Feb. 20, 2013
Aluminum Maker Novelis Reports 'Challenging Quarter'
Novelis Inc., Atlanta, a leading producer of aluminum rolled products, reported net income of $3 million in its third fiscal quarter ended Dec. 31 on net sales of $2.32 billion. That compares to a loss of $11 million on sales of $2.46 billion in the same quarter of 2011. Adjusted EBITDA totaled $185 million for the third quarter, down from $213 million in the same period the prior year, due primarily to implementation of a new ERP system that resulted in lost shipments and reduced productivity. In addition, the company experienced unfavorable pricing dynamics in several regions, higher metal input costs in North America, and incremental project start-up costs associated with its global expansions.
"The third quarter was challenging as we experienced more production disruptions than expected related to our ERP implementation in North America. These implementation issues are largely behind us, and production has returned to near normal levels," said Phil Martens, Novelis president and CEO.
"This is a heavy investment period for us, which is necessary to maintain and grow our leadership position in the industry and allow us to capitalize on the significant growth we see ahead in our key end-markets," he added. "While we were disappointed with our results in the third quarter, we are pleased with the strong execution of our strategy."
Novelis’ shipments of aluminum rolled products totaled 647,000 metric tons for the third quarter—flat compared to shipments of 648,000 tons for the same period the prior year. Net sales for the third quarter declined 6 percent, partly due to the divestiture of three foil plants in Europe. Sales also were affected by lower conversion premiums, as well as lower average aluminum prices.
Novelis continues to make progress on its expansion strategy. In October, it began the commissioning process at its 265,000-metric ton fully-integrated recycling facility in Korea. In November, it broke ground on a 120,000-ton automotive heat treatment line, the first of its kind in China, and the world's largest 400,000-ton aluminum recycling and casting center in Germany. In December, it began the commissioning process at its Pinda mill in Brazil, which will add an incremental 220,000 tons of capacity once fully operational over the next two to three years, bringing total rolling capacity in South America to 600,000 metric tons.