Slower demand for aluminium products hits Novelis FY12 earnings

Slower demand for aluminium products and lower average aluminium prices were chiefly responsible for fourth quarter loss reported by Novelis, Hindalco’s US based subsidiary.

With LME ( London Metal Exchange) aluminium prices not expected to rise above about $2,638 on average through 2012 and global demand expected to grow at around 6%, the next few quarters will continue to be challenging for Novelis, which contributes three fifths to Hindalco’s consolidated revenue.

On account of a 9% drop in shipments and lower aluminium prices, net sales at Novelis declined 12% to $2.6 billion. The company reported a loss of $107 million compared with a $50 million profit during the same quarter last year.

For the year, the company reported a five percent increase in net sales to $11.1 billion, compared to the $10.6 billion reported in the same period a year ago, mainly the result of favorable conversion premiums across all regions. This was despite a 4% decline in shipments.

Shipments of aluminum rolled products totaled 2,838 kilotonnes for fiscal 2012 compared to shipments of 2,969 kilotonnes for fiscal 2011. The decrease in shipments was primarily a result of customer destocking due to economic uncertainty and continued weakness in the company’s electronics business.

Profit for the year declined 46% to $63 million compared with $116 million last fiscal.