Taxes, Expenses, and Losses from Sale of Aluminium Recycling Business Weigh Down Aleris’ Bottom Line

Taxes, Expenses, and Losses from Sale of Aluminium Recycling Business Weigh Down Aleris’ Bottom Line

Cleveland rolled aluminium firm Aleris International, Inc. released results for 2017’s final quarter and full year yesterday. The firm’s bottom line in both periods suffered from certain tax items, peak start-up expenses, and write-offs from the sale of the company’s recycling business, among other factors.

The firm shipped 184 thousand metric tons of finished product in the fourth quarter, down slightly year-on-year from last year’s total of 189 thousand metric tons. Revenue in the fourth quarter totaled US$694 million, up from last year’s fourth-quarter total of US$613 million.

The firm’s fourth-quarter commercial margin came to US$291 million, better year-on-year from last fourth quarter’s total of US$284 million. Segment income for the quarter totaled US$44 million, down from last year’s fourth-quarter total of US$56 million.

Aleris’ net loss in the quarter totaled US$107 million, off from 2016’s fourth-quarter loss of US$35 million. Adjusted EBITDA totaled US$37 million in the quarter, down from the previous fourth-quarter adjusted EBITDA of US$43 million. The firm chalked up difficulties in this area to an unfavorable cost absorption, which was the result of a successful optimization of working capital at certain European operations. In addition, a weaker U.S. dollar and lower rolling margins took their toll as well. Favorable metal spreads and productivity improvements helped soften the blow, however.

Also, Aleris indicated that a non-cash expense related to the sale of the firm’s recycling business and certain expenses incurred in the course of the subsequently-terminated Zhongwang USA merger had a negative impact of approximately US$30 million in the fourth quarter.

For the year Aleris shipped a total of 800 thousand metric tons of finished product, down slightly from the prior year’s total of 829 thousand metric tons.

Revenue for the year totaled US$2.9 billion, up from the prior year’s total revenue of US$2.7 billion. Higher average aluminium prices, a weak U.S. dollar, and improved rolling margins helped bump this number up from the previous year’s total.

Aleris’ commercial margin for 2017 came to US$1.199 billion, up slightly from 2016’s commercial margin of US$1.993 billion. Segment income for the year came to US$230 million, down slightly from the prior year’s total of US$246 million.

Losses for the year totaled US$211 million, an increase from the prior year’s losses of US$76 million. A rise in interest expenses, start-up costs, costs incurred in the sale of its recycling arm, and an increase in depreciation expenses related to the North America ABS project, among other factors, contributed to losses in this area.

Adjusted EBITDA for 2017 totaled US$201 million, off slightly from 2016’s adjusted EBITDA of US$205 million. The planned outage at the Lewisville hot mill contributed significantly to the US$4-million drop-off.

Sean Stack, Aleris Chairman and CEO, expressed optimism that the difficulties of the previous year have laid the groundwork for a much-improved bottom line this year.

“2017 was a successful and pivotal year at Aleris. Our North America automotive project is substantially qualified and producing customer material, our major Lewisport outage is complete, and our key aerospace contracts have been renewed with higher shares. We are poised to begin the realization of our strategic vision and investments. I am pleased with the focused execution of our global teams on these projects as well as overall improvements in our operations which I believe has put us in the position to dramatically reshape our earnings trajectory in 2018 and beyond.”

Going forward, the company expects to report an improve adjusted EBITDA thanks to improvements planned for the spring. Commercial shipments are planned to commence from the first Lewisport CALP, and aerospace and automotive demand is likely to strengthen as the year progresses as well.

Ranked by Forbes as one of the United States’ largest privately-held companies, Aleris is a global leader in aluminum rolled products serving diverse industries including aerospace, automotive, building and construction, commercial transportation and industrial manufacturing.  Headquartered in Cleveland, Ohio, Aleris operates production facilities in North America, Europe and Asia.