Hindalco arm Novelis logs a stellar Q3 earnings, posts 33% yoy growth in net sales

8 Feb 2022 , 10:15 AM

Novelis Inc., a wholly-owned subsidiary of Hindalco Industries Limited reported net income attributable to its common shareholder of $262 million in the third quarter of the fiscal year 2022, compared to $176 million in the prior-year period.

Net income from continuing operations increased to $259 million compared to $195 million in the prior-year period. Excluding special items in both years, third-quarter fiscal year 2022 net income from continuing operations increased 15% to $241 million, driven mainly by lower interest expense and unrealized derivative gains in the current year.

Net sales increased 33% to $4.3 billion for the third quarter of the fiscal year 2022, compared to $3.2 billion in the prior-year period, primarily driven by higher average aluminum prices. Total flat-rolled product shipments were 930 kilotonnes in the third quarter of the fiscal year 2022, in line with the prior-year period shipments of 933 kilotonnes. Shipment growth was constrained by the continued semiconductor chip shortage impacting the automotive industry.

Adjusted EBITDA increased 1% to $506 million in the third quarter of the fiscal year 2022, compared to $501 million in the prior-year period, which included a $25 million customer contractual obligation benefit. The underlying increase in Adjusted EBITDA is primarily due to favorable product pricing and mix, as well as favorable metal benefits, which mitigated inflationary cost pressures and supply chain disruption-related costs. Adjusted EBITDA per ton shipped increased to $544 in the third quarter of fiscal year 2022, compared to $537 in the prior year period.

At around 10.18 am, Hindalco Industries Ltd was trading at Rs520.45 per share down by Rs2.5 or 0.48% from its previous closing of Rs522.95 per share on the BSE.

“Our strong third quarter results reflect our team’s ability to deftly navigate headwinds mainly arising from global supply chain disruptions,” said Steve Fisher, President and Chief Executive Officer, Novelis Inc.

“We will continue to manage through these challenges, while keeping our eyes on our strategic growth path and meeting growing demand for high-recycled-content, sustainable aluminium products.”

Since October 2021, Novelis has announced several capital expansion projects aimed at increasing capacity and capabilities and achieving its sustainability goal to become net carbon-neutral by 2050. In January 2022, Novelis announced plans to build a $365 million, highly advanced recycling center for the U.S. automotive market.

With an annual casting capacity of 240 kilotonnes of sheet ingot, Novelis expects the facility will enable it to grow closed-loop recycling programs with more automotive customers in North America and reduce the company’s carbon emissions by more than one million tons each year.

Novelis earlier announced strategic growth capital projects totalling approximately $500 million, including a $375 million investment to expand its rolling and recycling capabilities in Zhenjiang, China, and a $130 million investment at its Oswego, New York, plant to increase hot mill capacity and enhance automotive sheet finishing capabilities. Novelis expects these projects to commence this calendar year and begin commissioning in 2024.

Fiscal year-to-date adjusted free cash flow from continuing operations was $217 million compared to the prior year period of $331 million. Significantly higher working capital requirements, due mainly to rising aluminum prices in fiscal 2022, were partially offset by higher Adjusted EBITDA and favorable metal price lag. The company’s net leverage ratio (net debt / TTM Adjusted EBITDA) improved to 2.3x at the end of the third quarter of fiscal year 2022, compared to 3.3x at the end of the third quarter of fiscal 2021.

“Novelis has generated more than $1 billion in trailing-twelve-month adjusted free cash flow before capital investments, despite the significant impact from higher aluminum prices this year,” said Devinder Ahuja, Executive Vice President and Chief Financial Officer, Novelis Inc.

“Continued strong cash generation, coupled with our disciplined capital allocation strategy, enables us to continue to strategically invest in sustainably growing the business while remaining within our targeted net leverage range.”

The company ended the third quarter with strong total liquidity of $2.3 billion as of December 31, 2021.