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Margin pinch puts Aleris in red in quarter

Keywords: Tags  Aleris International, Steve Demetriou, earnings report, margin squeeze, Zhenjiang, Nathan Laliberte


NEW YORK — Aleris International Inc. posted a $6.9-million net loss in the fourth quarter of 2012, squeezed by the effects of "continued margin pressure in the scrap market in the face of steady demand," the company said.

"Tight metal spreads continue to negatively impact margins in our specification alloy business, which hurt our overall results for the quarter and the year," chairman and chief executive officer Steven J. Demetriou said during a conference call with analysts. "To restore profitability and reduce volatility in our specification alloy business, we are working towards better aligning the cost of scrap used to produce the products we offer our customers."

The Cleveland-based company’s net loss—on sales that fell 3.7 percent to $1.02 billion from nearly $1.06 billion in the same period a year earlier—was in sharp contrast to net income of $19.8 million in the fourth quarter of 2011. The company attributed the loss to startup expenses for a new rolling mill in Zhenjiang, China, restructuring charges associated with efforts to reduce general expenses, and an increase in depreciation and amortization expenses as a result of capital investment, among other factors.

The company’s Recycling and Specification Alloys North America segment continued to experience "pressure on metal spreads resulting from the combination of lower selling prices for the segment’s products caused by lower aluminum prices and higher scrap prices due to limited scrap availability." The segment posted fourth-quarter adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $13.2 million, down 29.4 percent from $18.7 million a year earlier.

Meanwhile, the Rolled Products North America segment showed a volume increase of 8 percent in the fourth quarter thanks to demand from the building and construction industry, and adjusted Ebitda increased 6.5 percent to $23 million from $21.6 million a year earlier.

Aleris posted full-year net income of $107.5 million, down 33.5 percent from $161.6 million in 2011 on sales that fell 8.6 percent to $4.41 billion. Despite the decline, Aleris noted "strong global market volumes, led by aerospace, and (an) improved overall mix of products sold."

Meanwhile, the company completed several expansion projects designed to increase capacity and improve production. "I am extremely proud of the Aleris team’s outstanding execution of several strategic growth initiatives in 2012, substantially competing construction of our state-of-the art mill in Zhenjiang, China, and a new cold mill for the production of wide auto-body sheet in Duffel, Belgium, and our paint line expansion in Ashville, Ohio," Demetriou said.


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