEA vice president of distribution and marketing.

Aluminum rolling and recycling company Novelis Inc., headquartered in Atlanta, has reported a net loss attributed to its common shareholder of $37 million, down 130 percent compared with the prior year owing to a $181 million net loss associated with discontinued operations. Net income from continuing operations increased 17 percent versus the prior year to $144 million for the second quarter of the company’s 2021 fiscal year. Excluding tax-effected special items in both years, second-quarter fiscal 2021 net income was $158 million, down 1 percent versus the prior-year period, as higher after-tax adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were offset by higher depreciation, amortization and interest expense mainly associated with the acquisition of Aleris, the company says in a news release announcing its quarterly financial performance.

Q2 fiscal year 2021 highlights

• net income from continuing operations of $144 million, up 17 percent year over year; excluding special items
• net income of $158 million record shipments of 923,000 metric tons, up 11 percent year over year and 19 percent sequentially
• record adjusted EBITDA of $455 million, up 22 percent year over year and 80 percent sequentially
• $2.6 billion in liquidity
• completed divestment of Duffel mill in Belgium Sept. 30 and signed agreement for the sale of Lewisport, Kentucky, mill Nov. 8
• Aleris integration work continues with $38 million run-rate acquisition cost synergies achieved through Q2

Its second-quarter results reflect “outstanding operational performance, flexible and efficient customer service and the ability to meet rapid recovery in customer demand across end markets,” Novelis says, adding that total flat-rolled product shipments increased 19 percent sequentially. The recovery is most pronounced in the automotive market, according to the company, which reports that second-quarter automotive shipments were double that of Novelis’ first quarter, led by North America and the second consecutive quarter of record automotive shipments in Asia.

In South America, increased at-home beverage consumption significantly has shifted package mix toward aluminum cans, resulting in record shipments in this segment, Novelis reports.

While the COVID-19 pandemic has caused muted demand in the aerospace market, the North American building and construction market has rebounded quickly, exiting the quarter at prepandemic levels, according to Novelis, which says it also is encouraged by improving demand levels across several other specialty markets, including electronics, coffee capsules and painted products. 

"Our outstanding performance this quarter was largely driven by our ability to effectively manage our business and work with customers to meet a sharp increase in demand," says Steve Fisher, president and CEO of Novelis. "While future economic implications resulting from the pandemic remain uncertain, our diverse product portfolio, geographic footprint and strong financial position will enable Novelis to continue to successfully meet customer needs and continue to invest in our business."

The company’s net sales increased 4 percent from the prior-year period to $3 billion for the second quarter of fiscal 2021, primarily driven by an 11 percent increase in shipments that were partially offset by lower average aluminum prices. Total flat-rolled product shipments increased to a record 923,000 metric tons, mainly reflecting the addition of the acquired Aleris business, Novelis says.

Adjusted EBITDA increased 22 percent to a record $455 million in the second quarter of fiscal 2021 compared with $374 million in the prior-year period. Adjusted EBITDA increased versus the prior year even before the positive EBITDA contribution from the acquired Aleris business or acquisition synergies, driven by targeted cost control initiatives, as well as favorable metal costs, the company says. On a consolidated per ton basis, Novelis achieved a record EBITDA of $493 in the quarter.

Year-to-date fiscal 2021 free cash flow of $132 million compares with $18 million in the prior-year period, driven primarily by lower capital expenditures and working capital, partially offset by lower adjusted EBITDA, negative metal price lag and exceptional items recorded in the first quarter of fiscal 2021, Novelis reports. Capital expenditures decreased versus the prior year to $222 million as the company reduces and defers nonstrategic capital spending to prioritize cash.

"Our financial strength, particularly as it relates to cash flow generation, is enabling us to move forward with our strategic plans to invest in new capacity and grow the business," says Devinder Ahuja, senior vice president and chief financial officer of Novelis Inc. "We also remain committed to reducing net leverage and total debt while maintaining ample liquidity levels that allow us to adapt quickly to changes in customer demand during these unprecedented times."

Update on Aleris acquisition and required divestments

On April 14, Novelis closed its acquisition of Aleris Corp., Cleveland. On Sept. 30, the company completed the required divestment of the Duffel plant to Alvance, London-based GFG Alliance’s international aluminum business that is headquartered in Paris. Nov. 8, Novelis signed an agreement to sell the Lewisport, Kentucky, automotive body sheet business to American Industrial Partners, a private equity firm, for estimated net cash proceeds of approximately $171 million. With divestments now complete, Novelis says it is focusing on integration of the continuing operations to drive value creation. Novelis says its acquisition of Aleris “provides a strong pro-forma financial profile, many strategic benefits, namely securing an integrated manufacturing footprint in China, further portfolio diversification with the addition of aerospace and building and construction, well as new technology and operational capabilities.”

Novelis is a subsidiary of Hindalco Industries Ltd., an industry leader in aluminum and copper and the metals flagship company of the Aditya Birla Group, a multinational conglomerate based in Mumbai, India.