Form: 8-K

Current report filing

November 12, 2013

Documents


Exhibit 99.1
  
News Release


Novelis Reports Second Quarter of Fiscal Year 2014 Results
Solid Quarterly Performance in a Transitional Year

•
Net Income, Excluding Certain Items, of $37 million
•
Adjusted EBITDA of $228 million
•
Positive Free Cash Flow $178 million
•
Solid Liquidity of $843 million
•
Excellent Progress with Commissioning of Global Expansion Projects


ATLANTA, November 11, 2013 – Novelis, the world leader in aluminum rolling and recycling, today reported net income attributable to its common shareholder of $23 million for the second quarter of fiscal 2014. Excluding certain tax-effected items, net income was $37 million for the quarter.
Adjusted EBITDA for the second quarter of fiscal 2014 was $228 million compared to $277 million reported for the same period a year ago. Sequentially, adjusted EBITDA improved 12 percent compared to the $204 million reported in the first quarter of fiscal 2014, in part due to initial success from the company’s rolling expansion in South America.  Excellent project execution allowed Novelis to meet strong market demand and puts the South America region on track to achieve record shipments this fiscal year.
“We are nearing an inflection point in the transition of our business from investment to growth,” said Phil Martens, President and Chief Executive Officer for Novelis.  “We have invested heavily in expanding our rolling, recycling and automotive finishing assets over the last three years to solidify our leadership position ahead of the strong market growth we expect, and we are beginning to see these results materialize. In fact, with the contribution from our expansions in South America and Asia, we expect results in the second half of fiscal 2014 to be stronger than the first half.”
Martens also highlighted the company’s stable business performance in North America, despite the challenging dynamics related to overcapacity in the North American can market which affected year-over-year results.  “The reallocation of some hot mill capacity towards high-growth, high-margin automotive sheet in this region is not only a key piece of our growth strategy, it also will help rebalance the North American can market,” said Martens. “We are aggressively increasing finishing capacity globally to support strong growth in the automotive flat rolled products market. Our two North American finishing lines are on track to produce commercial product by the end of this fiscal year and we are already evaluating additional investments.”
Shipments of aluminum rolled products totaled 713 kilotonnes for the second quarter of fiscal 2014, down one percent compared to 719 kilotonnes for the same period last year but up one percent from the first quarter. Net sales for the second quarter of fiscal 2014 were $2.4 billion, flat compared to both the prior year and prior quarter.


1


(in $M)
 
 
 
Q2FY14
 
Q1FY14
 
 
 
 
 
9/30/2013
 
6/30/2013
 
Cash and cash equivalents
 
$
338

 
$
249

 
Availability under Committed Revolving Facilities
505

 
481

 
Total Liquidity
 
$
843

 
$
730

 

(in $M)
 
 
 
Q2FY14
 
Q2FY13
 
 
 
 
 
9/30/2013
 
9/30/2012
 
Free Cash Flow
 
$
178

 
$
(25
)
 
Capital Expenditures
 
184

 
178

 
Free Cash Flow before CapEx
$
362

 
$
153

 

For the second quarter of fiscal 2014, Novelis reported liquidity of $843 million. Free cash flow was $178 million for the second quarter of fiscal 2014 and capital expenditures totaled $184 million. “As expected, we generated positive free cash flow in the second quarter despite meaningful investments in growth, primarily due to significant improvements in working capital,” said Steve Fisher, Chief Financial Officer for Novelis. “We will continue this diligent focus on cash generation and expect to drive positive free cash flow in the second half of this fiscal year as a result of working capital efficiencies and other cash improvement actions."

Second Quarter of Fiscal 2014 Earnings Conference Call
Novelis will discuss its second quarter of fiscal 2014 results via a live webcast and conference call for investors at 9:00 a.m. ET on Monday, November 11, 2013. Participants may access the webcast at
https://cc.callinfo.com/r/1jfuk9kqyew3h&eom. To join by telephone, dial toll-free in North America at 800 754 1366, India toll-free at 0008001006992 or the international toll line at +1 212 231 2939. Access information may also be found at www.novelis.com/investors.

About Novelis
Novelis Inc. is the global leader in aluminum rolled products and the world's largest recycler of aluminum. The company operates in 9 countries, had approximately 11,000 employees and reported revenue of $9.8 billion for its 2013 fiscal year. Novelis supplies premium aluminum sheet and foil products to transportation, packaging, construction, industrial and consumer electronics markets throughout North America, Europe, Asia and South America. The company is part of the Aditya Birla Group, a multinational conglomerate based in Mumbai, India. For more information, visit www.novelis.com and follow us on Twitter at twitter.com/Novelis.

Non-GAAP Financial Measures
This press release and the presentation slides for the earnings call contain 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. 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, together with a discussion of the usefulness and purpose of such measures.


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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 Net Income excluding Certain Items, Reconciliation to Adjusted EBITDA and Free Cash Flow.

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.  An example of forward looking statements in this new release is our expectation that the Company's results in the second half of fiscal 2014 will be stronger than the first half. 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, derivative instruments, 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; 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, 2013 are specifically incorporated by reference into this news release.



Media Contact:
 
Investor Contact:
Charles Belbin
 
Megan Cochard
+1 404 760 4120
 
+1 404 760 4170
charles.belbin@novelis.com
 
megan.cochard@novelis.com
    

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Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions)



 
 
 
 
 
 
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Net sales
$
2,427

 
$
2,441

 
$
4,835

 
$
4,991

Cost of goods sold (exclusive of depreciation and amortization)
2,087

 
2,077

 
4,192

 
4,279

Selling, general and administrative expenses
109

 
102

 
229

 
204

Depreciation and amortization
79

 
69

 
156

 
142

Research and development expenses
12

 
13

 
22

 
25

Interest expense and amortization of debt issuance costs
75

 
73

 
151

 
147

Loss (gain) on assets held for sale
—

 
2

 
—

 
(3
)
Restructuring and impairment, net
18

 
17

 
27

 
22

Equity in net loss of non-consolidated affiliates
3

 
3

 
7

 
5

Other income, net
(5
)
 
(2
)
 
(15
)
 
(29
)
 
2,378

 
2,354

 
4,769

 
4,792

Income before income taxes
49

 
87

 
66

 
199

Income tax provision
26

 
37

 
29

 
58

Net income
23

 
50

 
37

 
141

Net income attributable to noncontrolling interests
—

 
1

 
—

 
1

Net income attributable to our common shareholder
$
23

 
$
49

 
$
37

 
$
140




4

Novelis Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except number of shares)
 
September 30, 2013
 
March 31, 2013
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
338

 
$
301

Accounts receivable, net
 
 
 
— third parties (net of allowances of $4 as of September 30, 2013 and $3 as of March 31, 2013, respectively)
1,290

 
1,447

— related parties
45

 
38

Inventories
1,126

 
1,168

Prepaid expenses and other current assets
90

 
93

Fair value of derivative instruments
53

 
109

Deferred income tax assets
116

 
112

Assets held for sale
34

 
9

Total current assets
3,092

 
3,277

Property, plant and equipment, net
3,327

 
3,104

Goodwill
611

 
611

Intangible assets, net
645

 
649

Investment in and advances to non–consolidated affiliates
653

 
627

Deferred income tax assets
43

 
75

Other long–term assets
 
 
 
— third parties
178

 
166

— related parties
13

 
13

Total assets
$
8,562

 
$
8,522

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Current portion of long–term debt
$
31

 
$
30

Short–term borrowings
640

 
468

Accounts payable
 
 
 
— third parties
991

 
1,207

— related parties
51

 
47

Fair value of derivative instruments
79

 
74

Accrued expenses and other current liabilities
532

 
497

Deferred income tax liabilities
19

 
28

Liabilities held for sale
12

 
1

Total current liabilities
2,355

 
2,352

Long–term debt, net of current portion
4,429

 
4,434

Deferred income tax liabilities
468

 
504

Accrued postretirement benefits
653

 
731

Other long–term liabilities
263

 
262

Total liabilities
8,168

 
8,283

Commitments and contingencies
 
 
 
Shareholder’s equity
 
 
 
Common stock, no par value; unlimited number of shares authorized; 1,000 shares issued and outstanding as of September 30, 2013 and March 31, 2013
—

 
—

Additional paid–in capital
1,654

 
1,654

Accumulated deficit
(1,140
)
 
(1,177
)
Accumulated other comprehensive loss
(148
)
 
(268
)
Total equity of our common shareholder
366

 
209

Noncontrolling interests
28

 
30

Total equity
394

 
239

Total liabilities and equity
$
8,562

 
$
8,522



5


Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
 
Six Months Ended September 30,
 
2013
 
2012
OPERATING ACTIVITIES
 
 
 
Net income
$
37

 
$
141

Adjustments to determine net cash provided by operating activities:
 
 
 
Depreciation and amortization
156

 
142

Loss (gain) on unrealized derivatives and other realized derivatives in investing activities, net
14

 
(11
)
Gain on assets held for sale
—

 
(3
)
Deferred income taxes
(20
)
 
13

Amortization of fair value adjustments, net
6

 
8

Equity in net loss of non–consolidated affiliates
7

 
5

Loss (gain) on foreign exchange remeasurement of debt
2

 
(7
)
Loss (gain) on sale of assets
2

 
(1
)
Non-cash impairment charges
8

 
1

Amortization of debt issuance costs and carrying value adjustments
13

 
13

Other, net
(2
)
 
1

Changes in assets and liabilities including assets and liabilities held for sale (net of effects from acquisitions and divestitures):
 
 
 
Accounts receivable
163

 
30

Inventories
20

 
(148
)
Accounts payable
(213
)
 
(5
)
Other current assets
39

 
(31
)
Other current liabilities
10

 
(8
)
Other noncurrent assets
(6
)
 
(6
)
Other noncurrent liabilities
12

 
(17
)
Net cash provided by operating activities
248

 
117

INVESTING ACTIVITIES
 
 
 
Capital expenditures
(365
)
 
(345
)
Proceeds from sales of assets, third party, net
—

 
5

Proceeds from sales of assets, related party, net
8

 
2

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

 
1

Proceeds from related party loans receivable, net
—

 
2

Proceeds from settlement of other undesignated derivative instruments, net
6

 
31

Net cash used in investing activities
(351
)
 
(304
)
FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of debt
76

 
46

Principal payments
(59
)
 
(11
)
Short–term borrowings, net
131

 
54

Dividends, noncontrolling interest
—

 
(2
)
Debt issuance costs
(8
)
 
—

Net cash provided by financing activities
140

 
87

Net increase (decrease) in cash and cash equivalents
37

 
(100
)
Effect of exchange rate changes on cash
—

 
10

Cash and cash equivalents — beginning of period
301

 
317

Cash and cash equivalents — end of period
$
338

 
$
227





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Reconciliation from Net Income Attributable to our Common Shareholder to Adjusted EBITDA

Novelis is providing disclosure of the reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.
 
Three Months Ended September 30,
 
Six Months Ended September 30,
(in millions)
2013
 
2012
 
2013
 
2012
Net income attributable to our common shareholder
$
23

 
$
49

 
$
37

 
$
140

Noncontrolling interests
—

 
(1
)
 
—

 
(1
)
Income tax provision
(26
)
 
(37
)
 
(29
)
 
(58
)
Interest, net
(74
)
 
(72
)
 
(150
)
 
(145
)
Depreciation and amortization
(79
)
 
(69
)
 
(156
)
 
(142
)
EBITDA
202

 
228

 
372

 
486

 
 
 
 
 
 
 
 
Unrealized gain (loss) on derivatives
4

 
(24
)
 
(8
)
 
(11
)
Realized gain on derivative instruments not included in segment income
2

 
—

 
4

 
2

Proportional consolidation
(8
)
 
(9
)
 
(19
)
 
(20
)
(Loss) gain on assets held for sale
—

 
(2
)
 
—

 
3

Restructuring and impairment, net
(18
)
 
(17
)
 
(27
)
 
(22
)
Other (expense) income, net
(6
)
 
3

 
(10
)
 
(2
)
Adjusted EBITDA   
$
228

 
$
277

 
$
432

 
$
536



The following table shows the “Free cash flow” for the six months ended September 30, 2013 and 2012 and the ending balances of cash and cash equivalents (in millions).
 
 
Six Months Ended September 30,
 
2013
 
2012
Net cash provided by operating activities
$
248

 
$
117

Net cash used in investing activities
(351
)
 
(304
)
Less: Proceeds from sales of assets
(8
)
 
(7
)
Free cash flow
$
(111
)
 
$
(194
)
Ending cash and cash equivalents
$
338

 
227



The following table shows Net Income attributable to our common shareholder excluding Certain Items for the three months ended September 30, 2013 and 2012 (in millions). 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 September 30,
 
2013
 
2012
 
 
 
 
Net Income
$
23

 
$
49

Certain Items:
 
 
 
Loss on assets held for sale
—

 
2

Restructuring and impairment, net
18

 
17

Tax effect on Certain Items
(4
)
 
(4
)
Net Income, excluding Certain Items
$
37

 
$
64


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