Recap 2020: The “Corona crisis” and the impact on global Aluminium downstream segment

The aluminium sector is crucial to the modern economies and it supplies a wide range of highly distinguished products, from the intermediate semis required for many high-tech industries to parts and components for final applications. The most important impact of innovation in Aluminium will be on the social system like lessening energy consumption and protecting environmental pollution.

The COVID-19 pandemic developed a profound impact on manufacturing operations, prices collapsed, demand fell, operational activities curtailed, and capital projects reviewed. Hereby, we look into the impact of the pandemic on global aluminium downstream segment:

Aluminium Rheinfelden solicited for protective shield proceedings

The German-based Aluminium Rheinfelden applied for protective shield proceedings as preliminary insolvency proceedings with high requirements. This enabled viable companies to enhance their chances of restructuring.

The 100 years old automotive supplier company, Aluminium Rheinfelden, suffered a major blow due to the COVID-19 pandemic, as the vehicle productions remained on pause.

Initially, an attempt was made to compensate for the drop in sales with weeks of short-time work, and then the first bad news came in mid-June’20, the axing of 30 jobs. At the same time, company management and the works council said that there should be no lay-off. However, they were convinced that they could continue to run with around 210 employees.

The leadership of Aluminium company wanted to use the protective shield procedure to complete the optimization measures that have already been tackled.

Impacted by COVID-19, Novelis net income plunges 85% Y-o-Y in Q1 FY21

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

Novelis’ net sales decreased by 17% 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.

Arconic Corporation Q2 revenue shrinks by 38% YoY primarily due to COVID-19 pandemic

Arconic Corporation, a leading producer of aluminium sheet, plate and extrusions, as well as innovative architectural products, reported revenue of $1.2 billion in the second quarter 2020, down 38% Y-o-Y on weaker volumes across all segments primarily due to the impact of the COVID-19 pandemic.

Net loss stood at $92 million in Q2 compared with net income of $5 million in Q2 2019. Second-quarter 2020 Adjusted EBITDA was $94 million compared with $211 million in second-quarter 2019 on lower volumes due to the impact of the COVID-19 pandemic partly mitigated by cost reduction actions.

Arconic initiated operating as a standalone company on April 1, when sudden declines in critical end markets due to the COVID-19 pandemic shut down many of its customers’ production facilities around the world. The company restructured its balance sheet to be more flexible, increase liquidity, and better mitigate the impacts of the global pandemic.

Mexican conglomerate Alfa spin-off rest of its stake in Aluminium auto parts producer Nemak

The Mexican Multinational conglomerate Alfa announced on 31st July’20 that it projected to spin off the gross of its remaining 75% stake in aluminium automotive parts supplier Nemak.

The President of Alfa, Alvaro Fernandez Garza stated that they planned a gradual and orderly transition process to make Nemak an independent business.

Nemak, the producer of aluminium components for automakers like Ford, General Motors, Fiat Chrysler Automobiles and Toyota, saw Q2 results sharply stroked by closedown of light vehicle manufacturing due to the COVID-19 pandemic.

The company posted a $125 million loss compared with a net profit of $42 million the year before, while revenue shrank 60% from the year-earlier period to $403 million that made it the worst-performing of Alfa's publicly-traded companies.

Salzburger Aluminum AG lay-off 29 employees in Austria, as COVID-19 declined production

Salzburger Aluminum AG (SAG) is terminated 29 employees in Austria at its two locations in Lend (Pinzgau) and Schwarzach (Pongau). The company confirmed the news on 31st July ’20. The corona crisis led to a significant decline in production at the automotive supplier.

SAG with its subsidiaries is an internationally successful manufacturer of high-quality aluminium components for the automotive, commercial vehicle and railway industries. It also produces aluminium tanks for the automotive industry.

According to the company, after an optimistic start in 2020 and with stable order numbers, the production volumes were forced to reduce in mid-March. However, the long-term supply contracts and short-time work made the vehicle manufacturers' lockdown easy. The very hesitant restart on the part of the customer made it necessary to continue driving with the handbrake on.

The dismissals had been preceded by a conflict with the union and the Chamber of Labour.

Kaiser Aluminum Corporation’s VAR decreased to $175 million in Q2, demand impacted by COVID-19

Kaiser Aluminum Corporation, a leading producer of semi-fabricated speciality aluminium products, posted its second-quarter 2020 results, where net sales for the Q2 2020 were $276 million, from $375 million in the prior-year period, reflecting a 24% drop in shipments and a 4% decrease in average selling price.

Value-added revenue decreased to $175 million from $209 million, reflecting a 24% decrease in shipments as demand across end markets was impacted by COVID-19 as customers temporarily shut down operations and curtailed deliveries during the quarter.

Adjusted EBITDA stood at $34 million in the second quarter of 2020, reflecting the impact from lower value-added revenue and operating leverage.

British automotive specialist and aluminium producer Automet obtains £600,0000 Coronavirus package

The British company Automet Limited based in Manchester, a specialist car engine recycler obtained £600,0000 as Coronavirus Business Interruption Loan Scheme (CBILS) facility to support its cash flow during the Covid-19 outbreak.

Automet, on a two-acre site in Trafford Park, is one of the UK’s leading car engine recyclers and aluminium producers for customers in the UK and Europe.

Around 50% of the sales are generated through international clients. The COVID-19 outbreak has led the business to see de-growth and had to place some staff on layoff, however, it is well now positioned for the post-COVID-19 marketplace. The facility had enabled the business to purchase large volumes of car engines and ensured it is in a prime position to grow once Covid-19 restrictions get fully lifted.