Novelis Reports Third Quarter Fiscal 2021 Results

Q3 Fiscal Year 2021 Highlights

- Net income from continuing operations of $195 million, up 82% YoY; excluding special items, net income of $209 million
- Shipments of 933 kilotonnes, up 17% YoY
- Adjusted EBITDA of $501 million, up 46% YoY
- Adjusted EBITDA per ton of $537, up 25% YoY
- Focus on deleveraging resulted in net leverage ratio improvement to 3.3x from 3.8x at acquisition close
- Integration work continues with $54 million run-rate acquisition cost synergies achieved through end of Q3

Novelis Inc., the world leader in aluminum rolling and recycling, today reported a net income attributable to its common shareholder of $176 million in the third quarter of fiscal year 2021, and net income from continuing operations of $195 million, up 64 percent and 82 percent, respectively, versus the prior year. Excluding tax-effected special items in both years, third quarter fiscal 2021 net income was a record high $209 million, up 58 percent versus the prior year period, driven mainly by higher after-tax Adjusted EBITDA, partially offset by higher depreciation and amortization associated with the acquisition of Aleris.

Adjusted EBITDA increased 46 percent to $501 million in the third quarter of fiscal 2021 compared to $343 million in the prior year period. The increase in Adjusted EBITDA is due to organic growth, favorable metal benefits, and a net $50 million positive EBITDA contribution from the acquired Aleris business. The current quarter also includes a positive $25 million from a year-to-date customer contractual obligation. On a consolidated basis, Novelis achieved a record EBITDA per ton shipped of $537 in the third quarter, compared to $430 in the prior year.

Net sales increased 19 percent from the prior year period to $3.2 billion for the third quarter of fiscal 2021, primarily driven by a seventeen percent increase in total shipments and higher average aluminum prices. Total flat rolled product shipments increased to 933 kilotonnes, mainly reflecting the addition of the acquired Aleris business and strong demand across product end markets, particularly beverage can.

"Novelis achieved record financial performance in the third quarter based on continued demand for innovative, sustainable aluminum solutions and outstanding operational performance across our expanded business," said Steve Fisher, President and CEO, Novelis Inc. "We are also making excellent progress on our strategic growth initiatives to drive long term value, by investing in new capacity and technology, entering new partnerships to solidify aluminum as the material of choice for our customers, and bringing new alloys to market that will drive the industry forward."

Year-to-date fiscal 2021 free cash flow from continuing operations of $331 million compares to $61 million in the prior year period, driven primarily by higher Adjusted EBITDA, favorable working capital and lower capital expenditures. Capital expenditures of $333 million are down 23% versus the prior year as spending is prioritized to support maintenance activities and organic, strategic capacity projects underway. The greenfield Guthrie, Kentucky, automotive finishing plant in the U.S. shipped its first customer coils in December, while the new automotive finishing line in Changzhou, China, is expected to start commercial production in the fourth quarter this fiscal year. The recycling, casting and rolling expansion in Brazil remains on track to commission in the middle of fiscal year 2022.

Net leverage improved during the quarter to 3.3x, compared to 3.8x at the close of the Aleris acquisition in the first quarter fiscal 2021. This reduction is a factor of both stronger Adjusted EBITDA, as well as a $500 million reduction in the Company's short term bridge loan due 2022.

"We are delivering on our commitments to improve net leverage through debt reduction resulting from strong cash flow generation," said Devinder Ahuja, Senior Vice President and Chief Financial Officer, Novelis Inc. "With a favorable demand outlook, robust acquisition synergy savings, and prioritized capital spending, we now anticipate achieving our targeted net leverage level of below 3x earlier than the end of fiscal year 2022 as previously guided."

The company continues to maintain a very strong total liquidity position of $2.4 billion as of December 31, 2020.

Shares of HINDALCO INDUSTRIES LTD. was last trading in BSE at Rs.257.15 as compared to the previous close of Rs. 255.5. The total number of shares traded during the day was 775487 in over 6783 trades.

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Source : Equity Bulls

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