Atlanta-based aluminum giant Novelis Inc. reported a banner year as higher prices helped the company’s balance sheet as it continued moving up the value chain.
The Indian-owned company’s sales were up 20 percent to $11.5 billion and profits attributable to shareholders jumped by 80 percent to $635 million, the company announced in its annual earnings report May 8.
While there was an uptick in the proportion of sales coming from higher-value sectors — like aluminum sheet for cars, rather than say, rolled aluminum for beverage cans — a big part of the growth story is the price of aluminum itself.
The London Metals Exchange showed a spike in April after the U.S. targeted sanctions at Russian companies including its top aluminum producer, Rusal. Prices had already been climbing after China closed a few polluting plants last year. As of May 8, the cost for a ton aluminum had settled at $2,315, up 21 percent from a year earlier.
Novelis’ earnings report didn’t mention President Donald Trump’s decision in March to slap 10 percent tariffs on imported aluminum on national security grounds, but fourth-quarter results (sales up 17 percent to $3.1 billion) could also reflect a rush to purchase supplies before the tariff question is settled.
Novelis has urged the U.S. to reconsider the tax in light of the heavy interdependence between the U.S. and Canadian aluminum sectors. Canada, Mexico and the European Union were given another 30-day exemption from tariffs on May 1 while the U.S. aims to hammer out a deal with all sides.
So far, no country has received a permanent exemption from the aluminum tariffs. In a March interview with the Financial Times, Novelis CEO Steve Fisher said the result of tariffs would simply be higher prices passed on to consumers. Novelis told Global Atlanta that the tariffs don’t fix the “core problem” of Chinese overcapacity in the sector.
Novelis, which operates on four continents, also made some big moves throughout its global operation in the fiscal year ended March 31.
It sold a 50 percent stake in its Ulsan, South Korea, plant to Japan’s Kobe Steel, creating a new joint venture. Novelis also purchased some factories in Switzerland it had been leasing and continued collaborations with the London Electric Vehicle Co., which makes battery-powered black cabs for use in the British capital.
Novelis also made modest strides in its ongoing shift toward higher-value automotive products. The proportion of overall sales coming from the automotive sheet business grew from 18 to 20 percent during the year. The growth was driven partly by the expansion of a finishing plant in Guthrie, Ky., and new deals to supply key components to the Jeep Wrangler and other models made by Land Rover, Jaguar, Ford and Lincoln. Auto makers are turning to aluminum, a lighter metal than steel, to improve fuel efficiency and reduce environmental impacts.
Novelis upped its overall use of recycled content from 55 percent to 57 percent for the year.
An earnings call will be held May 8. View the full release here.