Adjusted EBITDA was $185 million compared to $213 million reported for the same period in 2012 and the decline was attributed to the implementation of an Enterprise Resource Planning (ERP) system which resulted in lost shipments, reduced productivity and stabilisation costs. It negatively impacted the third quarter of fiscal 2013 by approximately $39 million. Novelis also experienced unfavorable pricing dynamics in several regions, higher metal input costs in North America, and incremental project start-up costs associated with its global expansions.
Novelis president and chief executive officer Phil Martens said that Q3 was challenging as the company experienced more production disruptions than anticipated, which were related to its ERP implementation in North America. "These implementation issues are largely behind us and production has returned to near normal levels," Martens said.
He added that a heavy investment period for Novelis was necessary to maintain and grow its leadership position and enable the company to capitalise on the significant growth it forecasts in key end-markets.
"While we were disappointed with our results in the third quarter, we are pleased with the strong execution of our strategy. In fact, Brazil is a good example of this, with record shipments and the successful commissioning of our rolling expansion in the region," he said.
Shipments of rolled products totaled 647kt for the period, compared with shipments of 648kt for the same period last year.
Net sales for the third quarter were $2.3 billion, a 6% decrease compared with $2.5 billion for the same period a year ago – which included sales from the company's three foil plants in Europe that were divested. In addition, sales were impacted by lower conversion premiums as well as lower average aluminum prices compared with last year.
Novelis reported liquidity of $775 million. Free cash flow was a negative $309 million, primarily due to capital expenditures of $193 million, a $107 million bond interest payment and negative changes in working capital.
Novelis continues to make progress on its strategy. In October 2012, it began the commissioning process at its 265kt fully-integrated recycling plant in Korea, Asia's largest beverage can recycling centre. In November, it broke ground on a 120kt automotive heat treatment line, the first of its kind in China, and the world's largest 400kt aluminum recycling and casting centre in Germany.
In December last year, Novelis began the commissioning process at its Pinda mill in Brazil, which will add an incremental 220kt of capacity, once fully operational, over the next two to three years, bringing total rolling capacity in South America to approximately 600kt.
Novelis announced the closure of a pot line at its Ouro Preto smelter in Brazil as it is no longer competitive to operate, the company claims.
The company sees solid demand across its regions and key end-market segments and expects operating performance to improve. It forecasts that Q4 2013 EBITDA will be above fourth quarter of fiscal 2012.