Novelis Reports Second Quarter of Fiscal 2020 Results

ATLANTA, Nov. 6, 2019 /PRNewswire/ --

Second Quarter Fiscal Year 2020 Highlights

• Net income attributable to common shareholder of $123 million, up 6% YoY; excluding special items, net income of $160 million, up 31% YoY
• Adjusted EBITDA of $374 million, up 5% YoY
• Net sales of $2.9 billion, down 9% YoY
• Shipments of 835 kilotonnes, up 3% YoY
• Improved net leverage ratio to 2.4x

Novelis Inc., the world leader in aluminum rolling and recycling, today reported net income attributable to its common shareholder of $123 million for the second quarter of fiscal year 2020, compared to $116 million in the prior year period. Excluding tax-effected special items, such as $32 million for restructuring actions in the current period, the company reported net income of $160 million in the second quarter of fiscal 2020, compared to $122 million in the prior year period. This 31 percent increase is primarily due to higher Adjusted EBITDA and a lower effective tax rate.

Adjusted EBITDA increased five percent over the prior year period to $374 million in the second quarter of fiscal 2020, primarily driven by higher shipments as well as favorable price and product mix, partially offset by less favorable recycling benefits due to lower aluminum prices. Adjusted EBITDA per ton reached $448 in the quarter, as compared to $440 in the prior year period.

Net sales decreased nine percent from the prior year period to $2.9 billion for the second quarter of fiscal 2020, driven by lower average LME aluminum prices and local market premiums, partially offset by higher total shipments. Strong overall operational performance and solid demand for lightweight, sustainable aluminum products led to a three percent increase in flat rolled product shipments to 835 kilotonnes.

"Our outstanding operational performance resulted in record second quarter shipments and strong financials, while we continue to make excellent progress on our strategic growth initiatives," said Steve Fisher, President and CEO, Novelis Inc. "Our customers continue to enhance their sustainability initiatives through more sustainable packaging, automotive closed-loop recycling systems, and adopting more recycled content into their products. I believe we are making the right investments, such as the recent announcement to increase recycling capacity at our Greensboro, Georgia facility, to support our customers and deliver on our purpose of shaping a sustainable world together."

The company reported $112 million of free cash flow for the second quarter of fiscal 2020. On a year-to-date basis, fiscal 2020 free cash flow of $18 million includes a significant increase in capital expenditures year-over-year to $300 million mainly to support strategic investments in incremental rolling, recycling and automotive finishing capacity. Free cash flow before capital expenditures improved 46 percent over the prior year to $318 million, driven primarily by higher Adjusted EBITDA and a lower use of working capital year-to-date. Each of the three previously announced significant capacity expansion projects underway in the U.S., China and Brazil continue to progress on time and on budget.

"Strong financial performance allowed us to further improve our net leverage ratio during the quarter, despite a significant increase in strategic capital investments to meet growing demand for sustainable aluminum solutions," said Devinder Ahuja, Senior Vice President and Chief Financial Officer, Novelis Inc.

As of September 30, 2019, the company reported a strong total liquidity position of $1.8 billion, and reduced its net leverage ratio to 2.4x as compared to 2.8x in the prior year period.

Aleris Acquisition
On July 26, 2018, Novelis announced it signed a definitive agreement to acquire Aleris Corporation. Having received conditional approval in the European Union, as well as a clear path forward for approval in the U.S., Novelis continues to work closely with the Chinese State Administration for Market Regulation to receive its approval. The company expects to close the transaction by January 21, 2020, the outside date under the merger agreement.

Second Quarter of Fiscal Year 2020 Earnings Conference Call
Novelis will discuss its second quarter of fiscal year 2020 results via a live webcast and conference call for investors at 7:30 a.m. ET on Wednesday, November 6, 2019. To view slides and listen only, visit the web at https://cc.callinfo.com/r/z3xmd1ss8840&eom.  To join by telephone, dial toll-free in North America at 877 256 3669, India toll-free at 1800 266 0834 or the international toll line at +1 415 226 5361. Presentation materials and access information may also be found at novelis.com/investors.

About Novelis
Novelis Inc. is driven by its purpose to shape a sustainable world together.  As a global leader in innovative products and services and the world's largest recycler of aluminum, we partner with customers in the automotive, beverage can and specialties industries to deliver solutions that maximize the benefits of lightweight aluminum throughout North America, Europe, Asia and South America. The company is headquartered in Atlanta, Georgia, operates 23 facilities in nine countries, has approximately 11,000 employees and recorded $12.3 billion in revenue for its 2019 fiscal year. Novelis is a subsidiary of Hindalco Industries Limited, an industry leader in aluminum and copper, and the metals flagship company of the Aditya Birla Group, a multinational conglomerate based in Mumbai, India. For more information, visit novelis.com.

Non-GAAP Financial Measures
This news release and the presentation slides for the earnings call contain non-GAAP financial measures as defined by SEC rules. We believe these measures are helpful to investors in measuring our financial performance and liquidity and comparing our performance to our peers. However, our non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures used by other companies. These non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP financial measures. To the extent we discuss any non-GAAP financial measures on the earnings call, a reconciliation of each measure to the most directly comparable GAAP measure will be available in the presentation slides filed as Exhibit 99.2 to our Current Report on Form 8-K furnished to the SEC concurrently with the issuance of this press release. In addition, the Form 8-K includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.

Attached to this news release are tables showing the Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows, Reconciliation to Adjusted EBITDA, Free Cash Flow, Liquidity, Net Income excluding Special Items, and Segment Information.

Forward-Looking Statements
Statements made in this news release which describe Novelis' intentions, expectations, beliefs or predictions may be forward-looking statements within the meaning of securities laws. Forward-looking statements include statements preceded by, followed by, or including the words "believes," "expects," "anticipates," "plans," "estimates," "projects," "forecasts," or similar expressions. Examples of forward looking statements in this news release are statements about our expectation that demand for aluminum will continue to grow and support our investments in capacity expansion. Novelis cautions that, by their nature, forward-looking statements involve risk and uncertainty and Novelis' actual results could differ materially from those expressed or implied in such statements. We do not intend, and we disclaim any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise. Factors that could cause actual results or outcomes to differ from the results expressed or implied by forward-looking statements include, among other things: changes in the prices and availability of aluminum (or premiums associated with such prices) or other materials and raw materials we use; the capacity and effectiveness of our hedging activities; relationships with, and financial and operating conditions of, our customers, suppliers and other stakeholders; fluctuations in the supply of, and prices for, energy in the areas in which we maintain production facilities; our ability to access financing including in connection with potential acquisitions and investments; risks relating to, and our ability to consummate, pending and future acquisitions, investments or divestitures, including the proposed acquisition of Aleris Corporation; changes in the relative values of various currencies and the effectiveness of our currency hedging activities; factors affecting our operations, such as litigation, environmental remediation and clean-up costs, breakdown of equipment and other events; economic, regulatory and political factors within the countries in which we operate or sell our products, including changes in duties or tariffs; competition from other aluminum rolled products producers as well as from substitute materials such as steel, glass, plastic and composite materials; changes in general economic conditions including deterioration in the global economy; changes in government regulations, particularly those affecting taxes, derivative instruments, environmental, health or safety compliance; changes in interest rates that have the effect of increasing the amounts we pay under our credit facilities and other financing agreements; and our ability to generate cash. The above list of factors is not exhaustive. Other important risk factors are included under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

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SOURCE Novelis Inc.