Novelis Inc. reported results for the third quarter of fiscal year 2023. Net income attributable to its common shareholder decreased 95 percent versus the prior year to $12 million, due mainly to factors driving lower Adjusted EBITDA as outlined below and unfavorable metal price lag from falling aluminum local market premiums in the current year. Excluding special items in both years, third quarter fiscal year 2023 net income from continuing operations decreased 60 percent versus the prior year to $96 million due primarily to lower Adjusted EBITDA.
“As expected, our results were pressured by continued unprecedented inflationary headwinds, but were also further impacted by lower shipments resulting from significantly larger than anticipated customer inventory reduction actions in the beverage packaging market,” said Steve Fisher, president and chief executive officer, Novelis Inc. “We will continue to address these short-term challenges while remaining focused on building for our future in a prudent manner. Importantly, we believe the underlying demand fundamentals driven by increasing consumer preferences for lightweight, sustainable aluminum solutions in all our key end markets remains unchanged.”
Net sales decreased 3 percent to $4.2 billion for the third quarter of fiscal year 2023, compared to $4.3 billion in the prior year period, primarily driven by lower average aluminum prices and a 2 percent decrease in total flat rolled product shipments to 908 kilotonnes, partially offset by increased product pricing and favorable product mix. The decrease in shipments is mainly due to lower beverage can shipments as customers reduce their inventory and adjust to more normalized levels of can demand post-pandemic, and softer demand for specialties products in this weaker macro-economic environment. Conversely, easing supply chain constraints, including higher semiconductor availability, resulted in higher automotive shipments compared to the prior year.
Adjusted EBITDA decreased 33 percent to $341 million in the third quarter of fiscal year 2023, compared to $506 million in the prior year period, driven by an extraordinary inflationary environment and higher energy costs due to geopolitical instability. Results were also impacted by less favorable metal benefits from recycling, unfavorable foreign exchange, and lower volume. These headwinds were partially offset by higher product pricing, including some higher cost pass-through to customers, and favorable product mix.
Adjusted free cash flow from continuing operations was an outflow of $158 million for the first nine months of fiscal year 2023, compared to a generation of $217 million in the prior year period. The decrease is due primarily to unfavorable metal price lag in the current year compared to a favorable lag in the prior year, lower Adjusted EBITDA, and higher capital expenditures.
“We are navigating a challenging period of intensified inflationary headwinds, and continuing to implement cost control measures and work with our customers to share these extraordinary inflation impacts,” said Dev Ahuja, executive vice president. “We see some of these inflated costs gradually settling down, however, we are applying a disciplined approach to capital expenditures and working capital that will allow us to maintain a strong balance sheet through these near-term headwinds while strategically investing in projects to drive future growth.”