Novelis quarterly earnings affected by lower beverage packaging shipments

Mumbai-based Hindalco Industries Ltd. subsidiary Novelis Inc., an aluminum recycling and rolling company headquartered in Atlanta, has reported its financial results for the third quarter of its 2023 fiscal year, revealing some year-over-year losses, said Recyclingtoday.

Compared with the previous year, net income attributable to the company's common shareholder decreased 95 percent to USD12 million primarily because of factors driving lower adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and unfavorable metal price lag from falling aluminum local market premiums, according to the company. Excluding special items in both years, third-quarter fiscal year 2023 net income from continuing operations decreased 60 percent relative to the prior year to USD96 million largely because of lower adjusted EBITDA.

"As expected, our results were pressured by continued unprecedented inflationary headwinds but were also further impacted by lower shipments resulting from significantly larger than anticipated customer inventory reduction actions in the beverage packaging market,” says Novelis President and CEO Steve Fisher. "We will continue to address these short-term challenges while remaining focused on building for our future in a prudent manner. Importantly, we believe the underlying demand fundamentals driven by increasing consumer preferences for lightweight, sustainable aluminum solutions in all our key end markets remains unchanged."

The company's net sales for the quarter decreased 3 percent to USD4.2 billion compared with USD4.3 billion in the prior-year period. Novelis attributes this to lower average aluminum prices and a 2 percent decrease in total flat-rolled product shipments to 908,000 tons. The lower prices were offset somewhat by increased product pricing and favorable product mix. Novelis reports shipping fewer beverage cans as customers reduced inventories and adjusted to more normalized levels of can demand postpandemic and softer demand for specialty products in this weaker macroeconomic environment. Conversely, easing supply chain constraints, including higher semiconductor availability, resulted in higher automotive shipments compared with the prior year.

Adjusted EBITDA decreased 33 percent to USD341 million for the quarter compared with $506 million in the prior-year period as a result of what Novelis says was "an extraordinary inflationary environment and higher energy costs" arising from geopolitical instability. Less favorable metal benefits from recycling, unfavorable foreign exchange and lower volume also negatively affected its third-quarter results. Providing some relief were higher product pricing, including some higher cost pass-through to customers, and favorable product mix, the company says.

Adjusted free cash flow from continuing operations was an outflow of $158 million for the first nine months of fiscal year 2023 compared with generation of USD217 million in the prior-year period. The company attributes the decrease largely to unfavorable metal price lag in the current year compared with a favorable lag in the prior year, lower adjusted EBITDA and higher capital expenditures. The company says it had a net leverage ratio of 2.6x at the end of the third quarter of fiscal year 2023 compared with 2.3x in the prior-year period. Novelis says it had a total liquidity position of USD2.1 billion as of Dec. 31, 2022.

In its earnings presentation slides, the company notes that its capital expenditure growth projects remain on track, including its USD2.5 billion greenfield rolling and recycling facility in Bay Minette, Alabama, and its USD365 million automotive recycling center in Guthrie, Kentucky.

We remind, Novelis Inc, a leading sustainable aluminium solutions provider and the world leader in aluminium rolling and recycling, broke ground and began construction on 7 Oct 2022 on its USD2.5 bn recycling and rolling plant in Bay Minette, AL, US. The highly advanced facility is expected to create up to 1000 new jobs and will have an initial 600,000 tonnes of finished aluminium goods capacity per year focused on the beverage container market, with flexibility for automotive production. It also adds a new recycling centre for beverage cans, increasing the company's recycling capacity by 15 bn/y cans when fully operational.

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Single-use plastic production rose globally by 6 MMtpy from 2019 to 2021 despite tougher worldwide regulations, with producers making little progress to tackle the problem and boost recycling, said Hydrocarbonprocessing.

Single-use plastics have emerged as one of the world's most pressing environmental threats, with vast amounts of waste buried in landfills or dumped untreated in rivers and oceans. The manufacturing process is also a major source of climate-warming greenhouse gas.

However, while growth has slowed recently, the production of single-use plastic from virgin fossil fuel sources is still nowhere near its peak, and the use of recycled feedstocks remains "at best a marginal activity", Australia's Minderoo Foundation said in its Plastic Waste Makers Index.

"Make no mistake, the plastic waste crisis is going to get significantly worse before we see an absolute year-on-year decline in virgin single-use plastic consumption," it said.

Exxon Mobil was at the top of the list of global petrochemical companies producing virgin polymers used in single-use plastics, followed by China's Sinopec.

Sinopec also leads the way when it comes to building new production facilities over the 2019-2027 period, the report said, with more than 5 MMt of annual capacity planned. Exxon Mobil was second with around 4 MMt.

Sinopec said in a statement that it was the first Chinese company to join the Alliance to End Plastic Waste, a global coalition of companies supporting sustainable plastic, and was also developing its own biodegradable plastic products.

China has driven rapid growth in global plastic demand over the past 15 years. Despite high-profile bans on some single-use products starting in 2019, it also accounted for half of the 15 MMt of new capacity that came online over 2019-2021.

China said last year in a "five-year plan" to tackle plastic production that it would make deep cuts in the production and usage of single-use plastics and ban some products entirely.

Chinese production growth is expected to slow, but the country still accounts for half of the top 20 companies planning to increase virgin polymer capacity up to 2027, Minderoo said.

Around 137 MMt of single-use plastics were produced from fossil fuels in 2021, and it is expected to rise by another 17 MMt by 2027, the researchers said.

We remind, Repsol has announced an investment of EUR26m to start a new production line (Reciclex range) for recycled plastics at its Puertollano Industrial Complex in Spain. Expected to start in Q4 2024, the new line will have the capacity to manufacture 25,000 tons of recycled plastic per year, which is almost double the current capacity of 16,000 tons.

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Trinseo, a specialty material solutions provider, and its affiliate companies in Europe announced a price increase for all polystyrene (PS), ABS and SAN grades, mostly based on raw material cost increases for styrene production, said the company.

Effective February 1, 2023, or as existing contract terms allow, the contract and spot prices for the products listed below will increase as follows:

STYRON™ and STYRON™ X-TECH general purpose polystyrene grades (GPPS) by +50 Euro per metric ton
STYRON™ and STYRON™ A-TECH, STYRON™ C-TECH and STYRON™ X- TECH high impact polystyrene grades (HIPS) by +50 Euro per metric ton
MAGNUM™ ABS resins by +40 Euro per metric ton
TYRIL™ SAN resins by +50 Euro per metric ton

We remind, Trinseo, a specialty materials solutions provider, is pleased to announce a distribution agreement with Omya, a leading global producer of industrial minerals and worldwide distributor of specialty chemicals. Under the terms of the agreement, Omya will provide high-quality ABS and PC/ABS resins to Trinseo automotive and mobility customers in North America starting February 1, 2023. The materials are offered under Trinseo’s well-known brands MAGNUM™ ABS Resins and PULSE™ PC/ABS Resins.

Trinseo, a specialty material solutions provider, partners with companies to bring ideas to life in an imaginative, smart, and sustainably ility-focused manner by combining its premier expertise, forward-looking innovations and best-in-class materials to unlock value for companies and consumers. From design to manufacturing, Trinseo taps into decades of experience in diverse material solutions to address customers’ unique challenges in a wide range of industries, including consumer goods, mobility, building and construction, and medical.
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Aekyung Chemical, an affiliate of South Korea's Aekyung Group, has begun mass-producing eco-friendly plasticizers derived from recycled waste plastics, marking a first in South Korea, said Kedglobal.

The company succeeded in developing the plasticizers and built specialized production facilities.

As an essential additive for softening polyvinyl chloride (PVC) plastics, the eco-friendly alternative has the potential to lower carbon emissions compared to traditional petrochemical-based production methods.

Aekyung Chemical's product has received the international "ISCC PLUS" certification, recognizing its contribution to a circular economy in the entire production process.

"Our eco-friendly plasticizer offers a sustainable solution for addressing climate change in the widespread use of PVC materials in daily life," the company said.

We remind, DIC Corp. has reached an agreement with AK Holdings to return its 50% stake in their synthetic resins production and sales joint venture, Aekyung Chemical, to AK and dissolve the joint venture agreement.

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The European Union's full embargo of Russian oil products came into effect on Feb. 5, but data from traders and Refinitiv show that the bulk of Russia's fuel oil and vacuum gasoil (VGO) is already being shipped to other regions, mostly in Asia, said Hydrocarbonprocessing.

In January, less than 5% of Russian fuel oil and VGO was shipped to EU countries, including some 100,000 t to Agioi Theodoroi in Greece, about 80,000 t to the Latvian port of Ventspils and 30,000 t - to the Italian port of Augusta. "No need to say, that`s easy enough to divert those remains to the other destinations," one trader said.

The EU began restricting imports and transit of some fuel oil from Russia six months ago, under custom code 2707, with a full ban coming into force this month, in response to the dispute in Ukraine. The Group of Seven (G7) industrialized nations has also imposed a price cap on Russian fuel shipments.

In response, traders have diverted cargoes to Asia and the Middle East and increasingly used ship-to-ship (STS) loadings to transport their oil. In December and January total Russian exports of fuel oil and VGO were about 4.2 MMtpy-4.5 MMtpy each month.

According to Refinitiv data, Russia exported more than 0.8 million t of fuel oil in December 2022 to India, which buys the oil products to process at cokers in its refineries. In January 2023, fuel oil shipments from Russia to India totaled at least 0.5 MMt.

STS loadings near the Greek port of Kalamata, which is one of the main destinations for Russian fuel oil and VGO exports, surged to 8.2 MMt in 2022, up from 1.4 MMt in the previous year. In January 2023, Russia sent 0.5 MMt of dirty oil products to STS near Kalamata. Traders also use STS loadings in Skagen (Denmark) and Ceuta (Spain). Large volumes of fuel oil and VGO from Russia were also diverted last year to Singapore, Malaysia, China, Emirates, Turkey, Senegal and South Korea, Refinitiv data shows.

We remind, Russian energy minister Nikolai Shulginov on Friday said there was no reason for a sharp reduction in the country's petroleum products output in response to a European Union embargo. Interfax cited Shulginov as saying that Russia was not considering rescheduling maintenance works at refineries because of the embargo and that the price of Russian gas supplies to Belarus in 2023 would remain at the same level set in 2022.
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