Inc.s profits were hurt by the implementation of a new
enterprise planning system (ERP).
The Atlanta-based aluminum
producer said that installation of the ERP system at its
facilities in North America resulted in lost shipments and
reduced productivity in its fiscal third quarter, costing the
company about $39 million. Higher metal costs in North America
and project startups around the world also affected results,
the company said.
Most of the ERP issues were
experienced at Novelis operations in Oswego, N.Y.,
president and chief executive officer Philip Martens said
during a conference call. He was quick to note that production
had largely returned to near-normal levels and that Novelis
still intends to roll out ERP systems across its operations
Novelis posted net income of $3
million for the three months ended Dec. 31 in contrast to a
$12-million net loss in the same period a year earlier on sales
that slipped 5.7 percent to $2.32 billion. For the nine months
ended Dec. 31, net income of $143 million was down 15.9 percent
from $170 million a year earlier on sales that tumbled 13.5
percent to $7.31 billion.
"This is a heavy investment
period for us that is necessary to maintain and grow our
leadership position in the industry and allow us to capitalize
on the significant growth we see ahead in our key end-markets,"
Martens said in a statement.
Novelis said it began
commissioning of a 265,000-tonne recycling facility in South
Korea in October, and the following month it broke ground on a
120,000-tonne automotive heat-treatment line in China and a
400,000-tonne aluminum recycling and casting center in
In Brazil, the company
commissioned an expansion at its Pinda mill to increase rolling
capacity in South America, but last month Novelis closed a
potline at its Ouro Preto smelter because it was no longer
competitive to operate.
Martens pointed to anticipated
strong growth in the automotive sector as automakers look to
reduce vehicle weight. "Demand in automotive sheet is
consistently outstripping supply," he said.
European demand for specialty
product remains healthy, if spotty, with automotive aluminum
capacity "basically sold out" thanks in part to
aluminum-intensive vehicles, such as certain Land Rover and
Jaguar models, Martens said.
Novelis said it shipped 647,000
tonnes of aluminum rolled products in its fiscal third quarter,
virtually even with a year earlier. But shipments in North
America were hurt by the ERP problems, Martens said, while in
China the company suffered from lower-than-expected growth as
well as stiff competition.
Aluminum beverage can growth
continues around the world as steel was replaced by aluminum in
countries such as Spain, while growth also is expected in the
can sector in Brazil, Martens said.
In general, Novelis saw improved
global demand in the fiscal third quarter compared with a year
earlier, and Martens said he expects improvement in the current
quarter and beyond.