Novelis Reports Third Quarter Fiscal 2022 Results

ATLANTA, Feb. 7, 2022 /PRNewswire/ -- 

Q3 Fiscal Year 2022 Highlights

  • Net income from continuing operations of $259 million, up 33% YoY; net income from continuing operations excluding special items was $241 million, up 15% YoY
  • Shipments of 930 kilotonnes, flat YoY
  • Adjusted EBITDA of $506 million, up 1% YoY; Adjusted EBITDA per ton shipped reached $544, up 1% YoY
  • Net leverage ratio improved one full turn to 2.3x, compared to 3.3x as of December 31, 2020
  • Announced several strategic investments to expand production and recycling capacity and capabilities

Novelis Inc., the world leader in aluminum rolling and recycling, today reported net income attributable to its common shareholder of $262 million in the third quarter of fiscal year 2022, compared to $176 million in the prior year period. Net income from continuing operations increased to $259 million compared to $195 million in the prior year period. Excluding special items in both years, third quarter fiscal year 2022 net income from continuing operations increased 15% to $241 million, driven mainly by lower interest expense and unrealized derivative gains in the current year.

Net sales increased 33% to $4.3 billion for the third quarter of fiscal year 2022, compared to $3.2 billion in the prior year period, primarily driven by higher average aluminum prices. Total flat rolled product shipments were 930 kilotonnes in the third quarter of fiscal year 2022, in line with the prior year period shipments of 933 kilotonnes. Shipment growth was constrained by the continued semiconductor chip shortage impacting the automotive industry.

Adjusted EBITDA increased 1% to $506 million in the third quarter of fiscal year 2022, compared to $501 million in the prior year period, which included a $25 million customer contractual obligation benefit. The underlying increase in Adjusted EBITDA is primarily due to favorable product pricing and mix, as well as favorable metal benefits, which mitigated inflationary cost pressures and supply chain disruption-related costs. Adjusted EBITDA per ton shipped increased to $544 in the third quarter of fiscal year 2022, compared to $537 in the prior year period.

"Our strong third quarter results reflect our team's ability to deftly navigate headwinds mainly arising from global supply chain disruptions," said Steve Fisher, President and Chief Executive Officer, Novelis Inc. "We will continue to manage through these challenges, while keeping our eyes on our strategic growth path and meeting growing demand for high-recycled-content, sustainable aluminum products."

Since October 2021, Novelis has announced several capital expansion projects aimed at increasing capacity and capabilities and achieving its sustainability goal to become net carbon-neutral by 2050. In January 2022, Novelis announced plans to build a $365 million, highly advanced recycling center for the U.S. automotive market. With an annual casting capacity of 240 kilotonnes of sheet ingot, Novelis expects the facility will enable it to grow closed-loop recycling programs with more automotive customers in North America and reduce the company's carbon emissions by more than one million tons each year. Novelis earlier announced strategic growth capital projects totaling approximately $500 million, including a $375 million investment to expand its rolling and recycling capabilities in Zhenjiang, China, and a $130 million investment at its Oswego, New York, plant to increase hot mill capacity and enhance automotive sheet finishing capabilities. Novelis expects these projects to commence this calendar year and begin commissioning in 2024.

Fiscal year-to-date adjusted free cash flow from continuing operations was $217 million compared to the prior year period of $331 million. Significantly higher working capital requirements, due mainly to rising aluminum prices in fiscal 2022, were partially offset by higher Adjusted EBITDA and favorable metal price lag. The company's net leverage ratio (net debt / TTM Adjusted EBITDA) improved to 2.3x at the end of the third quarter of fiscal year 2022, compared to 3.3x at the end of the third quarter of fiscal 2021.

"Novelis has generated more than $1 billion in trailing-twelve-month adjusted free cash flow before capital investments, despite the significant impact from higher aluminum prices this year," said Devinder Ahuja, Executive Vice President and Chief Financial Officer, Novelis Inc. "Continued strong cash generation, coupled with our disciplined capital allocation strategy, enables us to continue to strategically invest in sustainably growing the business while remaining  within our targeted net leverage range."

The company ended the third quarter with strong total liquidity of $2.3 billion as of December 31, 2021.

Third Quarter Fiscal Year 2022 Earnings Conference Call

Novelis will discuss its third quarter fiscal year 2022 results via a live webcast and conference call for investors at 7:00 a.m. EST on Monday, February 7, 2022. To view slides and listen only, visit https://cc.callinfo.com/r/1vqlmcjl2noh8&eom. To join by telephone, dial toll-free in North America at 800-954-0591, India toll-free at 18002662122 or the international toll line at +1-303-223-0117. Presentation materials and access information can also be found at novelis.com/investors.

About Novelis

Novelis Inc. is driven by its purpose of shaping a sustainable world together. We are a global leader in the production of innovative aluminum products and solutions and the world's largest recycler of aluminum. Our ambition is to be the leading provider of low-carbon, sustainable aluminum solutions and to achieve a fully circular economy by partnering with our suppliers, as well as our customers in the aerospace, automotive, beverage can and specialties industries throughout North America, Europe, Asia and South America. Novelis had net sales of $12.3 billion in fiscal year 2021. 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. 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, which can be found at novelis.com/investors. 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 of Adjusted EBITDA, Adjusted Free Cash Flow, Total Liquidity, Net Debt, Income from continuing operations 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 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 ability to reach our long-term carbon neutrality goals and expand our business through investment in growth capital projects. 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 arising out of our acquisition of Aleris Corporation, including uncertainties inherent in the acquisition method of accounting; disruption to our global aluminum production and supply chain as a result of COVID-19; changes in the relative values of various currencies and the effectiveness of our currency hedging activities; factors affecting our operations, such as litigation, including pending and future litigation settlements, environmental remediation and clean-up costs, breakdown of equipment and other events; ability to manage existing facilities and workforce to operate the business; 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; the risks of pandemics or other public health emergencies, including the continued spread and impact of, and the governmental and third party response to, the ongoing COVID-19 outbreak; changes in government regulations, particularly those affecting taxes, tax policies and effective tax rates, 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, 2021.

Novelis Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)



Three Months Ended

December 31,


Nine Months Ended

December 31,

(in millions)

2021


2020


2021


2020

Net sales

$     4,326


$     3,241


$   12,300


$     8,645

Cost of goods sold (exclusive of depreciation and amortization)

3,613


2,578


10,150


7,063

Selling, general and administrative expenses

156


149


457


400

Depreciation and amortization

137


137


405


396

Interest expense and amortization of debt issuance costs

54


66


173


206

Research and development expenses

23


20


68


57

Loss on extinguishment of debt, net

1



63


Restructuring and impairment expenses, net

3


20


1


28

Equity in net (income) loss of non-consolidated affiliates

(7)


3


(8)


1

Business acquisition and other related costs




11

Other (income) expenses, net

(2)


(7)


(86)


86


$     3,978


$     2,966


$   11,223


$     8,248

Income from continuing operations before income tax provision

348


275


1,077


397

Income tax provision

89


80


276


119

Net income from continuing operations

$       259


$       195


$       801


$       278

Income (loss) from discontinued operations, net of tax

3


(18)


(62)


(47)

Loss on sale of discontinued operations, net of tax




(170)

Net income (loss) from discontinued operations

$           3


$        (18)


$        (62)


$      (217)

Net income

$       262


$       177


$       739


$         61

Net income attributable to noncontrolling interest


1



1

Net income attributable to our common shareholder

$       262


$       176


$       739


$         60

 

Novelis Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


(in millions, except number of shares)

December 31,
2021


March 31,
2021

ASSETS




Current assets:




Cash and cash equivalents

$               808


$               998

Accounts receivable, net




— third parties (net of allowance for uncollectible accounts of $6 and $5 as of December 31,
2021 and March 31, 2021, respectively)

2,247


1,687

— related parties

260


166

Inventories

2,912


1,928

Prepaid expenses and other current assets

155


198

Fair value of derivative instruments

217


137

Assets held for sale

5


5

Current assets of discontinued operations

6


15

Total current assets

$            6,610


$            5,134

Property, plant and equipment, net

4,614


4,687

Goodwill

1,082


1,083

Intangible assets, net

637


696

Investment in and advances to non–consolidated affiliates

840


838

Deferred income tax assets

125


130

Other long–term assets




— third parties

280


316

— related parties

1


1

Total assets

$         14,189


$         12,885

LIABILITIES AND SHAREHOLDER'S EQUITY




Current liabilities:




Current portion of long–term debt

$               340


$                 71

Short–term borrowings

373


236

Accounts payable




— third parties

3,147


2,498

— related parties

356


230

Fair value of derivative instruments

407


280

Accrued expenses and other current liabilities

727


670

Current liabilities of discontinued operations

21


16

Total current liabilities

$            5,371


$            4,001

Long–term debt, net of current portion

4,984


5,653

Deferred income tax liabilities

223


162

Accrued postretirement benefits

841


878

Other long–term liabilities

294


305

Total liabilities

$         11,713


$         10,999

Commitments and contingencies




Shareholder's equity




Common stock, no par value; unlimited number of shares authorized; 1,000 shares issued and
outstanding as of December 31, 2021 and March 31, 2021


Additional paid–in capital

1,304


1,404

Retained earnings

1,603


864

Accumulated other comprehensive loss

(416)


(366)

Total equity of our common shareholder

$            2,491


$            1,902

Noncontrolling interest

(15)


(16)

Total equity

$            2,476


$            1,886

Total liabilities and equity

$         14,189


$         12,885

 

Novelis Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)



Nine Months Ended

December 31,

(in millions)

2021


2020

OPERATING ACTIVITIES




Net income

$               739


$                 61

Net income (loss) from discontinued operations

(62)


(217)

Net income from continuing operations

$               801


$               278

Adjustments to determine net cash provided by operating activities:




Depreciation and amortization

405


396

Loss (gain) on unrealized derivatives and other realized derivatives in investing activities, net

17


(8)

Gain on sale of business

(15)


Loss on sale of assets

5


Loss on extinguishment of debt, net

63


Deferred income taxes, net

75


1

Equity in net (income) loss of non-consolidated affiliates

(8)


1

Gain on foreign exchange remeasurement of debt

(6)


(2)

Amortization of debt issuance costs and carrying value adjustments

14


21

Other, net

6


Changes in assets and liabilities including assets and liabilities held for sale (net of effects from divestitures):




Accounts receivable

(702)


(174)

Inventories

(1,036)


83

Accounts payable

843


154

Other assets

24


68

Other liabilities

17


(170)

Net cash provided by operating activities - continuing operations

503


648

Net cash provided by (used in) operating activities - discontinued operations

12


(78)

Net cash provided by operating activities

$               515


$               570

INVESTING ACTIVITIES




Capital expenditures

$             (287)


$             (333)

Acquisition of business, net of cash acquired


(2,614)

Proceeds from sales of assets, third party, net of transaction fees and hedging


4

Proceeds from the sale of a business

9


Proceeds from investment in and advances to non-consolidated affiliates, net

1


10

Outflows from the settlement of derivative instruments, net

(11)


(3)

Other

11


9

Net cash used in investing activities - continuing operations

(277)


(2,927)

Net cash provided by investing activities - discontinued operations


357

Net cash used in investing activities

$             (277)


$          (2,570)

FINANCING ACTIVITIES




Proceeds from issuance of long-term and short-term borrowings

$           1,670


$           1,972

Principal payments of long-term and short-term borrowings

(2,034)


(589)

Revolving credit facilities and other, net

39


(609)

Debt issuance costs

(25)


(25)

Contingent consideration paid in acquisition of business


(9)

Return of capital to our common shareholder

(100)


Net cash (used in) provided by financing activities - continuing operations

(450)


740

Net cash used in financing activities - discontinued operations


(2)

Net cash (used in) provided by financing activities

$             (450)


$               738

Net decrease in cash, cash equivalents and restricted cash

(212)


(1,262)

Effect of exchange rate changes on cash

7


53

Cash, cash equivalents and restricted cash — beginning of period

1,027


2,402

Cash, cash equivalents and restricted cash — end of period

$               822


$           1,193





Cash and cash equivalents

$                 808


$           1,164

Restricted cash (Included in other long-term assets)

14


15

Restricted cash (Included in prepaid expenses and other current assets)


14

Cash, cash equivalents and restricted cash — end of period

$               822


$           1,193

 

Reconciliation of Adjusted EBITDA (unaudited) to Net income attributable to our common shareholder

The following table reconciles Adjusted EBITDA, a non-GAAP financial measure, to Net income attributable to our common shareholder.



Three Months Ended

December 31,


Nine Months Ended

December 31,

(in millions)

2021


2020


2021


2020

Net income attributable to our common shareholder

$       262


$       176


$       739


$         60

Net income attributable to noncontrolling interests


1



1

Income tax provision

89


80


276


119

Interest, net

52


63


167


199

Depreciation and amortization

137


137


405


396

EBITDA

$       540


$       457


$     1,587


$       775









Adjustment to reconcile proportional consolidation

$         17


$         13


$         46


$         42

Unrealized (gains) losses on change in fair value of derivative
instruments, net

(26)


(13)


(6)


14

Realized (gains) losses on derivative instruments not included in
segment income


(2)


(1)


2

Loss on extinguishment of debt, net

1



63


Restructuring and impairment expenses, net

3


20


1


28

Gain on sale of business

(15)



(15)


Loss on sale of fixed assets

3


2


5


Purchase price accounting adjustments




29

(Income) loss from discontinued operations, net of tax

(3)


18


62


47

Loss on sale of discontinued operations, net of tax




170

Metal price lag

(14)



(127)


32

Business acquisition and other related costs




11

Other, net


6


(1)


59

Adjusted EBITDA

$       506


$       501


$     1,614


$     1,209

 

Adjusted Free Cash Flow (unaudited)

The following table reconciles Adjusted free cash flow and Adjusted free cash flow from continuing operations, non-
GAAP financial measures, to Net cash provided by operating activities - continuing operations.



Nine Months Ended

December 31,

 (in millions)

2021


2020

Net cash provided by operating activities - continuing operations

$           503


$           648

Net cash used in investing activities - continuing operations

(277)


(2,927)

Plus: Cash used in the acquisition of business, net of cash and restricted cash acquired


2,614

Less: Proceeds from sales of assets and business, net of transaction fees, cash income
taxes and hedging

(9)


(4)

Adjusted free cash flow from continuing operations

217


331

Net cash provided by (used in) operating activities - discontinued operations

12


(78)

Net cash provided by investing activities - discontinued operations


357

Less: Proceeds from sales of assets and business, net of transaction fees, cash income
taxes and hedging - discontinued operations


(403)

Adjusted free cash flow

$           229


$           207

 

Cash and Cash Equivalents and Total Liquidity (unaudited)

The following table reconciles Total liquidity to the ending balances of cash and cash equivalents.


(in millions)

December 31,
2021


March 31,
2021

Cash and cash equivalents

$           808


$           998

Availability under committed credit facilities

1,514


1,223

Total liquidity

$        2,322


$        2,221

 

Net debt (unaudited)

The following table reconciles Long-term debt, net of current portion to Net debt.



December 31,


2021


2020

Long–term debt, net of current portion

$        4,984


$        6,295

Current portion of long–term debt

340


59

Short–term borrowings

373


151

Cash and cash equivalents

(808)


(1,164)

Net debt

$        4,889


$        5,341

 

Reconciliation of Net income from continuing operations, excluding special items (unaudited) to Net income from continuing operations

The following table presents Net income from continuing operations excluding special items. We adjust for items which may recur in varying magnitude which affect the comparability of the operational results of our underlying business.



Three Months Ended

December 31,


Nine Months Ended

December 31,

(in millions)

2021


2020


2021


2020

Net income from continuing operations

$       259


$       195


$       801


$       278

Special Items:








Business acquisition and other related costs




11

Gain on sale of a business

(15)



(15)


Loss on extinguishment of debt, net

1



63


Metal price lag

(14)



(127)


32

Restructuring and impairment expenses, net

3


20


1


28

Charitable donation




50

Purchase price accounting adjustment




29

Tax effect on special items

7


(6)


22


(39)

Net income from continuing operations, excluding special items

$       241


$       209


$       745


$       389

 

Segment Information (unaudited)

The following tables present selected segment financial information (in millions, except shipments which are in kilotonnes).


Selected Operating Results

Three Months Ended December 31, 2021


North
America


Europe


Asia


South
America


Eliminations
and Other


Total

Adjusted EBITDA


$         181


$           71


$           76


$         178


$           —


$         506














Shipments (in kt)













Rolled products - third party


358


248


167


157



930

Rolled products - intersegment



6


4



(10)


Total rolled products


358


254


171


157


(10)


930

Selected Operating Results

Three Months Ended December 31, 2020


North
America


Europe


Asia


South
America


Eliminations
and Other


Total

Adjusted EBITDA


$         206


$           98


$           78


$         129


$          (10)


$         501














Shipments (in kt)













Rolled products - third party


347


245


183


158



933

Rolled products - intersegment



8


1



(9)


Total rolled products


347


253


184


158


(9)


933














Selected Operating Results

Nine Months Ended December 31, 2021


North
America


Europe


Asia


South
America


Eliminations
and Other


Total

Adjusted EBITDA


$         580


$         251


$         256


$         525


$             2


$      1,614














Shipments (in kt)













Rolled products - third party


1,091


767


553


460



2,871

Rolled products - intersegment



26


7


1


(34)


Total rolled products


1,091


793


560


461


(34)


2,871














Selected Operating Results

Nine Months Ended December 31, 2020


North
America


Europe


Asia


South
America


Eliminations
and Other


Total

Adjusted EBITDA


$         489


$         181


$         227


$         317


$           (5)


$      1,209














Shipments (in kt)













Rolled products - third party


986


685


541


418



2,630

Rolled products - intersegment



20


5


1


(26)


Total rolled products


986


705


546


419


(26)


2,630

 

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SOURCE Novelis Inc.