Novelis third quarter net profit jumps 3-fold to $46 million on new business model

10 February 2015
The Economic Times

Mumbai: Profits more than tripled at Novelis, the North America-based subsidiary of Hindalco Industries, as its "new business model" started to deliver benefits enabling it to set new "record shipments" in highgrowth markets. Novelis' third quarter net profit tripled to $46 million (Rs 285.6 crore) against $13 million in the corresponding quarter last year, helped by higher shipments on the back on expansion in Asia and South America and more sales of stronger-margin products. Sales rose 18 per cent to $2.8 billion for the quarter.

Novelis expects profit to get even better in the fourth quarter with increasing sales of automotive sheets to United States' best-selling vehicle Ford 150. Novelis' strong outlook is a bright spot for Hindalco, who is currently facing lower-than-expected cash accruals due to de-allocation of coal blocks and subsequent rise in cost of production. The subsidiary had paid a dividend of $250 million (Rs 1,470 crore) to the parent lion company early this financial year. This was a huge contribution from Novelis, considering it generated about $254 million in cash between fiscal 2008 and 2014 cumulatively. At the end of Q3, Novelis reported liquidity of $839 million and expects to end the year cash positive. However, the company said it had no plans to return cash to parent Hindalco as of now.

Novelis is gradually shifting sales to higher-margin automobiles industry, where growth is picking up fast. Novelis wants to raise sales contribution of automotive industry to 20 per cent from 9 per cent in fiscal 2014. "By shifting our portfolio to more premium products in high-growth markets, we set record on automotive shipments, generated significantly higher earnings," said CEO Phil Martens in a statement.