Aleris’ results for 4QFY17indicates a loss: Its aluminium recycling business bears criticism

Located at Cleveland, the reputed aluminium firm Aleris International, Inc. announced its result for the final quarter of 2017, as well as the full year. Both the results indicated an overall downfall. Certain tax items, peak start-up expenses, and write-offs from the sale of the company aluminium recycling business bear criticisms for the fall, among many other factors.

Results for 4QFY17

The firm shipped 184 thousand tonnes of finished products in the final quarter of the year, slightly low year-on-year from the contemporary period of the prior year totalling 189 thousand tonnes. However, the revenue in the fourth quarter 2017 saved the predicament by attaining US$694 million, up from last year’s fourth quarter total of US$613 million.

The commercial margin increased as well in the fourth quarter to US$291 million, better year-on-year from previous year’s fourth quarter total of US$284 million. But, on the other hand, the segment income, unfortunately, slipped for 2017 from US$56 million in last year’s fourth quarter to US$44 million.

Aleris’ net loss in the quarter totalled US$107 million, notably higher from 2016’s fourth quarter loss of US$35 million. Adjusted EBITDA shrank as well from US$43 million to US$37 million, compared with last year’s fourth quarter.

According to the firm, unfavourable cost absorption, a resultant of successful optimisation of working capital at certain European operations was the primary cause of all difficulties, adding to a weaker US dollar and lower rolling margins. Favourable metal spreads and productivity improvements helped soften the blow, however.

Aleris even pointed out that a non-cash expense related to the sale of the firm’s recycling business and other expenses incurred in the course of the subsequently-terminated Zhongwang USA merger took a toll of US$30 million in the fourth quarter.

Results for the full year

In the entire year of 2017, Aleris shipped a total of 800 thousand tonnes of finished product, whereas, in 2016, the company shipped a total of 829 thousand tonnes. Nevertheless, the revenue in 2017 maintained a steady growth by securing US$2.9 billion, up from the prior year’s total revenue of US$2.7 billion.

Aleris’ commercial margin for 2017 also climbed up totalling US$1.199 billion from the previous year’s total of US$1.193 billion, while the segment income slipped from US$246 million to US$230 million.

Adjusted EBITDA also appeared wretched this year totalling US$201 million as compared to US$205 million in the previous year.

Nonetheless, despite all kinds of oscillation, Aleris Chairman and CEO, Sean Stack expressed optimism stating that the difficulties of the previous year led to a much-improved bottom line this year.

“2017 was a successful and pivotal year at Aleris. Our North America automotive project is substantially qualified and producing customer material, our major Lewisport outage is complete, and our key aerospace contracts have been renewed with higher shares. We are poised to begin the realization of our strategic vision and investments. I am pleased with the focused execution of our global teams on these projects as well as overall improvements in our operations which I believe has put us in the position to dramatically reshape our earnings trajectory in 2018 and beyond”, said Mr. Stack.