Form: 8-K

Current report filing

November 9, 2011

Novelis Second Quarter 2012
Earnings Conference Call
Philip Martens
President and Chief Executive Officer
Steve Fisher
Senior Vice President and Chief Financial Officer
Brighter Ideas with Aluminum
November 9, 2011
Exhibit 99.2


2
Safe Harbor Statement
Forward-Looking Statements
Statements made in this presentation 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 such statements in this presentation are our
stated view regarding our ability to generate free cash flow this fiscal year, our target Adjusted EBITDA for fiscal 2012 our projections for aluminum
demand, our projected liquidity levels, expected cost savings from plant closures and anticipated increases to our production capacity from our
debottlenecking initiatives.  Novelis cautions that, by their nature, forward-looking statements involve risk and uncertainty and that 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 metal
hedging activities, including our internal used beverage cans (UBCs) and smelter hedges; 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 for future capital requirements; 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, labor relations and
negotiations, breakdown of equipment and other events; the impact of restructuring efforts in the future; 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, particularly sectors in which our customers operate; changes in the fair value of derivative instruments;
cyclical demand and pricing within the principal markets for our products as well as seasonality in certain of our customers’ industries; changes in
government regulations, particularly those affecting taxes, environmental, health or safety compliance; changes in interest rates that have the effect
of increasing the amounts we pay under our principal credit agreement and other financing agreements; the effect of taxes and changes in tax rates;
and our indebtedness and our ability to generate cash. The above list of factors is not exhaustive.  Other important risk factors included under the
caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2011 and our Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2011 are specifically incorporated by reference into this presentation.
Non-GAAP Financial Measures
This presentation contains non-GAAP financial measures as defined by SEC rules.  We think that 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.  We have included reconciliations of
each of these measures to the most directly comparable GAAP measure.  In addition, a more detailed description of these non-GAAP financial
measures used in this presentation, together with a discussion of the usefulness and purpose of such measures, is included as Exhibit 99.2 to our
Current Report on Form 8-K furnished to the SEC with our earnings press release.


DETAILED FINANCIAL PERFORMANCE
NOVELIS STRATEGY
QUESTIONS AND ANSWERS
FINANCIAL HIGHLIGHTS & OUTLOOK
3
Agenda


4
4


5
(Q2FY12 vs. Q2FY11)
Continued Strong Performance
Shipments Down 2% to 720 Kilotonnes
Net Sales Up 14% to $2.9 Billion
Strong Adjusted EBITDA Up 3% to $301 Million
Free Cash Flow Before CapEx of $237 Million
Liquidity of $993 Million
Net Income of $120 Million
Second Quarter Financial Highlights


6
FY12 Targets
Adjusted EBITDA $1.10 -
$1.15B
Free Cash Flow before CapEx of
$600 -
$700M
CapEx of $550 -
$600M Primarily
for Strategic Investments
On Track to
Achieve
Record FY12
Results


7
Strong & Predictable Results
Competitive Advantages in this Market
Recession Resistant
Growth in Emerging Markets
Increasing Substitution
Low Exposure to True Commodity Type Product 
and


8


9
Shipments & Sales
Shipments by Region
Total Company
Sales (Billions) •
Shipments (Kt)
Solid Global Demand
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
Shipments
Sales
Q2FY12
Q2FY11
2.5
2.9
200
350
500
650
800
Q2FY11
Q2FY12
0
50
100
150
200
250
300
South
America
Asia
Europe
North
America
(2%)
0%
(4%)
(3%)


10
Adjusted EBITDA/Shipments
Adjusted Pre-Tax Income*
EBITDA, Shipments and Pre-Tax Income
Strong EBITDA –
Up 3% on Shipment Decrease of 2%
EBITDA
&
Pre-Tax
Income
(Millions)
•
Shipments
(Kt)
Shipments
Adjusted EBITDA
* Adjusted Pre-Tax Income excludes restructuring charges, unrealized gains/losses on derivatives, gain/loss on sale of assets, gain on litigation.
$0
$40
$80
$120
$160
Q2FY11
Q2FY12
$200
$225
$250
$275
$300
$325
$350
Q2FY11
Q2FY12
291
301
137
128
0
150
300
450
600
750
900


11
(Millions)
Adjusted EBITDA Trend
Driving Consistent & Predictable Results


12
Less Controllable
Business Variables
Adjusted EBITDA
Q2FY11 vs. Q2FY12 (Millions)


13
(Millions)
Free Cash Flow Before CapEx
Expect to Generate ~$600-700 Million for FY12


(Millions)
Capital Expenditures
Focused on Strategic Investments
CapEx Plan:
CapEx plan     
Back-end Weighted
Strategic
Investments of
~$410-$460M
Maintenance
Investments of
~$140M
FY11
FY12
~550-600
$0
$100
$200
$300
$400
$500
$600
$700
234
107
48
67
23
Q1
Q2
FY
14


15


16
Source:  Novelis Estimates and March 2011 CRU
Long-Term Global Trends in Aluminum Demand
Electronics & High-End
Specialties
Beverage Can
Automotive
~25%
~25%
~6%
~6%
~4-5%
~4-5%
Strong Long-Term Outlook
Long-term
(CY11-16)
16


17
Committed to Capitalizing on Strong Market Growth and
Solidifying Market Leadership Through Expansion
Novelis Long-Term Strategy  
Long-Term Strategic Investments
Long-Term Strategic Investments
Brazil Mill Expansion
Asia Mill Expansion
North America Mill Expansion
17


18
Brazil
Mill
Expansion
–
Status
Update
Expansion Project
Additional
Capacity
Product
Segment
Annual Beverage
Can Growth of
7% for S.A. over
the next 5 years
~$300M
Halfway
Through
Expansion –
On Track & On
Budget
On Track
for
Incremental
Capacity of
~220kt by
End of CY
2012
Investment &
Status


19
Brazil Mill Expansion
Cold Mill 3 Foundation
Pre-assembling
Cold Mill stands
Line-D Casting Center
Foundation
19


20
Brazil –
Additional Investment
New Recycling Line
Adds Recycling
Capacity of   
~190 kts of UBC
and scrap, brings
total recycling
capacity to   
~390 kts
~$30M
Late
CY2013
Additional Capacity
Investment
& Status
Benefits
•
Drives Towards 80%
Recycled Content
Goal
•
Ensures Metal
Supply
•
Reduces Costs
20


21
Korea
Mill
Expansion
–
Status
Update
Expansion Project
Investment
& Status
Additional
Capacity
Product
Segment
Annual FRP
Growth of 8% for
Asia over the next
5 years
~$400M
Broke Ground
in Q2
On Track
for
Incremental
Capacity of
~350kt by
End of   
CY 2013
21


22
North
America
Mill
Expansion
–
Status
Update
22
Expansion Project
Investment &
Status
Additional
Capacity
Product
Segment
Strong Double
Digit Annual Auto
Sheet Growth in
N.A. over the next
5 years
On Track for
Incremental
Capacity of
~200kt by
Mid CY 2013
~$200M
Broke Ground
in Q2


23
Source:  Ducker Worldwide and The Aluminum Association, Oct. 2011
Government Regulation Driving Aluminum Demand
0
100
200
300
400
500
600
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
Driven by Castings
23
Driven by Sheet
Aluminum Content  in Pounds per Light Vehicle
-
History and Forecast -
Aluminum Content Growth to be Driven by Sheet Starting 2015


24
Summary
Performance Remains Solid Across Four Operating
Regions
Planning to Achieve Record FY12 Adjusted EBITDA of
$1.10 -
$1.15B
Making Headway on Global Investments:
•
Three Large Mill Expansions on Track & Budget
•
Global Recycling Initiatives on Track & Budget
24


25


26


27
Income Statement Reconciliation to Adjusted EBITDA  
(in $ m)
Q1
FY10
Q2
FY10
Q3
FY10
Q4
FY10
FY 10
Q1
FY11
Q2
FY11
Q3
FY11
Q4
FY11
FY11
Q1
FY12
Q2
FY12
Net Income (loss) Attributable to Our Common
Shareholder
143
195
68
(1)
405
50
62
(46)
50
116
62
120
-
Interest, net
(40)
(41)
(42)
(41)
(164)
(36)
(37)
(42)
(79)
(194)
(73)
(73)
-
Income tax (provision) benefit
(112)
(87)
(48)
(15)
(262)
(15)
(56)
(33)
21
(83)
(59)
7
-
Depreciation and amortization
(100)
(92)
(93)
(99)
(384)
(103)
(104)
(100)
(97)
(404)
(89)
(81)
-
Noncontrolling interests
(18)
(19)
(13)
(10)
(60)
(9)
(11)
(11)
(13)
(44)
(15)
(10)
EBITDA
413
434
264
164
1,275
213
270
140
218
841
298
277
-
Unrealized gain (loss) on derivatives
299
254
62
(37)
578
(47)
1
9
(27)
(64)
26
(1)
-
Realized gain on derivative
instruments not included  in     
segment income
-
-
-
-
-
-
-
4
1
5
2
-
-
Loss on early extinguishment of debt
-
-
-
-
-
-
-
(74)
(10)
(84)
-
-
-
Proportional consolidation 
(16)
(17)
2
(21)
(52)
(10)
(11)
(10)
(14)
(45)
(13)
(12)
-
Restructuring  charges, net
(3)
(3)
(1)
(7)
(14)
(6)
(9)
(20)
1
(34)
(19)
(11)
-
Others costs, net
9
1  
1
(3)
8
13
(2)
(7)
(13)
(9)
(4)
-
Adjusted EBITDA
124
199
200
232
755
263
291
238
280
1,072
306
301
Other Income (expense) Included in Adjusted
EBITDA
-
Metal price lag
(30)
(10)
3
2
(35)
9
19
-
(3)
25
5
15
-
Foreign currency remeasurement
5
13
(6)
4
16
(22)
20
1
9
8
(8)
-
-
Purchase accounting
52
49
42
(2)
141
(3)
(4)
(3)
(3)
(13)
(3)
(3)
-
Can price ceiling, net
(54)
(54)
(20)
-
(128)
-
-
-
-
-
-
-


28
Free Cash Flow  
(in $m)
FY10
FY11
FY12
Q1
Q2
Q3
Q4
Full
Year
Q1
Q2
Q3
Q4
Full
Year
Q1
Q2
Cash Provided by (used
in) Operating Activities
256
195
179
214
844
22
102
94
236
454
(115)
171
Cash Provided by (used
in) Investing Activities)
(233)
(196)
(55)
0
(484)
27
(2)
(39)
(99)
(113)
(79)
(40)
Less: Proceeds from
Sales of Fixed Assets
(3)
(1)
0
(1)
(5)
(15)
(3)
(10)
(3)
(31)
0
1
Free Cash Flow
20
(2)
124
213
355
34
97
45
134
310
(194)
130


29
Explanation of Other Income (Expenses)
Included in our Adjusted EBITDA
1) Metal Price Lag Net of Related Hedges:
On certain sales contracts we experience timing differences on the pass through of changing aluminum prices from our
suppliers to our customers. Additional timing differences occur in the flow of metal costs through moving average inventory
cost values and cost of goods sold. This timing difference is referred to as Metal Price Lag. We have a risk management
program in place to minimize impact of this “lag”.
2) Foreign Currency Remeasurement Net of Related Hedges:
All non-functional currency denominated Working Capital and Debt gets remeasured every period by the period end
exchange
rates.
This
impacts
our
profitability.
Like
Metal
Price
Lag,
we
have
a
risk
management
program
in
place
to
minimize impact of such Remeasurement.
3) Purchase Accounting:
Following our acquisition, the consideration and transaction costs paid by Hindalco in connection with the transaction were
“pushed down”
to us and were allocated to the assets acquired and the liabilities assumed. These allocations are amortized
over
periods,
impacting
our
profitability.
A
significant
portion
of
such
amortizations
pertain
to
ceiling
contracts.
4) Can Price Ceilings:
Some sales contracts contained  a ceiling over which metal prices could not be contractually passed through to certain
customers. This negatively impacted our margins and cash flows when the price we paid for metal was above the ceiling
price contained in these contracts. These contracts expired December 31, 2009.