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.