Novelis sees record automotive shipments in 3Q of fiscal 2016

Recycling Today
09 February 2016

The company’s automotive shipments increase 52 percent year over year

Atlanta-based Novelishas reported net income of $6 million for the third quarter of its 2016 fiscal year. Excluding tax-effected special items, the company reported net income of $32 million for the period compared with $54 million in the third quarter of fiscal 2015.

Excluding the impact of metal price lag in both quarters, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $238 million in the third quarter of fiscal 2016, up 4 percent compared with $228 million in the prior year. Novelis says the increase was driven by higher shipments of automotive and beverage can sheet, partially offset by less favorable recycling benefits in light of depressed aluminum prices as compared with the prior year. Current year results also reflect higher fixed costs associated with new automotive and recycling operations, the company notes.

"Our good performance this quarter validates our strategy to grow aluminum rolled products capabilities around the world to serve high growth, high value industries including automotive and packaging," says Steve Fisher, Novelis president and CEO. "The success of our expansion projects coupled with our steady improvement in operational performance positions Novelis for continued growth and profitability."

Shipments of rolled aluminum products grew 3 percent to 779 kilotonnes in the third quarter of fiscal 2016 as compared to 757 kilotonnes reported in the prior year period. Despite higher shipments, revenue decreased 17 percent to $2.4 billion for the third quarter of fiscal 2016, driven by significantly lower average aluminum prices and local market premiums, according to the company.

While average local market metal premiums stabilized during the quarter, the company reports negative metal price lag of $26 million as it continued to turn higher average metal cost inventory from previous months. Although Novelis says it uses derivatives contracts to minimize the price lag associated with LME (London Metal Exchange) base aluminum prices, adequate cost-effective hedges are not available for local market premiums. Adjusted EBITDA for the third quarter of fiscal 2016 including metal price lag was $212 million.

Novelis reports negative $12 million of free cash flow in the third quarter of fiscal 2016, which is what it reported in the third quarter of fiscal 2015. Capital expenditures totaled $78 million in the third quarter of fiscal 2016, down from $104 million reported in the prior year period. The company says it continues to expect positive free cash flow for the full fiscal year and capital expenditures slightly below $400 million in fiscal 2016.

As of December 31, 2015, the company reported liquidity of $946 million.