Novelis net sales up in full year results
Novelis Inc. reported results for the fourth quarter and full fiscal year 2023.
“Novelis continues to deliver solid performance in a challenging environment, enabled by our diversified product mix, operational efficiencies and financial discipline,” said Steve Fisher, President and CEO, Novelis Inc.
“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.
“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 aluminium solutions.”
Fourth Quarter Fiscal Year 2023 Results
Net sales decreased 9% to $4.4 billion for the fourth quarter of fiscal year 2023, primarily driven by lower average aluminium prices and a 5% decrease in total flat rolled product shipments to 936 kilotonnes, partially offset by increased product pricing and favourable product mix.
The decrease in shipments is mainly due to lower beverage can shipments driven by short-term headwinds, primarily customer inventory reduction actions, as well as macro-economic impacts on specialties products, mainly in building & construction.
Partially offsetting these declines were higher aerospace shipments, and record automotive shipments due to higher OEM build rates driven by pent-up demand.
Adjusted EBITDA decreased 6% to $403 million in the fourth quarter of fiscal year 2023, compared to $431 million in the prior year period, driven by less favourable metal benefit from recycling, higher energy costs and other cost inflation, and lower volume, partially offset by higher product pricing and favourable product mix.
Net income attributable to our common shareholder decreased 27% versus the prior year to $156 million in the fourth quarter of fiscal year 2023, due mainly to lower Adjusted EBITDA, as well as higher restructuring, interest expense, and favourable metal price lag in the prior year that did not recur. Net income from continuing operations, excluding special items, decreased 7% versus the prior year to $175 million.
Full Year Fiscal Year 2023 Results
Net sales increased 8% to $18.5 billion in fiscal year 2023, primarily driven by higher average aluminium prices, higher product pricing and favourable product mix, partially offset by a 2% decrease in total flat rolled product shipments to 3,790 kilotonnes.
The decrease in shipments is mainly due to lower beverage can shipments driven by customer inventory reductions in the second half of the fiscal year as the broader beverage supply chain normalised post-pandemic, as well as softer demand for specialties products in a weaker macro-economic environment.
Conversely, easing supply chain constraints, including higher semiconductor availability, resulted in record automotive shipments, while aerospace shipments also grew as demand returns toward pre-pandemic levels.
Adjusted EBITDA decreased 11% to $1.8 billion in fiscal year 2023, compared to $2.0 billion in fiscal 2022, driven by an extraordinary inflationary environment, higher energy costs due to geopolitical instability, and less favourable metal benefit.
Results were also impacted by unfavourable foreign exchange, lower volume, and a non-recurring prior year tax litigation settlement in Brazil. These headwinds were partially offset by higher product pricing, including some cost pass-throughs to customers, and favourable product mix.
Fiscal 2023 net income attributable to our common shareholder decreased 31% versus the prior year to $658 million.
The decrease is mainly driven by lower Adjusted EBITDA and negative current year metal price lag compared to favourable metal price lag in the prior year.
This was partially offset by a lower income tax provision in the current year and prior year losses from discontinued operations and extinguishment of debt that did not recur. Net income from continuing operations, excluding special items, decreased 16% to $781 million.
Adjusted free cash flow from continuing operations was $443 million in fiscal year 2023 compared to $649 million in the prior year. The decrease is due primarily to significantly higher capital expenditures, as well as unfavourable metal price lag in the current year compared to a favourable lag in the prior year, and lower Adjusted EBITDA, partially offset by a favourable release in working capital.
Total capital expenditures increased 76% over the prior year to $786 million in fiscal 2023, as the company begins to ramp up spending associated with a number of announced strategic, sustainability-focused, capital investment projects that support increased long-term customer demand.
“While our results continue to be muted by near-term challenges, we have demonstrated that our business is resilient, with fourth quarter Adjusted EBITDA per ton improving significantly on a sequential basis compared to the third quarter and very strong free cash flow generation even as we increase capital investments for future growth,” said Dev Ahuja, Executive Vice President and CFO, Novelis Inc. “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.”
The balance sheet remains resilient, with a net leverage ratio (Net Debt / TTM Adjusted EBITDA) of 2.3x at the end of fiscal year 2023, compared to 2.2x in the prior year period. Total Liquidity also remains strong at $2.6 billion as of March 31, 2023.