Atlanta reports $4 million less net income in Q1 compared to last year

Source: Novelis Inc.

Atlanta, Georgia, USA — Novelis, the world leader in aluminum rolling and recycling, has reported a net loss of $60 million for first quarter of fiscal year 2016. Excluding certain tax-effected items, the company reported net income of $24 million in the first quarter of fiscal 2016 compared to $28 million in the first quarter of fiscal 2015.

Excluding the impact of non-operational metal price lag in both periods, Adjusted EBITDA was $212 million in the first quarter of fiscal 2016, down 9 percent compared to $233 million in the prior year. The decrease was primarily driven by higher costs associated with the start-up and support of new automotive finishing and recycling capacity, partially offset by favorable product mix due to a strategic shift to grow automotive shipments.

„We remain focused on the fundamentals of our manufacturing operations – growing our premium portfolio, managing costs and working capital, and driving operational excellence,“ said Steve Fisher, President and Chief Executive Officer for Novelis. „The first two automotive sheet finishing lines at Oswego are ramping up production capacity to meet current market demand, including supply for the aluminum intensive 2015 Ford F-150. We will continue to increase production to fully utilize these lines and rationalize our cost base to increase profitability.“

Shipments of rolled aluminum products totaled 768 kilotonnes in the first quarter of fiscal 2016, in line with the 770 kilotonnes reported in the prior year period. Revenues decreased two percent to $2.6 billion for the first quarter of fiscal 2016 compared to $2.7 billion in fiscal 2015. This sales decrease on flat shipments was primarily driven by lower average metal prices and local market premiums in the first quarter of fiscal year 2016.

Local market premiums have declined sharply over the past several months toward historical norms, causing a negative metal price lag effect on first quarter of fiscal 2016 results. Although the company uses derivatives contracts to minimize the price lag associated with LME base aluminum prices, it does not use derivative contracts for local market premiums, as these are not prevalent in the market. Adjusted EBITDA for the first quarter of fiscal 2016, including $85 million of negative metal price lag, was $127 million. While future aluminum prices and premiums are difficult to predict, at current levels the company does not expect negative metal lags of this magnitude to repeat.

As of June 30, 2015, the company reported liquidity of $1.2 billion.

Source: Novelis / PRNewswire