Form 10-K

For the fiscal year ended March 31, 2014

Yes   ¨    No  ý

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”).    Yes  ¨    No  ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

As of May 15, 2014, the registrant had 1,000 common shares outstanding. All of the Registrant’s outstanding shares were held indirectly by Hindalco Industries Ltd., the Registrant’s parent company. 

We are the world’s leading aluminum rolled products producer based on shipment volume in fiscal 2014, with flat rolled product shipments during that period of approximately 2,895 kt. We are also the global leader in the recycling of aluminum. We are the only company of our size and scope focused solely on aluminum rolled products markets and capable of local supply of technologically sophisticated aluminum products in all four major industrialized continents: North America, South America, Europe and Asia. We had “Net sales” of approximately $10 billion for the year ended March 31, 2014.

We produce aluminum sheet and light gauge products primarily for use in the beverage can, automotive, specialties (including consumer electronics, architecture, and other transportation) and foil markets. We also have recycling operations in many of our plants to recycle aluminum, such as UBCs. As of March 31, 2014, we had manufacturing operations in nine countries on four continents: North America, South America, Asia and Europe, through 25 operating facilities, including recycling operations in nine of these plants. In addition to aluminum rolled products plants, our South American business includes primary aluminum smelting and power generation facilities.

Aluminum, because of its light weight, recyclability and formability, has a wide variety of uses in packaging and other end-use markets. The recyclability of aluminum enables it to be used, collected, melted and returned to the original product form an unlimited number of times, unlike paper and polyethylene terephthalate (PET) plastic, which deteriorate with every iteration of recycling.

Packaging. Aluminum is used in beverage cans and bottles, food cans, screw caps used in the beverage industry and household foil. Beverage cans are the second largest aluminum rolled products application (behind foil), accounting for approximately 23% of total worldwide shipments in the calendar year ended December 31, 2013, according to market data from Commodity Research Unit International Limited (CRU), an independent business analysis and consultancy group. In addition to their recyclability, aluminum beverage cans offer advantages in fabricating efficiency and product shelf life. Fabricators are able to produce and fill beverage cans at very high speeds, and non-porous aluminum cans provide longer shelf life than PET plastic containers. Additionally, the use of aluminum to package beverages such as craft beer is increasing, as aluminum blocks sunlight and therefore extends the shelf life of the product. Aluminum cans are light, stackable and use space efficiently, making them convenient and cost-efficient to ship.

Transportation. Aluminum rolled products are used in vehicle structures as well as automotive body panel applications, including hoods, deck lids, fenders and lift gates. These uses typically result from cooperative efforts between aluminum rolled products manufacturers and their customers that yield tailor-made solutions for specific requirements in alloy selection, fabrication procedure, surface quality and joining. There has been recent growth in certain geographic markets in automotive applications due to the lighter weight, better fuel economy and improved emissions performance associated with these applications. We expect increased growth in this end-use market as automotive companies continue to explore opportunities for ways to reduce the weight (lightweighting) of automobiles as a result of environmental regulations concerning emissions and fuel economy.

Consumer Electronics. Aluminum’s lightweight characteristics, high formability, ability to conduct electricity and dissipate heat and to offer corrosion resistance makes it useful in a wide variety of electronic applications. Uses of aluminum rolled products in electronics include flat screen televisions, personal computers, laptops, mobile devices, and digital music players.

Architectural. Construction is the largest application within this end-use market. Aluminum rolled products developed for the construction industry are often decorative and non-flammable, offer insulating properties, are durable and corrosion resistant, and have a high strength-to-weight ratio. Aluminum siding, gutters, and downspouts comprise a significant amount of construction volume. Other applications include doors, windows, awnings, canopies, facades, roofs and ceilings.

Industrial and Other. Industrial applications include heat exchangers, process and electrical machinery, lighting fixtures and insulation. Other uses of aluminum rolled products in consumer durables include microwaves, coffee makers, air conditioners and cooking utensils.

The aluminum rolled products market is highly competitive and is characterized by economies of scale, significant capital investments required to achieve and maintain technological capabilities and demanding customer qualification standards. We face competition from a number of companies in all of the geographic regions and end-use markets in which we operate. Our primary competitors are as follows:

Production Capacity and Alternative Technology. In the aluminum rolled products industry, the addition of rolling capacity requires large capital investments and significant plant construction or expansion, and typically requires long lead-time equipment orders. Advances in technological capabilities allow aluminum rolled products producers to better align product portfolios and supply with industry demand. In addition, there are lower cost ways to enter the industry such as continuous casting, which offers the ability to increase capacity in smaller increments than is possible with hot mill additions. This enables production capacity to better adjust to small year-over-year increases in demand; however the continuous casting process results in the production of a more limited range of products.

Trade. Some trade flows do occur between regions despite shipping costs, import duties and the need for localized customer support. Higher value-added products are more likely to be traded internationally, especially if demand in certain markets exceeds local supply. With respect to less technically demanding applications, emerging markets with low cost inputs may export commodity aluminum rolled products to larger, more mature markets, as we have seen with China. Accordingly, regional changes in supply, such as plant expansions, have some impact on the worldwide supply of aluminum rolled products.

The following factors have historically affected the demand for aluminum rolled products:

Economic Growth. We believe that economic growth is a significant driver of aluminum rolled products demand. In mature markets, growth in demand has typically correlated closely with growth in industrial production.

Substitution Trends. Manufacturers’ willingness to substitute other materials for aluminum in their products and competition from substitution materials suppliers also affect demand. There has been a strong substitution trend toward aluminum in the use of vehicles as automobile manufacturers look for ways to meet fuel efficiency regulations and reduce carbon emissions in a cost-efficient manner. As a result of aluminum’s durability, strength and light weight, automobile manufacturers are substituting aluminum for heavier alternatives such as steel and iron. Consequently, demand for flat rolled aluminum products has increased. We also see strong substitution trends toward aluminum and away from other packaging materials in the beverage can market globally, except for North America which is already a mature market.

Seasonality. During our third fiscal quarter, we typically experience seasonal slowdowns resulting in lower shipment volumes. This is a result of declines in overall production output due primarily to holidays and cooler weather in North America and Europe, our two largest operating regions. We also experience downtime at our mills and customers’ mills due to scheduled plant maintenance and are impacted to a lesser extent by the seasonal downturn in construction activity.

Sustainability. Growing awareness of environmentalism and demand for recyclable products has increased the demand for aluminum rolled products. Unlike other commonly recycled materials such as paper or PET plastic, aluminum can be recycled an unlimited number of times without affecting the quality of the product. Additionally, the recycling process uses 95% less energy than is required to produce primary aluminum from mining and smelting, with an equivalent reduction in greenhouse gas emissions.

We have invested to increase our capacity in growth markets. Our international presence positions us well to capture additional growth opportunities in targeted aluminum rolled products. In particular, we believe there is strong automotive growth potential worldwide. Additionally, we believe Asia and South America have high growth potential in areas such as beverage cans and specialties. While our existing manufacturing and operating presence positions us well to capture this growth, we are making incremental capital expenditures in these areas. The following table summarizes our significant global expansion projects, the estimated capacity and estimated or actual commission start date.    

Novelis is working closely with our customers to bring innovation to products in which our aluminum is used. Through lifecycle analysis, aluminum has shown to be a key material for lightweighting automobiles in order to increase fuel-efficiency. We are positioning ourselves to meet dramatically increased global demand for aluminum from our automobile customers by increasing the number of auto finishing lines in our facilities in North America, Europe, and Asia. We are also working closely with our auto customers to redesign auto alloys to be made with more scrap, as well as to close the loop with them by taking back their production scrap and, in the longer term, end-of-life scrap. For our can customers, Novelis introduced the evercan^TM, the first-of-its-kind, independently certified, high-recycled content aluminum beverage can sheet.

The following is a description of our operating segments as of March 31, 2014:

Headquartered in Atlanta, Georgia, Novelis North America operates 10 aluminum rolled products facilities, including two fully dedicated recycling facilities and one facility with recycling operations, and manufactures a broad range of aluminum sheet and light gauge products. End-use markets for this segment include beverage and food cans, containers and packaging, automotive and other transportation applications, architectural and other industrial applications. The majority of North America’s volumes are currently directed toward the beverage can sheet market. The beverage can end-use market is technically demanding to supply. There is currently overcapacity in the beverage can market which has resulted in competitive pricing.

Headquartered in Zurich, Switzerland, Novelis Europe operates nine operating plants, including one fully dedicated recycling facility and two facilities with recycling operations, and manufactures a broad range of sheet and foil products. End-use markets for this segment include beverage and food can, automotive, architectural and industrial products, foil and technical products and lithographic sheet. Beverage and food can represent the largest end-use market in terms of shipment volume for Europe. Europe has seven aluminum rolled products facilities, one fully dedicated recycling facility, distribution centers in Italy, and sales offices in several European countries. Operations include our 50% joint venture interest in Aluminium Norf GmbH (Alunorf), which is the world’s largest aluminum rolling and remelt facility. Alunorf supplies high quality can stock, foilstock and feeder stock for finishing at our other European operations.

Headquartered in Seoul, South Korea, Novelis Asia operates three manufacturing facilities, including two facilities with recycling operations, and manufactures a broad range of sheet and light gauge products. End-use markets include beverage and food cans, electronics, architectural, industrial and other products, automotive and foil. The beverage can market represents the largest end-use market in terms of volume. Recycling is an important part of our operations with recycling facilities at both the Ulsan and Yeongju, South Korea plants. We believe that Asia is well-positioned to benefit from further economic development in China as well as other parts of Asia.

Headquartered in Sao Paulo, Brazil, Novelis South America operates two rolling plants, including one facility with recycling operations, along with one primary aluminum smelter and hydroelectric power plants, all of which are located in Brazil. Novelis South America manufactures aluminum rolled products, including can stock, industrial sheet and light gauge. The main markets are beverage and food can, specialty, industrial, foil and other packaging and transportation end-use applications. Beverage can represents the largest end-use application in terms of shipment volume. Our operations in South America include a smelter line, which produces primary aluminum billets, and hydroelectric power plants, which we use to fulfill our own power requirements.

Primary Aluminum Sourcing. We purchased or tolled approximately 1,644 kt of primary aluminum in fiscal 2014 in the form of sheet ingot, standard ingot and molten metal, approximately 32% of which we purchased from Rio Tinto Alcan.

Aluminum Products Recycling. We operate facilities in several plants to recycle post-consumer aluminum, such as UBCs collected through recycling programs. In addition, we have agreements with several of our large customers where we have a closed-looped system whereby we take recycled processed material from their fabricating activity and re-melt, cast and roll it to re-supply these customers with aluminum sheet. Other sources of recycled material include lithographic plates, and products with longer lifespans, like cars and buildings, which are starting to become high volume sources of recycled material. We purchased or tolled approximately 1,460 kt of recycled material inputs in fiscal 2014 and are making recycling investments in Europe, Korea and South America to increase the amount of recycled material we use as raw materials.

The materials that we recycle are remelted, cast and then used in our operations. The net effect of all recycling activities is that approximately 46% of our total aluminum rolled product shipments in fiscal 2014 were made with recycled material inputs. Our recycled content performance and methodology are detailed in our annual sustainability report, which can be found at www.novelis.com/sustainability. Information in our sustainability report does not constitute part of this Annual Report on Form 10-K.

We use several sources of energy in the manufacture and delivery of our aluminum rolled products. In fiscal 2014, natural gas and electricity represented approximately 97% of our energy consumption by cost. We also use fuel oil and transport fuel. The majority of energy usage occurs at our casting centers, at our smelter in South America and during the hot rolling of aluminum. Our cold rolling facilities require relatively less energy. We purchase our natural gas on the open market, which subjects us to market pricing fluctuations. We have in the past and may continue to seek to stabilize our future exposure to natural gas prices through the purchase of derivative instruments. Natural gas prices in Europe, Asia and South America have historically been more stable than in the United States.

In South America, we own and operate hydroelectric facilities that met all of our electricity requirements for our smelter operations in fiscal 2014. In March 2014, we made a decision sell our hydroelectric power plant facilities. In April 2014, we executed an agreement to sell our hydroelectric power plant facilities to a third party, subject to regulatory approval.

In fiscal 2014, approximately 54% of our total “Net sales” were to our ten largest customers, most of whom we have been supplying for more than 20 years. To address consolidation trends, we focus significant efforts on developing and maintaining close working relationships with our customers and end-users. Our major customers include:

We have two principal distribution channels for the end-use markets in which we operate: direct sales to our customers and sales to distributors.

We consider our employee relations to be satisfactory. Approximately 63% of our employees are represented by labor unions and their employment conditions are governed by collective bargaining agreements. Collective bargaining agreements are negotiated on a site, regional or national level, and are of varying durations. As of March 31, 2014, approximately 1,400 of our employees were covered under collective bargaining agreements that expire within one year.

Item 1A. Risk Factors

Our ten largest customers accounted for approximately 54%, 51% and 51% of our total “Net sales” for the year ended March 31, 2014, 2013 and 2012, respectively, with Rexam Plc, a leading global beverage can maker, and its affiliates representing approximately 17%, 15% and 14% of our total “Net sales” in the respective periods. A significant downturn in the business or financial condition of our significant customers could materially adversely affect our results of operations and cash flows. In addition, if our existing relationships with significant customers materially deteriorate or are terminated in the future, and we are not successful in replacing business lost from such customers, our results of operations and cash flows could be adversely affected. Some of the longer term contracts under which we supply our customers, including under umbrella agreements such as those described under “Business - Our Customers,” are subject to renewal, renegotiation or re-pricing at periodic intervals or upon changes in competitive supply conditions. Our failure to successfully renew, renegotiate or re-price such agreements could result in a reduction or loss in customer purchase volume or revenue, and if we are not successful in replacing business lost from such customers, our results of operations and cash flows could be adversely affected. The markets in which we operate are competitive and customers may seek to consolidate supplier relationships or change suppliers to obtain cost savings and other benefits.

In addition, global climate change may increase our costs for energy sources, supplies or raw materials. See We may be affected by global climate change or by legal, regulatory or market responses to such change. If energy costs were to rise, or if energy supplies or supply arrangements were disrupted, our profitability and cash flows could decline.

Approximately 63% of our employees are represented by labor unions under a large number of collective bargaining agreements with varying durations and expiration dates. We may not be able to satisfactorily renegotiate our collective bargaining agreements when they expire. In addition, existing collective bargaining agreements may not prevent a strike or work stoppage at our facilities in the future.

Our financial condition and results of operations depend significantly on worldwide economic conditions. Uncertainty about current or future global economic conditions poses a risk as our customers may postpone purchases in response to tighter credit and negative financial news, which could adversely impact demand for our products. In addition, there can be no assurance that actions we may take in response to economic conditions will be sufficient to counter any continuation or any downturn or disruption. A significant global economic downturn or disruption in the financial markets could have a material adverse effect on our financial condition and results of operations.

We recorded “Restructuring and impairment, net” of $75 million and $47 million for the year ended March 31, 2014 and 2013, respectively, and $6 million and $3 million “Gain on assets held for sale” for the year ended March 31, 2014 and 2013, respectively. During these periods, we announced, among others, the following restructuring actions and programs:

We have a relatively high degree of leverage. As of March 31, 2014, we had $5.2 billion of indebtedness outstanding. Our substantial indebtedness and interest expense could have important consequences to our company and holders of notes, including:

Item 1B. Unresolved Staff Comments

Item 2. Properties

The total number of operating facilities within our operating segments as of March 31, 2014 is shown in the table below, including operating facilities that we jointly own and operate with third parties.

The following tables provide information, by operating segment, about the plant locations, processes and major end-use markets/applications for the aluminum rolled products, recycling and primary metal facilities we operated during all or part of the year ended March 31, 2014.

North America 

We operate primary aluminum smelting operations and casting at our Ouro Preto, Brazil facility and hydroelectric power generation operations in the state of Minas Gerais. Our owned power generation supplied all of our smelter needs in fiscal 2014. Our hydroelectric power generation operations are classified as held for sale as of March 31, 2014. We also own certain mining rights that are not currently being explored and are classified as held for sale as of March 31, 2014.

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Item 6. Selected Financial Data

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Novelis is the world's leading aluminum rolled products producer based on shipment volume in fiscal 2014. We produce aluminum sheet and light gauge products for use in the packaging market, which includes beverage and food can and foil products, as well as for use in the transportation, electronics, architectural and industrial product markets. We are also the world's largest recycler of aluminum and have recycling operations in many of our plants to recycle both post-consumer aluminum and post-industrial aluminum. As of March 31, 2014, we had manufacturing operations in nine countries on four continents, which include 25 operating plants, and recycling operations in nine of these plants. In addition to aluminum rolled products plants, our South American businesses include primary aluminum smelting and power generation facilities. We are the only company of our size and scope focused solely on the aluminum rolled products markets and capable of local supply of technologically sophisticated products in all of our geographic regions, but with the global footprint to service global customers.

Shipments of our flat rolled products increased from 2,786 kt in fiscal 2013 to 2,895 kt in fiscal 2014. Our recent rolling expansion in our Pindamonhangaba (Pinda) facility, coupled with strong demand in Brazil, contributed to the higher shipments and strong operating results in South America. Shipments were also up in Europe in fiscal 2014 compared to fiscal 2013, driven by higher automotive and can product shipments. Our recent rolling expansion in South Korea contributed to the higher shipment levels in our Asia region. Shipments in North America were down compared to prior year driven by lower can product shipments.

We increased the amount of recycled content in our products over this past fiscal year from 43% to 46%. Our recent recycling facility expansion in Yeongju, South Korea was a significant driver of higher recycled content, which is a component of our strategy to achieve 80% recycled content in our products by 2020. Our recycling expansion in Nachterstedt, Germany will be commissioned in the middle of calendar year 2014 and will become the largest aluminum recycling facility in the world. We began the commissioning process of our recycling expansion at our Pinda facility in Brazil in February 2014. Additionally, we are expanding our recycling operations in Oswego, New York to support the increase in automotive scrap. In April 2014, we announced that Red Hare Brewing Company will launch the world's first commercial use of evercan^TM, the Company's high-recycled content aluminum sheet for beverage cans. Cans made of the evercan^TM aluminum sheet, which are made of a guaranteed minimum 90% recycled content, are expected to be on store shelves beginning in May 2014.

We reported "Net income" of $104 million in the year ended March 31, 2014, which is down compared to $203 million in the year ended March 31, 2013. Cash flow provided by operating activities was $702 million for the year ended March 31, 2014 compared to $203 million in the prior year.

All of our strategic expansion projects are progressing well. We spent $717 million on capital expenditures globally for the year ended March 31, 2014, primarily on our global strategic expansion projects.

See Segment Review below for the impact of metal price lag on each of our segments.

LME Aluminum Prices

The average (based on the simple average of the monthly averages) and closing prices based upon the LME prices for aluminum for the years ended March 31, 2014, 2013, and 2012 are as follows:

Average aluminum prices were lower by 10% in fiscal 2014 compared to fiscal 2013, and lower by 15% in fiscal 2013 compared to fiscal 2012. The fluctuating prices and timing of when derivatives are realized resulted in $9 million net unrealized losses on undesignated metal derivatives in fiscal 2014, $8 million of net gains in fiscal 2013, and $25 million of net losses in fiscal 2012. The reduction in volatility in our unrealized gains and losses compared to fiscal years prior to 2013 is attributable to the Company's application of hedge accounting for our derivative transactions.

Recycled aluminum is generally purchased at a discount as compared to the price of primary aluminum. The benefit we receive from utilizing recycled metal is influenced by the spread between the prices for recycled aluminum and the LME primary aluminum price. Average LME aluminum prices were $203 per metric tonne lower in fiscal 2014 compared to fiscal 2013, which had an unfavorable impact on the benefits we realize from utilizing recycled metal. Additionally, the spread between the prices we pay for the recycled aluminum and LME primary aluminum prices tightened in fiscal 2014 compared to fiscal 2013, which lowered the benefits we realized from utilizing recycled metal.

Foreign Currency and Related Hedging Activities

In fiscal 2014, the U.S. dollar was stronger on average against the Brazilian real and Canadian dollar, while it was weaker against the Euro and South Korean won, as compared to fiscal 2013. In Europe, the weaker U.S. dollar resulted in favorable foreign exchange translation when comparing fiscal 2014 operating results with fiscal 2013, as these operations are recorded in their local currency and translated into the U.S. dollar reporting currency. In South Korea, the change in rates had an immaterial impact on results when compared to prior year. In Brazil and Canada, the U.S. dollar is the functional currency due to predominantly U.S. dollar selling prices while our operating costs are predominately denominated in the Brazilian real and the Canadian dollar. The stronger U.S. dollar compared to the Brazilian real and the Canadian dollar resulted in a favorable remeasurement of our operating costs into the U.S. dollar in fiscal 2014 compared to fiscal 2013.

The impact of foreign exchange remeasurement, net of the related hedges, was a net gain of $7 million in fiscal 2014 and a net gain of $10 million in fiscal 2013 due primarily to gains on the Brazilian real denominated liabilities being remeasured to the U.S. dollar, partially offset by our hedging losses on these liabilities. For other foreign currency hedging programs, the unrealized gains or losses on undesignated derivatives are recognized in the statement of operations prior to the hedged transaction. The movement of currency exchange rates during fiscal 2014 and fiscal 2013 resulted in $3 million and $14 million of unrealized losses on undesignated foreign currency derivatives (excluding balance sheet remeasurement hedges), respectively, which were not recognized in the statement of operations in the same period as the hedged transaction.

See Segment Review below for the impact of foreign currency on each of our segments.

Year Ended March 31, 2014 Compared with the Year Ended March 31, 2013

"Net sales" were $9.8 billion, which was flat compared to the prior year. Factors impacting "Net sales" include a 10% decrease in average aluminum prices, lower sales due to the sale of three foil and packaging plants in Europe in the prior year, and a decline in conversion premiums in our can products driven by global competitive market conditions, which were offset by higher shipments of automotive, can and non-FRP, and favorable foreign currency translation.

“Cost of goods sold (exclusive of depreciation and amortization)” was $8.5 billion, which was flat compared to the prior year. Factors impacting "Cost of goods sold (exclusive of depreciation and amortization)" include lower average aluminum prices, cost reductions from utilizing more recycled metal, incremental costs we incurred in the prior year related to supply disruptions from our ERP implementation that didn't recur this year, cost reductions due to an amendment we made to a non-union retiree medical plan in the current year, and lower costs due to the sale of three foil and packaging plants in Europe in the prior year. Offsetting these declines were higher total shipments, reduction in the benefits from utilizing recycled metal due to lower average aluminum prices and a reduction in the discount off primary aluminum prices for the procurement of recycled metal. Total metal input costs included in "Cost of goods sold (exclusive of depreciation and amortization)” declined $176 million.

“Income before income taxes” for the year ended March 31, 2014 was $115 million, which compared to $286 million reported in the year ended March 31, 2013. In addition to the factors noted above, the following items affected “Income before income taxes:”