ENP Newswire -
Release date- 06082014 -
Second Quarter Summary
Adjusted EBITDA of
Sequential Adjusted EBITDA improvement but disappointing year-over-year performance
Significantly higher automotive volumes
Global aerospace volumes and price negatively impacted by customer destocking
Operational issues limited shipments and increased costs in rolled products
North American rolled products margins down due to product mix and competitive imports
Nichols acquisition integration efforts progressing; raising synergy capture target
Improvement in Specification Alloy metal spreads and overall Recycling business profitability
Third Quarter Outlook
Sequential and year-over-year performance improvement expected
Automotive light weighting impact on aluminum demand expected to significantly exceed prior year
Aerospace volumes and price will continue to be negatively impacted by customer destocking
Building and construction and distribution volumes expected to exceed prior year
Improved Specification Alloy metal spreads and mill grade scrap spreads
Nichols synergies expected to exceed original target
'Stronger overall volumes are confirming our expectation that demand would strengthen in 2014, particularly in our automotive business, which has grown significantly. We are extremely pleased with the positive momentum in our Recycling & Specification Alloys businesses. However, we are disappointed that operational issues and compressed margins in rolled products have prevented us from fully capitalizing on the improved demand and we are taking steps to address these issues,'
'We expect to see improved performance in the second half of the year, as global automotive demand continues to grow and our Rolled Products business in
Second Quarter 2014 Results
Adjusted EBITDA totaled
a weaker mix of rolled products sales more than offset the impact of higher overall volume and reduced Adjusted EBITDA by approximately
pricing pressures due to competitive imports and overcapacity in plate production reduced rolling margins and decreased Adjusted EBITDA by approximately
improved metal spreads in specification alloys were partly offset by tighter spreads in
higher costs due to inflation and operational issues, partially offset by productivity related savings, decreased Adjusted EBITDA by approximately
Net loss attributable to
Partially offsetting these unfavorable items were:
In the second quarter of 2014, cash flows used by operating activities totaled
RPNA's segment income decreased to
a weaker mix of products sold into the distribution and building and construction industries, partially resulting from operational issues, more than offset a 32 percent overall volume increase mainly due to the Nichols acquisition. The combination of volume and mix reduced segment Adjusted EBITDA by
pricing pressures caused by the high Midwest Premium and competitive imports reduced rolling margins, which resulted in a
higher costs associated with inflation in energy and employee costs were partially offset by productivity related savings.
The decrease in segment income was driven by the factors that impacted segment Adjusted EBITDA, as well as the impact of recording the acquired inventory of Nichols at fair value, which increased cost of sales by
Rolled Products Europe ('RPEU')
RPEU's segment income was
an overall volume decline of 4 percent and a weaker mix decreased segment Adjusted EBITDA by
pricing pressures resulting from overcapacity lowered rolling margins and decreased segment Adjusted EBITDA by
higher costs associated with the operational issues and inflation in cash conversion costs, partially offset by productivity related savings, decreased Adjusted EBITDA by approximately
The decrease in segment income was driven by the factors that drove the decrease in segment Adjusted EBITDA, partially offset by a
Rolled Products Asia Pacific ('RPAP')
RPAP continued to ramp-up production and shipped approximately 2,800 tons of plate, generating revenue of
Extrusions' segment income of
RSAA's segment income and segment Adjusted EBITDA increased to
continued improvement in metal spreads increased segment Adjusted EBITDA by
a better mix of buy and sell volume more than offset a 6 percent decrease in volume. The combination of volume and mix increased segment Adjusted EBITDA by
higher costs associated with inflation in employee and energy costs exceeded productivity gains and decreased segment Adjusted EBITDA by
Recycling and Specification Alloys Europe ('RSEU')
RSEU's segment income and segment Adjusted EBITDA increased to
continued improvement in metal spreads increased segment Adjusted EBITDA by
a 5 percent increase in volume increased segment Adjusted EBITDA by
productivity-related savings more than offset inflation and increased segment Adjusted EBITDA by
Key financial highlights for the six months ended
Revenues of approximately
Adjusted EBITDA decreased to
Net loss attributable to
Cash used by operating activities totaled
Capital expenditures decreased to
We estimate third quarter 2014 segment income and Adjusted EBITDA will be sequentially higher than the second quarter of 2014 and higher than the third quarter of 2013. Factors influencing anticipated third quarter 2014 performance include:
improved building and construction and distribution volumes;
demand for auto body sheet is expected to continue to increase;
lower aerospace volumes and price pressures;
improved metal spreads in specification alloys;
improved mill grade scrap flow and spreads;
competitive imports negatively impacting margins and
actively addressing rolled products' production issues.
Capital expenditures during the third quarter of 2014 are expected to be lower than the third quarter of 2013 and consistent with the first and second quarters of 2014 as our capital spending has returned to more normalized levels. We continue to estimate capital spending of
Certain statements in this press release are 'forward-looking statements' within the meaning of the federal securities laws. Statements under headings with 'Outlook' in the title and statements about our beliefs and expectations and statements containing the words 'may,' 'could,' 'would,' 'should,' 'will,' 'believe,' 'expect,' 'anticipate,' 'plan,' 'estimate,' 'target,' 'project,' 'look forward to,' 'intend' and similar expressions intended to connote future events and circumstances constitute forward-looking statements.
Forward-looking statements include statements about, among other things, future costs and prices of commodities, production volume, industry trends, demand for our products and services, anticipated cost savings, anticipated benefits from new products or facilities, and projected results of operations. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in or implied by any forward-looking statement.
Some of the important factors that could cause actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following: (1) our ability to successfully implement our business strategy; (2) the cyclical nature of the aluminum industry, material adverse changes in the aluminum industry or our end-use segments, such as global and regional supply and demand conditions for aluminum and aluminum products, and changes in our customers' industries; (3) our ability to fulfill our substantial capital investment requirements; (4) variability in general economic conditions on a global or regional basis; (5) our ability to retain the services of certain members of our management; (6) our ability to enter into effective metal, natural gas and other commodity derivatives or arrangements with customers to manage effectively our exposure to commodity price fluctuations and changes in the pricing of metals, especially
Investors, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether in response to new information, futures events or otherwise, except as otherwise required by law.
Non-GAAP Financial Measures
In addition to the results reported in accordance with GAAP, this press release includes information regarding certain non-GAAP financial measures. Management uses EBITDA, Adjusted EBITDA, segment Adjusted EBITDA, commercial margin and segment commercial margin as performance metrics and believes these measures provide additional information commonly used by the holders of the Senior Notes and parties to our ABL Facility with respect to the ongoing performance of our underlying business activities, as well as our ability to meet our future debt service, capital expenditures and working capital needs.
In addition, EBITDA with certain adjustments is a component of certain covenants under the indentures governing
Management also uses commercial margin, including segment commercial margin, as a performance metric and believes that it provides useful information regarding the performance of our segments because it measures the price at which we sell our aluminum products above the hedged cost of the metal and the effects of metal price lag, thereby reflecting the value-added components of our commercial activities independent of aluminum prices which we cannot control.
Our EBITDA calculations represent net income and loss attributable to
Segment Adjusted EBITDA represents Adjusted EBITDA on a per segment basis. EBITDA as defined in the indentures governing
Adjusted EBITDA as defined under the ABL Facility also limits the amount of adjustments for restructuring charges incurred after
EBITDA, Adjusted EBITDA, segment Adjusted EBITDA, commercial margin and segment commercial margin, as we use them, may not be comparable to similarly titled measures used by other companies. We calculate EBITDA, Adjusted EBITDA and segment Adjusted EBITDA by eliminating the impact of a number of items we do not consider indicative of our ongoing operating performance.
You are encouraged to evaluate each adjustment and the reasons we consider it appropriate for supplemental analysis. However, EBITDA, Adjusted EBITDA, segment Adjusted EBITDA, commercial margin and segment commercial margin are not financial measurements recognized under GAAP, and when analyzing our operating performance, investors should use EBITDA, Adjusted EBITDA, segment Adjusted EBITDA, commercial margin and segment commercial margin in addition to, and not as an alternative for, net income and loss attributable to
EBITDA, Adjusted EBITDA, segment Adjusted EBITDA, commercial margin and segment commercial margin have limitations as analytical tools, and they should not be considered in isolation, or as a substitute for, or superior to, our measures of financial performance prepared in accordance with GAAP.
Aleris is a privately held, global leader in aluminum rolled products and extrusions, aluminum recycling and specification alloy production. Headquartered in
The information disclosed in this press release is believed by Aleris to be accurate as of the date hereof. Aleris expressly disclaims any duty to update the information contained in this press release. Persons engaging in any transactions with Aleris or in Aleris's securities are cautioned that there may exist other material information regarding Aleris that is not publicly available.
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