Higher automotive shipments and operational efficiency lift Q3 FY2018 earnings for Novelis

Novelis, the aluminium rolling and recycling major has reported net income of $121 million for Q3 FY 2018, compared to $63 million in the same period of 2017. Excluding special items in both years, the company reported net income of $138 million in Q3 FY 2018, more than double the $67 million reported in Q3 FY 2017. The YoY increase in net income is driven primarily by 20% higher EBITDA and lower interest expense. Higher shipments and the company's strategy to deliver a more favourable product mix with higher automotive shipments and increased operational efficiencies supported the gain in EBITDA. Adjusted EBITDA reached $383 per ton in the quarter.

Net sales increased 33% YoY to $3.1 billion, driven by higher aluminium prices, higher total shipments, and a strategic portfolio shift to higher conversion premium products. Flat rolled product shipment increased six per cent to 796,000 tonnes. Aluminium automotive sheet shipments increased 12 per cent YoY, as productions were ramped up to meet growing customer demand.

"Aluminum is increasingly the material of choice for our customers.  Following another quarter of record-setting financial results, we are making strategic investments to grow with our customers and advance the continued penetration of aluminum sheet in the broad automotive market of competing materials," said Steve Fisher, President and CEO of Novelis.

"These investments, coupled with the most advanced manufacturing processes and largest footprint in the industry, solidify our global leadership position and strengthen our diverse portfolio of lightweight, high-strength aluminum solutions," he added.

The company reported free cash flow of $79 million in Q3 FY2018. YTD free cash flow has improved $74 million over the prior year. The company expects to be on the upper end of its EBITDA range of $1,150-$1,200 million for the full year. Fiscal 2018 free cash flow is expected to be on the lower end of its pre-guided range of $400-450 million.

"Record Adjusted EBITDA for the second consecutive quarter has put us on track to achieve record free cash flow this fiscal year, and is providing the financial flexibility to reduce net debt and seek strategic investments, particularly in the growing automotive segment," said Devinder Ahuja, Senior Vice President and Chief Financial Officer for Novelis.

The company recently announced $300 million investment in automotive finishing capacity in Guthrie, Kentucky and also agreed to acquire operating facilities and manufacturing assets at its leased plant at Sierre, Switzerland. The press release says the recently announced automotive investments in the US and Switzerland will not impact free cash flow of FY2018.