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Novelis posts stronger net income despite challenges

Keywords: Tags  Novelis, earnings report, ERP, fire, Oswego, expansion, capital expenditure, Philip Martens aluminum


CHICAGO — Novelis Inc.’s profits surged despite lower average aluminum prices, lower shipments and disruptions at its North American operations.

The headwinds included the implementation of a new enterprise resource planning system (ERP) at two of its North American plants and a fire at its Oswego, N.Y., aluminum complex (amm.com, Feb. 14), but the Atlanta-based producer still managed to swing to a profit in its fiscal fourth quarter due to stronger demand and good cost-control measures.

Novelis posted net income of $203 million for its fiscal year ended March 31, more than double $90 million the previous, even as revenue slipped 11.3 percent to $9.81 billion.

Fiscal fourth-quarter net income of $59 million was in sharp contrast to a $106-million net loss in the same period a year earlier despite revenue slipping 4.1 percent to $2.5 billion.

But while profits jumped, shipments of aluminum rolled products slipped 1.8 percent to 2.79 million tonnes in fiscal 2013 from 2.84 million tonnes the previous year, mostly as a result of the sale of the company’s three foil plants in Europe (amm.com, July 2) and production disruptions in North America, Novelis said. Shipments of aluminum rolled products dipped to 698,000 tonnes in the fiscal fourth quarter, down 0.7 percent from 703,000 tonnes a year earlier.

Novelis previously said it closed its Saguenay plant in Canada and its Ouro Preto potline in Brazil.

"We produced solid results in a transitional year marked by heavy investment," Novelis president and chief executive officer Philip Martens said in a May 14 statement released with earnings data. The strong results also came in the face of "multiple unexpected headwinds" in the second half of the fiscal year.

Novelis reported fiscal-year capital investments of $775 million, which were directed primarily at expansions of its global rolling, finishing and recycling businesses.

The company said it made "significant headway" on expansion projects, including beginning the commissioning process for its rolling expansion in Brazil as well as its recycling center in South Korea.

Capital expenditures are expected to total between $700 million and $750 million in fiscal 2014. "This is a heavy investment period for us that is necessary to maintain and grow our leadership position in the industry. Fiscal ’13 was a transitional year, much like fiscal ’14 will be," Martens said.

Novelis expects "significant growth" in its can, automotive and specialty segments, its key end-markets, Martens said.

Novelis said it boosted the recycled content of its products to 43 percent in fiscal 2013, which the company said was "good progress" toward its goal of 80-percent recycled content by 2020.


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