Novelis reports second quarter of fiscal year 2014 results – expansion continues

Novelis reports solid Quarterly Performance in a Transitional Year.

Novelis, the world leader in aluminum rolling and recycling, today reported net income attributable to its common shareholder of $23 million for the second quarter of fiscal 2014. Excluding certain tax-effected items, net income was $37 million for the quarter.

Adjusted EBITDA for the second quarter of fiscal 2014 was $228 million compared to $277 million reported for the same period a year ago. Sequentially, adjusted EBITDA improved 12 percent compared to the $204 million reported in the first quarter of fiscal 2014, in part due to initial success from the company's rolling expansion in South America. Excellent project execution allowed Novelis to meet strong market demand and puts the South America region on track to achieve record shipments this fiscal year.

"We are nearing an inflection point in the transition of our business from investment to growth," said Phil Martens, President and Chief Executive Officer for Novelis. "We have invested heavily in expanding our rolling, recycling and automotive finishing assets over the last three years to solidify our leadership position ahead of the strong market growth we expect, and we are beginning to see these results materialize. In fact, with the contribution from our expansions in South America and Asia, we expect results in the second half of fiscal 2014 to be stronger than the first half."

Martens also highlighted the company's stable business performance in North America, despite the challenging dynamics related to overcapacity in the North American can market which affected year-over-year results. "The reallocation of some hot mill capacity towards high-growth, high-margin automotive sheet in this region is not only a key piece of our growth strategy, it also will help rebalance the North American can market," said Martens. "We are aggressively increasing finishing capacity globally to support strong growth in the automotive flat rolled products market. Our two North American finishing lines are on track to produce commercial product by the end of this fiscal year and we are already evaluating additional investments."

Shipments of aluminum rolled products totaled 713 kilotonnes for the second quarter of fiscal 2014, down one percent compared to 719 kilotonnes for the same period last year but up one percent from the first quarter. Net sales for the second quarter of fiscal 2014 were $2.4 billion, flat compared to both the prior year and prior quarter.

For the second quarter of fiscal 2014, Novelis reported liquidity of $843 million. Free cash flow was $178 million for the second quarter of fiscal 2014 and capital expenditures totaled $184 million. "As expected, we generated positive free cash flow in the second quarter despite meaningful investments in growth, primarily due to significant improvements in working capital," said Steve Fisher, Chief Financial Officer for Novelis. "We will continue this diligent focus on cash generation and expect to drive positive free cash flow in the second half of this fiscal year as a result of working capital efficiencies and other cash improvement actions."