COVID-19 Impact: Novelis net income declines 85% Y-o-Y in Q1 FY21, attributing to lower sales and shipments

Novelis Inc., the world leader in aluminium rolling and recycling, has reported the first-quarter results of fiscal 2021 ended June 30, mentioning a net loss of $61 million from continuing operations, down 148 per cent year-on-year. The company’s net income totalled $22 million during Q1 FY2021, excluding tax-effected special items. This stood down by 85 per cent versus the same period last year, primarily attributing to the after-tax impact of lower Adjusted EBITDA, which was 32 per cent lower year-on-year to $253 million in Q1.

The company's financial results were mainly impacted by the COVID-19 pandemic, said Novelis. However, the resiliency of the beverage can market and the recovery in the automotive and specialty markets towards the end of the quarter provided some stability. Besides, the company started realizing targeted operating fixed costs, general administrative expenses, and R&D savings. It also maintained substantial liquidity to help navigate the current dynamic environment and managed the successful integration of Aleris.

"We swiftly implemented a number of cost reduction initiatives to create sustainable flexibility in our cost structure, and are prepared to take further action if needed based on customer demand trends," said Devinder Ahuja, Senior Vice President and Chief Financial Officer, Novelis Inc.

He added, "These initiatives, combined with our strong liquidity position and identified business combination synergies provide us the confidence to manage through near-term market headwinds while continuing to strengthen the business for future success."

Steve Fisher, President and CEO of Novelis Inc, said: "With employee safety as our top priority, Novelis continues implementing a number of measures to protect our colleagues from COVID-19-related challenges, while successfully serving our customers and integrating Aleris with minimal disruption."

He also said, "We entered this fiscal year in a position of strength based on four consecutive years of record earnings and remain confident in our ability to handle this near-term uncertainty. With our diverse product portfolio, reliable and efficient operations, and world-class workforce, we have the flexibility and expertise to provide the solutions our customers need."

Novelis’ net sales decreased by 17 per cent to $2.4 billion over the year in Q1 FY2021, driven by lower average LME aluminium prices, local market premiums, and dip in aluminium flat rolled product shipments.

The report showed that its FRP shipments dwindled by 7 per cent to 774 kilotonnes, impacted by weak market conditions but partially offset by the addition of the acquired Aleris business.