Novelis Q4 and full-year 2016 results: Productivity and automotive sheet shipments increase driving growth

Novelis, the world leader in aluminium rolling and recycling, yesterday reported net income of $29 million for the fourth quarter of fiscal year 2016. Excluding tax-effected special items, the company reported net income of $50 million in the fourth quarter of fiscal 2016, a 35 percent increase over the prior year period. For fiscal year 2016, the company recorded a net loss of $38 million. Excluding tax-effected special items, net income was $131 million for the full year.

"We ended fiscal 2016 with strong operational performance globally, enabling us to achieve record total shipments and automotive sheet shipments for the year," said Steve Fisher, President and Chief Executive Officer for Novelis. "This volume growth and our portfolio management strategy translated into our highest full year EBITDA excluding metal price lag since fiscal 2012. Heading into fiscal 2017, we remain focused on driving asset efficiency as well as managing costs and working capital. In addition, we will continue to strengthen our product portfolio through further growth in the premium automotive sheet segment while continuing to deliver quality products and service to all of our customers."

Fourth Quarter Fiscal 2016 Results

Shipments of rolled aluminium products grew four percent to 788 kilotonnes in the fourth quarter of fiscal 2016. Despite higher shipments, revenues decreased 14 percent to $2.4 billion as a result of lower average aluminium prices and local market premiums.

Excluding the impact of metal price lag, Adjusted EBITDA was $277 million in the fourth quarter of fiscal 2016, up 29 percent compared to $214 million in the prior year. This increase was a result of record global shipments in a seasonally strong quarter, as well as positive product mix primarily driven by a 23 percent increase in automotive shipments over the prior year.

The company reported negative metal price lag of $7 million in the fourth quarter of fiscal 2016 as compared to negative $13 million in the prior year period. Volatility in average local market metal premiums has greatly reduced over the last several months, lessening the impact of metal price lag on current results as expected. Adjusted EBITDA including metal price lag was $270 million, a 34 percent increase over $201 million in the prior year.

Full Year Fiscal 2016 Results

Higher shipments of beverage can and automotive sheet drove total flat rolled aluminium product shipments up two percent to 3,123 kilotonnes in fiscal 2016. For the full fiscal year, the percentage of the company's shipment portfolio stemming from automotive sheet grew to 15 percent, up from eleven percent in the prior year.

Revenues decreased eleven percent to $9.9 billion in fiscal 2016, as higher shipments were more than offset by a 16 percent decrease in average base aluminium prices and a 58 percent decrease in local market premiums.

The rapid decline in local market premiums over the early months of fiscal 2016 resulted in $172 million in negative metal price lag for the full year, and was the primary driver of the twelve percent decrease in Adjusted EBITDA to $791 million in fiscal 2016.

Excluding the impact of metal price lag in both years, Adjusted EBITDA was $963 million in fiscal 2016, up seven percent compared to $896 million in fiscal 2015.

The company more than doubled its free cash flow as compared to the prior year, generating $160 million in fiscal 2016 after investing $370 million in capital expenditures.

As of March 31, 2016, the company reported strong liquidity of $1.2 billion.