A Novelis Inc. employee inspects bales of crushed aluminum cans at the company’s production facility in Yeongju, South Korea (Photographer: Woohae Cho/Bloomberg)  

Q4 Results: Beverage Can Demand Drives Novelis’ Earnings

Robust demand for beverage cans aided the earnings of Novelis Inc., the U.S.-based subsidiary of aluminium giant Hindalco Industries Ltd.

The beverage can maker’s profit—excluding special items—rose 29 percent for the three months ended March mainly due to higher operational profits, the company said in a press release. These special items include metal price lag, restructuring and impairment, gains on sale of business.

The industrial aluminium producer reported 12 percent growth in earnings before interest, taxes, depreciation, and amortisation despite a slowdown in China’s auto sales. Higher shipments, improved product mix and favourable metal costs led to a strong operational profit, the company said.

Ebitda per tonne rose by 12 percent to $410 million for the March-ended quarter compared to $367 million in the year-ago period. The company’s net debt average reduced to 2.5 times as of financial year 2018-19 compared to 3 times during the previous fiscal.

While terming the fourth-quarter numbers as “surprisingly positive”, Jefferies highlighted that concerns around potential downward repricing of auto contracts may be overdone.

Novelis’ management, in its conference call, said that it expects good auto demand in the U.S. and that slowdown in China was short-lived.

Edelweiss Securities, in its report, said that Novelis is at a vantage position as Ebitda per tonne is expected to remain at an elevated level amidst favourable conditions in the can market.

Aleris Corp.’s March Quarter Numbers

Aleris Corporation, the proposed step-down subsidiary of Hindalco, posted a 57 percent jump in adjusted Ebitda on a yearly basis to $85 million for the first quarter of calendar year 2019. This, according to the company, was aided by stronger-than-expected shipments in profitable auto and aerospace divisions. It expects Ebitda growth to continue in these two divisions.

Novelis had signed an agreement to acquire Aleris for $2.6 billion on July 26, 2018. The merger is expected to be completed within 15 months from the date of agreement.