Novelis plans strategic investments in automotive aluminum

　　The increase in net income, excluding special items, is mainly because of a 20 percent increase in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to a record $305 million in the third quarter of fiscal 2018 compared with the prior year. Novelis says this increase reflects higher shipments and its strategy to deliver a more favorable product mix with higher automotive shipments and increased operational efficiencies. Adjusted EBITDA reached $383 per ton in the quarter, according to Novelis.

　　Net sales increased 33 percent from the prior year to $3.1 billion for the third quarter of fiscal 2018, driven by higher average aluminum prices, higher total shipments and a favorable impact from the strategic portfolio shift to higher-conversion premium products, the company says. Shipments of flat-rolled products increased 6 percent to 796 kilotonnes. Automotive sheet shipments increased 12 percent year over year as production has ramped up to meet customer demand.

　　Steve Fisher, president and CEO of Novelis, says, “Following another quarter of record-setting financial results, we are making strategic investments to grow with our customers and advance the continued penetration of aluminum sheet in the broad automotive market of competing materials. These investments, coupled with the most advanced manufacturing processes and largest footprint in the industry, solidify our global leadership position and strengthen our diverse portfolio of lightweight, high-strength aluminum solutions."

　　The company recently announced plans to expand its production footprint in the U.S. by investing approximately $300 million in automotive finishing capacity in Guthrie, Kentucky. Novelis also has agreed to acquire operating facilities and manufacturing assets for €200 million ($247 million) at its Sierre, Switzerland, plant that have historically been leased.

　　Novelis reported free cash flow of $79 million for the third quarter of fiscal 2018, including $54 million of capital expenditures. Year-to-date free cash flow has improved $74 million over the prior year, Novelis says, primarily a result of higher adjusted EBITDA, lower cash interest payments because of refinancing savings and lower metal price lag, partially offset by higher taxes and working capital requirements because of rising aluminum prices.

　　"Record Adjusted EBITDA for the second consecutive quarter has put us on track to achieve record free cash flow this fiscal year and is providing the financial flexibility to reduce net debt and seek strategic investments, particularly in the growing automotive segment," says Devinder Ahuja, senior vice president and chief financial officer for Novelis.

　　As of Dec. 31, 2017, the company reported a liquidity position of $1,724 million.

　　During the third quarter of fiscal 2018, Novelis recorded a net $18 million noncash income tax benefit for the remeasurement of deferred tax assets and liabilities in accordance with the recently enacted U.S. tax reform. The tax benefit attributable to the common shareholder is $34 million, as $16 million of tax expense is attributable to noncontrolling interest related to Logan Aluminum as reflected in the net loss attributable to noncontrolling interests in our financial statements. Novelis says it does not expect other provisions of the act to have a material impact on fiscal 2018.

　　The company says it expects to be on the upper end of its previously guided fiscal 2018 adjusted EBITDA range of $1,150 million to $1,200 million. It also says it expects fiscal 2018 free cash flow to be on the lower end of its previously guided range of $400 million to $450 million, driven by the impact of higher aluminum prices. The recently announced automotive investments in the U.S. and Switzerland will not impact fiscal 2018 free cash flow.