Novelis Q4 sales dive 12% to $2.7 bn as commodity prices fall, shipments decline; firm on capacity additions

Atlanta (USA): Novelis Inc, a subsidiary of Aditya Birla-led Hindalco Industries, has reported 12 percent year-on-year decline in net sales to 2.7 billion dollars for the fourth quarter of fiscal 2020 due to lower average LME aluminum prices and local market premiums, and a 7 percent decline in shipments.

The decline in flat rolled product shipments to 811 kilotonnes was against a strong prior year record level, and partially due to the initial impacts from COVID-19 related disruptions in March.

Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 7 percent to $383 million in the fourth quarter of fiscal 2020 as compared to $357 million in the prior year period.

The current quarter includes a cumulative positive impact of $29 million from a contractual customer obligation pertaining to the full fiscal year.

Other favourable drivers for the year-over-year improvement include lower metal and other operating costs, lower selling, general and administrative expenses (SG&A), and favourable foreign exchange, mostly offset by lower shipments.

For the full year, net sales decreased 9 percent from the prior year to $11.2 billion, driven by lower average LME aluminum prices and local market premiums.

Flat rolled product shipments were flat as compared to the prior year at 3,273 kilotonnes.

Adjusted EBITDA increased 8 percent to a record $1.47 billion in fiscal 2020 compared to $1.36 billion in the prior year, primarily driven by portfolio optimisation efforts, favorable North American specialties product pricing, operating cost efficiencies and favorable foreign exchange, partially offset by less favorable recycling benefits due to lower aluminum prices.

“We entered a period of challenging market conditions in a position of strength with ample cash and liquidity,” said Devinder Ahuja, senior vice president and chief financial officer at Novelis Inc.

“We remain committed to completing our strategic capacity expansion projects to position the company for long-term growth, while at the same time taking decisive steps to reduce costs and prioritise capital spend to ensure Novelis is positioned to continue to drive sustainable growth.”

As of 31 March, the company reported a strong total liquidity position of $2.6 billion, including $400 million in cash used to partially fund the Aleris acquisition in April and reduced its net leverage ratio to 2.1x as compared to 2.5x in the prior year period.