Aleris reports higher adjusted EBITDA for Q2 and H1 2018 on strong demand and operating performance

In Q2, the company reported a net loss of $47 million compared to net loss of $2 million in Q2 2017. The loss is attributed to a debt adjustment of US$49 million associated with the Company's debt refinancing.  Record adjusted EBITDA increased to $85 million from US$66 million in Q2 2017.

Strong demand, improved operating performance and a favourable metal environment in North America drove the positive results. Results are also positively affected by higher global automotive volumes, improved rolling margins and improved operating performance in Europe as well as commercial shipments from new North America automotive assets.  Favorable North America metal spreads, resulting from increased aluminium prices, improved scrap availability and strategic metal purchasing also drove the results.

"Our strong performance reflects the successful ramp up of multiple growth projects …," Sean Stack, Aleris chairman and CEO said. "With our new automotive capabilities at our facility in Lewisport, Kentucky delivering to customers and the benefits of multiple multi-year global aerospace contracts taking effect, we expect to continue our momentum into the next quarter and beyond."

"As previously announced, Aleris has signed a definitive agreement to be acquired by Novelis, where I am confident that our assets and people will continue to thrive and be successful. The transaction is expected to close in the next 9-15 months," he added.

In Q2 2018, capital expenditures were $21 million as compared to $55 million in Q2 2017.

The company expects the Q3 segment income and Adjusted EBITDA to be substantially higher than the Q3 2017. Commercial shipments from new North America automotive assets are expected to increase based on committed volumes. The company expects to be benefitted from increasing global aerospace volumes.

North America segment income increased to US$72 million in Q2 2018 from US$31 million in Q2 2017. Segment Adjusted EBITDA also increased to US$55 million from US$36 million in Q2 2017. Increased volume, improved rolling margins and favourable scrap spreads drove the segment performance. Segment income was also impacted by a $22 million favourable variance in metal price lag.

Europe segment income increased to US$42 million in Q2 2018 compared to US$35 million in Q2 2017. Segment Adjusted EBITDA was US$34 million compared to US$35 million in Q2 2017. Lower rolling margins and increased slab costs due to sanction on Rusal aluminium reduced segment adjusted EBITDA approximately to US$6 million. Increase in automotive volumes was offset by a 3 per cent decrease in overall aerospace volumes as well as a weaker mix of aerospace products sold.

Asia Pacific segment income increased to $7 million in Q2 2018 from $4 million in Q2 2017. Segment Adjusted EBITDA increased to US$6 million from US$4 million in Q2 2017. The primary performance driver for segment income and segment Adjusted EBITDA was an increase in volumes driven by improved aerospace shipments.

On July 26, 2018, Aleris signed a definitive agreement to be acquired by Novelis, a subsidiary of Hindalco Industries Limited, for approximately $2.6 billion. The Merger is expected to close in nine to fifteen months from the date of the definitive agreement, subject to customary regulatory approvals and closing conditions.

Key financial highlights for H1 2018 include revenues of US$1,733 million compared to US$1,450 million in H1 2017. The increase was primarily attributable to higher average aluminium prices, increased volumes, particularly in global automotive and North America building and construction and distribution, improved rolling margins, and the favourable impact of exchange rates.

Net loss of $42 million compared to a net loss of $38 million in H1 2017. Increased debt, depreciation expense, start-up costs and interest expense were largely offset by the above factors. Adjusted EBITDA increased to $138 million from $118 million.  Strong demand, improved operating performance and a favourable metal environment in North America drove the positive results.