Aleris reports Q3 2016 results: net loss decreases but earning drops YOY

Aleris Corporation reported results for the Third Quarter and first nine months ended September 30, 2016. Though Aleris is making net loss consecutively, net loss decreased to $22 million in the Q2 2016 from $25 million in Q3 2015. Adjusted EBITDA dropped to $53 million from $68 million in Q3 2015. Though rising demand in global aerospace & automotive sector helped in squeezing the net loss, production issues and other bottlenecks stopped them from fully capitalizing on strong demand from the end-uses. Third quarter net loss and Adjusted EBITDA were attributed to a number of factors in the company press release:
 
• A fall in overall sales volumes, below anticipation distributor volume, slow truck trailer volume, production outrage and an unfavourable mix of products sold pulled down the earning.
• Unfavourable metal spreads in North America

However, improved rolling margins increased Adjusted EBITDA approximately $1 million. Net loss was also lessened by favourable aluminium price movements and derivative settlements. Start-up cost in various new projects, a $4 million increase in professional fees BD costs related to the proposed acquisition of Aleris Corporation by Zhongwang USA LLC negatively affected the net loss.

As for the Year-to-date results, revenues was approximately $2,051 million compared to $2,281 million for the same period in 2015. The drop of 10 per cent was primarily due to lower average aluminum prices included in the invoiced prices and drop in sales volume. The revenue decrease was partially offset by improved rolling margins. Net loss for the first nine months was $41 million compared to net income of $61 million in 2015. Adjusted EBITDA dropped from $183 million in 2015 to $162 million in the current year due to unfavourable scrap spreads and currency movements.

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Region wise, North America segment income dropped to $18 million in Q3 2016 from $36 million in Q3 2015. On the Europe front, income increased to $41 million in Q3 2016 from $35 million in Q3 2015.

Asia Pacific segment reported segment income and segment Adjusted EBITDA of $3 million in Q3 2016 as compared to $1 million in Q3 2015.

As on September 30, 2016, Aleris reports a liquidity of $288 million.

Acquisition of Aleris by Zhongwang USA

On August 29, 2016, Aleris signed an agreement to be aquired by Zhongwang USA LLC at a cost of approximately $1.1 billion in cash. Aleris Corporation is expected to operate from Cleveland, Ohio headquarter as an independent entity with the management team unchanged. The Board of Directors of Aleris approved the merger and it is expected to close by Q1 2017, subject to customary regulatory approvals and closing conditions.
 
Aleris however, has a positive outlook for the Fourth Quarter and the performance is expected to be in line with Q4 2015. Asia Pacific aerospace volumes and building and construction volume in North America are expected to improve considerably. The company expects slow pace in distribution and heat exchanger volumes. However, they believe changing aluminium prices and the resulting metal price lag will continue to impact income in the fourth quarter.