Global automotive production surges to meet growing customer demand
First Quarter Fiscal Year 2016 Highlights
- Net loss $60 million; excluding certain items, net income $24 million
- Global FRP shipments of 768 kilotonnes in line with prior year
- Adjusted EBITDA excluding metal price lag down 9 percent to $212 million
- Record automotive shipments up 68 percent YoY reflects focus on premium product growth
Novelis, the world leader in aluminum rolling and recycling, today 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.
The company reported negative free cash flow of $425 million for the first quarter of fiscal 2016 as compared to negative $177 million in the first quarter of fiscal 2015. First quarter free cash flow is negative in both periods as a result of semi-annual bond interest payments and capital investments in maintenance and strategic growth projects. The decrease in cash flow compared to the prior year is primarily a result of lower EBITDA and higher working capital requirements as the company ramps up new assets. Despite negative first quarter free cash flow, the company expects working capital improvement, higher EBITDA and lower capital spending over the remaining quarters of fiscal 2016 to result in positive free cash flow for the full fiscal year.
As of June 30, 2015, the company reported liquidity of $1.2 billion.
