CHICAGO Aleris International Inc.s profits were squeezed in the first quarter amid lower sales volumes, winter weather and tight profit margins in scrap and some rolled products.
But Cleveland-based Aleris expects financial results to improve in the coming quarters as cold weather subsides and the company benefits from strength in transport and the North American building and construction sector, it said.
The start-up of the companys wide automotive body sheet mill in Duffel, Belgium (amm.com, March 14), and its wide-coating facility in Ashville, Ohio (amm.com, March 5), should also bolster results, Aleris said.
"While pockets of soft demand and continued compression of metal spreads contributed to a sluggish start to the year, we saw demand strengthen late in the quarter, indicating a sequential improvement going into the second quarter," Aleris chairman and chief executive officer Steven J. Demetriou said May 9 in a statement released with earnings data.
Aleris reported net income of $10.9 million in the first quarter, down 77.1 percent from $47.6 million in the year-ago quarter, on revenue that slipped 2.7 percent to $1.11 billion.
The company attributed the sharp decline to lower sales volumes and a weaker product mix of products; lower rolling margins for some rolled products in Europe and North America; and $8 million in start-up expenses related to Aleris expansions, including its new rolling mill in Zhenjiang, China (amm.com, April 25). Reduced metal spreads caused by low aluminum prices and "limited scrap availability" also put pressure on profits, the company said.
In North America, Aleris saw income from its Rolled Products North America division slip to $23.5 million for the three months ended March 31, down nearly 10 percent from $26.1 million in the same period last year, as lower sales volumes to the building and construction sector offset strong shipments to transportation and distribution, the company said.
The poor showing from building and construction came as cold weather across much of the United States delayed the start of the building season, Aleris said, also noting that a strike at a competitor last year boosted results in the first quarter of 2012. The company also saw lower rolling margins on some products as it sought to fight off imported material, it added.
Income for the Rolled Products Europe segment fell 6.3 percent year on year to $38.5 million in the first quarter as aerospace volumes dropped 3 percent due to production issues at the companys Koblenz, Germany, plant. In addition, an 8-percent decline in global automotive volumes compared with the 2012 quarter hurt order rates, Aleris said. But the European plate and sheet markets continued to see demand recovery that began in the fourth quarter, it added.