Novelis cuts 2012 forecast; quarterly loss narrows

Aluminum products producer Novelis cut its fiscal-year earnings estimate for the second time, citing lower shipments because of soft demand in Europe and weakness in its electronics business in Asia.

But the U.S. unit of top Indian aluminum producer HindalCo Industries Ltd said it was seeing signs of improvement despite posting a quarterly loss and that it was optimistic over the longer-term prospects for the flat-rolled aluminum products market.

"We are seeing a recovery, particularly in our European segment which was the most negatively impacted in the third quarter," Chief Executive Officer Phil Martens said in a statement on Wednesday.

However, the company said it was lowering its forecast for fiscal-year 2012 earnings before interest, taxes, depreciation and amortization because of market pressures that caused customers in several regions to shy away from replacing inventories during its third quarter, which ended on December 31.

It now expects adjusted EBITDA of $1.05 billion to $1.08 billion for fiscal 2012 -- down from its previous target of $1.10 billion to $1.15 billion. It had reduced that forecast from a range of $1.15 billion to $1.20 billion last November.

For the third quarter, EBITDA was $213 million, down $25 million from a year earlier, Novelis said.

The net loss narrowed to $12 million from $46 million, while sales dipped 4 percent to $2.5 billion as a result of lower shipments and lower average aluminum prices.

Shipments of aluminum-rolled products fell 9 percent to 648,000 tonnes due to soft demand in Europe because of economic uncertainty and continued weakness in the company's electronics business in Asia.

"Our results this quarter were impacted by softer demand in Europe and Asia, reducing our ability to absorb fixed costs, and higher net interest expense as a result of our debt refinancing last year," said Chief Financial Officer Steve Fisher.

Still, Martens said the company remained optimistic in the long term, projecting 34 percent growth for the aluminum flat rolled products market over the next five years.

He said Novelis was committed to global expansion of its rolling and recycling operations. It completed the acquisition of the minority stake in its Korean operations in December, bringing its total ownership to more than 99 percent.

Last November, Novelis announced a deal with Taihan Electric Wire Co to purchase 31.2 percent of the outstanding shares in the Korean subsidiary for $350 million.

(Reporting by Swetha Gopinath in Bangalore and Steve James in New York; Editing by Lisa Von Ahn)