Novelis Reports Third Quarter Fiscal 2021 Results

ATLANTA, Feb. 3, 2021 /PRNewswire/ --

Q3 Fiscal Year 2021 Highlights

• Net income from continuing operations of $195 million, up 82% YoY; excluding special items, net income of $209 million
• Shipments of 933 kilotonnes, up 17% YoY
• Adjusted EBITDA of $501 million, up 46% YoY
• Adjusted EBITDA per ton of $537, up 25% YoY
• Focus on deleveraging resulted in net leverage ratio improvement to 3.3x from 3.8x at acquisition close
• Integration work continues with $54 million run-rate acquisition cost synergies achieved through end of Q3

Novelis Inc., the world leader in aluminum rolling and recycling, today reported a net income attributable to its common shareholder of $176 million in the third quarter of fiscal year 2021, and net income from continuing operations of $195 million, up 64 percent and 82 percent, respectively, versus the prior year.  Excluding tax-effected special items in both years, third quarter fiscal 2021 net income was a record high $209 million, up 58 percent versus the prior year period, driven mainly by higher after-tax Adjusted EBITDA, partially offset by higher depreciation and amortization associated with the acquisition of Aleris.

Adjusted EBITDA increased 46 percent to $501 million in the third quarter of fiscal 2021 compared to $343 million in the prior year period. The increase in Adjusted EBITDA is due to organic growth, favorable metal benefits, and a net $50 million positive EBITDA contribution from the acquired Aleris business. The current quarter also includes a positive $25 million from a year-to-date customer contractual obligation. On a consolidated basis, Novelis achieved a record EBITDA per ton shipped of $537 in the third quarter, compared to $430 in the prior year.

Net sales increased 19 percent from the prior year period to $3.2 billion for the third quarter of fiscal 2021, primarily driven by a seventeen percent increase in total shipments and higher average aluminum prices. Total flat rolled product shipments increased to 933 kilotonnes, mainly reflecting the addition of the acquired Aleris business and strong demand across product end markets, particularly beverage can.

"Novelis achieved record financial performance in the third quarter based on continued demand for innovative, sustainable aluminum solutions and outstanding operational performance across our expanded business," said Steve Fisher, President and CEO, Novelis Inc. "We are also making excellent progress on our strategic growth initiatives to drive long term value, by investing in new capacity and technology, entering new partnerships to solidify aluminum as the material of choice for our customers, and bringing new alloys to market that will drive the industry forward."

Year-to-date fiscal 2021 free cash flow from continuing operations of $331 million compares to $61 million in the prior year period, driven primarily by higher Adjusted EBITDA, favorable working capital and lower capital expenditures. Capital expenditures of $333 million are down 23% versus the prior year as spending is prioritized to support maintenance activities and organic, strategic capacity projects underway. The greenfield Guthrie, Kentucky, automotive finishing plant in the U.S. shipped its first customer coils in December, while the new automotive finishing line in Changzhou, China, is expected to start commercial production in the fourth quarter this fiscal year. The recycling, casting and rolling expansion in Brazil remains on track to commission in the middle of fiscal year 2022.

Net leverage improved during the quarter to 3.3x, compared to 3.8x at the close of the Aleris acquisition in the first quarter fiscal 2021. This reduction is a factor of both stronger Adjusted EBITDA, as well as a $500 million reduction in the Company's short term bridge loan due 2022.

"We are delivering on our commitments to improve net leverage through debt reduction resulting from strong cash flow generation," said Devinder Ahuja, Senior Vice President and Chief Financial Officer, Novelis Inc. "With a favorable demand outlook, robust acquisition synergy savings, and prioritized capital spending, we now anticipate achieving our targeted net leverage level of below 3x earlier than the end of fiscal year 2022 as previously guided."

The company continues to maintain a very strong total liquidity position of $2.4 billion as of December 31, 2020.

COVID-19 Response
Novelis' primary focus remains the health and well-being of its employees. The company is closely monitoring the changing landscape with respect to the COVID-19 pandemic and taking actions to manage its business and support customers. Novelis has bolstered its Environmental Health and Safety protocols to align with guidance from global health authorities and government agencies across company operations to help ensure the safety of its employees, customers, suppliers, communities and other stakeholders. Customer demand has recovered to pre-COVID levels in most end markets, and Novelis will continue to work closely with customers to leverage its global manufacturing footprint and adjust production levels to meet their needs.

Update on Aleris Acquisition, Integration and Required Divestments
On April 14, 2020, Novelis closed its acquisition of Aleris Corporation and is integrating the two companies to drive a number of strategic benefits and allow for at least $180 million in potential annual synergies. The results from continuing operations reported today for the period ending December 31, 2020 reflect the acquired businesses. Results related to the Duffel and Lewisport plants are reflected as results from discontinued operations. The company filed a form 8-K/A with the Securities and Exchange Commission on June 30, 2020, providing historical and pro forma financial information related to the acquisition.

On November 30, 2020, Novelis completed the required divestment of the Lewisport automotive body sheet business to American Industrial Partners, a private equity firm. Upon closing, Novelis received $180 million in cash proceeds. The required divestment of the Duffel plant was previously completed in September, 2020. With divestments now complete, Novelis is focusing on the safe integration of the continuing operations to drive value creation. Novelis' acquisition of Aleris provides a strong pro-forma financial profile, many strategic benefits, namely securing an integrated manufacturing footprint in China, further portfolio diversification with the addition of aerospace and building and construction, well as new technology and operational capabilities.

Third Quarter of Fiscal Year 2021 Earnings Conference Call
Novelis will discuss its third quarter of fiscal year 2021 results via a live webcast and conference call for investors at 7:30 a.m. ET on Wednesday, February 3, 2021. To view slides and listen only, visit https://cc.callinfo.com/r/1rx5pyo03mq8y&eom. To join by telephone, dial toll-free in North America at 800-954-0592, India toll-free at 18002662120 or the international toll line at +1-303-223-0120. 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 aerospace, automotive, beverage can and specialties industries to deliver solutions that maximize the benefits of lightweight aluminum throughout North America, Europe, Asia and South America. 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 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 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 ability to reduce net leverage and total debt, expected results from our strategic growth initiatives, adjustments to production to meet customer needs, expected start dates of new facilities, and potential acquisition synergies from our acquisition of Aleris. 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 risks 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, 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, 2020.

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SOURCE Novelis Inc.