Novelis income dips in Q4 and 2023 fiscal year

Novelis Inc., an Atlanta-based aluminum recycling and rolling company and subsidiary of Mumbai, India-based Hindalco Industries Ltd., has reported a dip in income for the fourth quarter and its overall 2023 fiscal year.

According to Novelis’ fourth-quarter earnings report, net sales decreased 9 percent to $4.4 billion, driven by lower average aluminum prices and a 5 percent decrease in total flat-rolled product shipments to 936,000 metric tons. Novelis says the sales decrease partially was offset by increased product pricing and favorable product mix.

The company attributes the decrease in shipments to lower beverage can shipments driven by short-term headwinds, primarily customer inventory reduction actions as well as macroeconomic impacts on specialty products, mainly in building and construction. Novelis adds that these declines were partially offset by higher aerospace shipments and record automotive shipments due to higher original equipment manufacturer build rates driven by pent-up demand.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 6 percent to $403 million in the fourth quarter compared with $431 million in the fourth quarter of 2022. Novelis attributes the decrease in EBITDA to less favorable metal benefit from recycling, higher energy costs and lower volume, which was partially offset by higher product pricing and favorable product mix.

Additionally, net income attributable to Novelis’ common shareholder decreased 27 percent in the quarter compared with the prior-year fourth quarter to $156 million, due mainly to lower adjusted EBITDA as well as higher restructuring, interest expense and favorable metal price lag in the prior year that did not recur. Novelis says net income from continuing operations, excluding special items, decreased 7 percent compared with the prior-year fourth quarter to $175 million.

RELATED: Novelis quarterly earnings affected by lower beverage packaging shipments

For the full 2023 fiscal year, net sales increased 8 percent to $18.5 billion, driven by higher average aluminum prices, higher product pricing and favorable product mix; however, a 2 percent decrease in total flat-rolled product shipments to 3,790,000 metric tons adversely affected overall sales. Novelis says the decrease in shipments is mainly from lower beverage can shipments driven by customer inventory reductions in the second half of the fiscal year as the beverage supply chain normalized postpandemic as well as softer demand for specialties products in a weaker macroeconomic environment. Novelis adds that easing supply chain constraints, including higher semiconductor availability, resulted in record automotive shipments, while aerospace shipments also grew as demand returned toward prepandemic levels.

For the 2023 fiscal year, Novelis reports adjusted EBITDA decreased 11 percent to $1.8 billion compared with $2 billion in the 2022 fiscal year. Novelis says the decrease was driven by inflation, higher energy costs and less favorable metal benefit. Results also were impacted by unfavorable foreign exchange, lower volume and a nonrecurring prior-year tax litigation settlement in Brazil. Novelis says these headwinds were partially offset by higher product pricing.

Additionally, 2023 fiscal year net income attributable to Novelis’ common shareholder decreased 31 percent compared with the prior year to $658 million. Novelis attributes the decrease to lower adjusted EBITDA and negative current-year metal price lag compared with favorable metal price lag in the 2022 fiscal year.

Sustainability also remained at the forefront of Novelis’ operations in its 2023 fiscal year. According to the company’s 2023 fiscal year earnings presentation, the company increased recycled material inputs in its operations and decreased prime material dependency. Additionally, the company recycled more than 82 billion used beverage cans in its 2023 fiscal year.

Novelis President and CEO Steve Fisher says the company faced a challenging environment in its 2023 fiscal year.

“While macroeconomic headwinds are muting near-term performance, we believe these are transitory and that the long-term market outlook for our business remains robust,” Fisher says. “With our market-leading position and strong balance sheet, we remain committed to our transformational organic growth plan to further our position as a leading global provider of low-carbon, sustainable aluminum solutions.”

Dev Ahuja, executive vice president and chief financial officer at Novelis Inc., adds that the company’s fourth-quarter adjusted EBITDA per ton improving on a sequential basis and strong free cash flow generation provides some optimism for the future. Ahuja says, “We are well-positioned to navigate current market headwinds and will continue to maintain a disciplined approach to managing cash efficiently as we embark on our next phase of transformational growth.”