Novelis Inc. reported net income attributable to its common shareholder of $63 million for the fourth quarter of fiscal year 2020, down 39 percent from the fourth quarter of fiscal 2019, and $420 million for the full year, down three percent from fiscal 2019. The decrease for both the quarter and full year is mainly due to a $71 million loss on extinguishment of debt related to the refinancing of senior notes in the fourth quarter of fiscal 2020.
Excluding tax effected special items in both years, the company grew its fourth quarter fiscal 2020 net income 18 percent to $153 million, and its full year net income by 26 percent to $590 million. The increase for both the quarter and year is primarily due to higher Adjusted EBITDA and lower interest expense.
Full Year Fiscal 2020 Highlights
Net sales decreased nine percent from the prior year to $11.2 billion for the full year driven by lower average LME aluminum prices and local market premiums. Flat rolled product shipments were flat compared to the prior year at 3,273 kilotonnes.
Adjusted EBITDA increased eight percent to a record $1,472 million in fiscal 2020 compared to $1,368 million in the prior year, primarily driven by portfolio optimization efforts, favorable North American Specialties product pricing, operating cost efficiencies, and favorable foreign exchange, partially offset by less favorable recycling benefits due to lower aluminum prices.
Fiscal 2020 free cash flow before capital expenditures improved 30 percent over the prior year to $983 million, driven primarily by higher Adjusted EBITDA and favorable working capital. Capital expenditures increased to $599 million for the fiscal year ended 2020, mainly to support strategic investments in incremental rolling, recycling and automotive finishing capacity. As a result of this increased capital spending, fiscal 2020 free cash flow of $384 million compares to $408 million in the prior year period.
“We entered a period of challenging market conditions in a position of strength with ample cash and liquidity,” said Devinder Ahuja, Senior vice president and chief financial officer, Novelis Inc.
As of March 31, 2020, the company reported a strong total liquidity position of $2.6 billion, including $400 million in cash used to partially fund the Aleris acquisition in April 2020, and reduced its net leverage ratio to 2.1x as compared to 2.5x in the prior year period.
COVID-19 Response
Novelis is experiencing increasing disruption to global aluminum production and supply chain – including the shutdown of some plants – as a result of government decrees and some customers temporarily shutting down their own manufacturing operations in response to the COVID-19 pandemic. The extent to which the pandemic impacts the business, results of operations and financial condition will be dependent on future developments which are highly uncertain and cannot be predicted. While anticipated lower demand will continue to negatively impact sales in the near term, particularly in the automotive segment, Novelis has several strategic advantages that provide confidence in their ability to maintain business continuity for the long term due to its strong balance sheet, diverse product mix and global operating footprint. While navigating this dynamic environment, they will continue to work closely with all relevant parties to address challenges as they arise, and will continue making decisions that are in the best interest of everyone.
Aleris Acquisition
On April 14, 2020, Novelis closed its acquisition of Aleris Corporation and has begun integrating the two companies. The acquisition provides a number of strategic benefits, including product portfolio diversification with the entry into high-value aerospace, enhances their strategic position in Asia and allows for approximately $150 million in potential annual cost synergies. The financial results reflect legacy Novelis standalone performance. Combined company results will be reported beginning in the first quarter fiscal 2021, for the period ending June 30, 2020.
Published in the June 2020 Edition