Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

With higher North American aluminium distribution and improved conditions in the housing industry, Aleris expects production volumes to rise this year over last. 


The company is also projecting increased productivity and improved operating efficiency through all segments this year, it said in its Q4 2019 earnings report.


However, Aleris said rising common alloy imports and declining aerospace business, especially because of suspended Boeing 737 Max production, could negatively affect its earnings in 2020. Soft demands from Europe and right-sizing inventories in North America could also cut global automotive volumes this year.


Segment income and EBITDA ae expected to be lower in 2020 than in 2019. Annual capital expenditure is projected to be between $140-150mn in 2020, and the company expects to generate positive cash flow once its Lewisport facility stabilizes following completion of the North America ABS project. 


In Q1 2020, segment income and adjusted EBITDA are projected to fall below Q1 2019. Aerospace product sales are expected to decline this quarter compared to Q1 2019, while automotive product ouput volumes in North America are also expected to decline because of a labor disruption in its supply chain last year.


Aleris is also monitoring COVID-19 and taking appropriate measures to protect its employees. At this stage, however, the company is finding it difficult to assess COVID-19’s impact on its 2020 outlook.


Sales in 2019 were down by 2pc to 858,000mt from 873,000mt in 2018. In the fourth quarter of 2019, sales dropped by 2pc to 187,000mt from 203,000mt in Q4 2018.


Total revenue in 2019 decreased by 3pc to $3.37bn from $3.44bn in 2018, mainly due to lower volumes and aluminum prices decreasing from 2018. Q4 2019 revenue also declined significantly by 10pc to $725mn from 802mn in Q4 2018. 


Aleris had a net loss in 2019 of $12mn, down by 87pc from $92mn in 2018. However, its net loss in Q4 2019 was higher at $28mn, up by 18pc from that $23mn in Q4 2018. 


In 2019, its adjusted EBITDA was $388mn, rising by almost 30pc from $276mn in 2018. The increase was attributed to a mix of improved products sold, better rolling margins, and better metal environment in North America. The adjusted EBITDA in Q4 2019 was also up by 25pc to $80mn from $61mn in Q4 2018.


The adjust EBITDA in Q4 2019 in North America increased to $52mn from $32mn in Q4 2018. This was led by improved availability of scrap, favorable metal spreads, and better rolling margins. In Europe, the adjusted EBITDA was down to $22mn in Q4 2019 from $31mn in Q4 2018. However, the adjusted EBITDA in Asia Pacific rose to $14mn in Q4 2019 from $7mn in Q4 2018. 

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