Aleris acquisition benefits Novelis’ bottom line

Novelis Inc., the Atlanta-based aluminum rolling and recycling company, has reported net income attributable to its common shareholder of $176 million in the fourth quarter of fiscal year 2021 and net income from continuing operations of $180 million, up 179 percent and 186 percent, respectively, versus the prior year. Net income attributable to its common shareholder was $236 million for the full fiscal year 2021, and net income from continuing operations was $458 million, down 44 percent and up 9 percent, respectively, versus the prior year.

Excluding special items in both years, fourth-quarter fiscal 2021 net income from continuing operations was $172 million, up 12 percent versus the prior year, driven primarily by higher after-tax adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) partially offset by higher depreciation and amortization associated with the acquired Aleris business, according to the company. For the full fiscal year, net income excluding special items decreased 5 percent versus the prior year to $561 million in light of pandemic-related impacts on first-quarter profitability.

Steve Fisher, president and CEO of Novelis, says, "With the ongoing successful integration of Aleris, a diverse and innovative product portfolio and unmatched geographic footprint, we have proven our ability to deliver sustainable aluminum solutions to customers in a way that resulted in record financial performance. Looking forward we will continue to pursue growth opportunities through organic investment while working towards creating a more sustainable and circular future for our business, industry and society."

The company says its principal achievements in fiscal 2021 included completing the acquisition of Aleris, generating initial run-rate integration cost synergies of $79 million and contributing to record full-year shipments of 3.6 million metric tons, adjusted EBITDA of $1.7 billion, net income from continuing operations of $458 million and free cash flow from continuing operations of $740 million.

Additionally, Novelis says it expanded its sustainability platform by committing to reduce its carbon footprint by 30 percent by 2026, becoming a net carbon-neutral company by 2050 or sooner.

Novelis says it also committed to becoming a more diverse and inclusive workplace by increasing representation of women in leadership to 30 percent and to 15 percent in senior technical roles by 2024.

The company’s recycled content in its products grew to 61 percent in its 2021 fiscal year, and Novelis also says it strengthened its automotive business with the commissioning of new auto finishing capacity in the U.S. and China, co-founding Alumobility and offering an ultra-high-strength 7-series aluminum alloy to advance the continued adoption of aluminum in vehicles.

In the fourth quarter of its 2021 fiscal year, Novelis says its net sales increased 33 percent over the prior year to $3.6 billion, primarily driven by a 21 percent increase in shipments, favorable product mix and higher average aluminum prices. Total flat-rolled product shipments increased to 983,000 metric tons, mainly reflecting the addition of the acquired Aleris business and record automotive and beverage can shipments, as well as continued strong demand for building and construction and other specialty flat-rolled aluminum products, the company adds.

Adjusted EBITDA increased 32 percent to $505 million in the fourth quarter of fiscal 2021 compared to $383 million in the prior-year period. The increase in Adjusted EBITDA is because of higher organic volume, favorable metal benefits and a $60 million positive EBITDA contribution from the acquired Aleris business, Novelis says. On a consolidated basis, the company achieved an adjusted EBITDA per ton shipped of $514 in the fourth quarter of its 2021 fiscal year compared with $472 in the prior-year’s fourth quarter.

For the full 2021 fiscal year, the company says its net sales increased 9 percent versus the prior year to $12.3 billion, which was driven largely by a 10 percent increase in total shipments. Total flat-rolled product shipments increased to 3.61 million metric tons, which mainly reflects the addition of the Aleris business, beverage can demand and a rapid recovery in demand for automotive and specialty products following a challenging first quarter affected by the pandemic, according to Novelis.

Adjusted EBITDA increased 16 percent to $1.7 billion in fiscal 2021 compared with $1.5 billion in fiscal 2020. The company says the increase in adjusted EBITDA largely is attributable to $200 million in positive EBITDA contributed by the Aleris purchase, favorable metal benefits and good cost control, partially offset by unfavorable volume and product mix from lower automotive shipments in early fiscal 2021.

Novelis commissioned its greenfield Guthrie, Kentucky, automotive finishing plant and the new automotive finishing line in Changzhou, China, in the second half of fiscal 2021. Customer qualification continues to ramp up at both facilities to meet strong demand for lightweight, automotive aluminum sheet, the company says. The recycling, casting and rolling expansion in Brazil also remains on track to commission in the middle of fiscal year 2022.

"Our strong operational performance and the ongoing successful integration of Aleris have allowed us to nearly double cash flow generation over the prior year, enabling us to reduce net leverage while continuing to invest in organic growth projects that meet our customers' evolving needs," says Devinder Ahuja, senior vice president and chief financial officer, Novelis Inc.

Novelis says the integration of Aleris' continuing operations will drive a number of strategic benefits, including more than $180 million in potential run-rate synergies that have been identified. In the period between closing and the end of fiscal 2021, the company says it achieved $79 million of run-rate cost synergies. Novelis' acquisition of Aleris is expected to provide a strong pro-forma financial profile and strategic benefits that include gaining an integrated manufacturing footprint in China, further portfolio diversification with the addition of aerospace and building and construction, as well as new technology and operational capabilities.