Form: 8-K

Current report filing

November 9, 2015

Documents


Exhibit 99.1
  
News Release

Novelis Reports Second Quarter of Fiscal Year 2016 Results
Strategic portfolio shift towards premium products delivering results

Second Quarter Fiscal Year 2016 Highlights
•
Net loss of $13 million; excluding special items, net income $25 million
•
Adjusted EBITDA excluding metal price lag of $236 million, up 7% YoY, up 11% versus Q1
•
Record global FRP shipments of 788 kilotonnes up 3% YoY and versus Q1
•
Record automotive shipments up 59% YoY, up 6% versus Q1
•
Generated $140 million of free cash flow

ATLANTA, November 9, 2015 – Novelis, the world leader in aluminum rolling and recycling, today reported a net loss of $13 million for second quarter of fiscal year 2016.  Excluding tax-effected special items, the company reported net income of $25 million in the second quarter of fiscal 2016 compared to $36 million in the second quarter of fiscal 2015.
Excluding the impact of metal price lag in both periods, Adjusted EBITDA was $236 million in the second quarter of fiscal 2016, up seven percent compared to $221 million in the prior year. The increase was driven by higher shipments of premium automotive and beverage can sheet, partially offset by less favorable recycling benefits due to lower aluminum prices as compared to the prior year. Current year results also reflect higher costs associated with the start-up and support of new automotive finishing and recycling capacity. However, the company has made good progress reducing new asset start-up costs on a sequential basis. Adjusted EBITDA excluding metal price lag increased eleven percent in the second quarter of fiscal 2016 from $212 million reported in the first quarter of fiscal 2016, primarily driven by higher shipments, better product mix and lower start-up costs.
"Our focus on growing premium can, automotive and high-end specialty shipments, managing costs and reducing working capital is delivering results," said Steve Fisher, President and Chief Executive Officer for Novelis. "We are leveraging new assets, reducing start-up costs, and building momentum in our expanded automotive and can sheet businesses. We are now commissioning our two most recently constructed automotive lines in the US and Germany and solidifying our position as the global leader in aluminum flat rolled products."
Shipments of rolled aluminum products totaled a record 788 kilotonnes in the second quarter of fiscal 2016, a three percent increase compared to 765 kilotonnes reported in the prior year period. However, sharply lower average aluminum prices and local market premiums drove a twelve percent decrease in revenues to $2.5 billion for the second quarter of fiscal 2016 compared to $2.8 billion in fiscal 2015. 
Average local market metal premiums continued to decline in the second quarter of fiscal 2016 creating negative metal price lag of $54 million. Although the company uses derivatives contracts to minimize the price lag associated with LME base aluminum prices, it does not use derivative contracts for local market premiums, as adequate cost-effective hedges are not available. Adjusted EBITDA for the second quarter of fiscal 2016 including metal price lag was $182 million.


1


(in $M)
 
 
 
Three Months Ended
 
 
 
 
 
9/30/2015
 
9/30/2014
 
Free Cash Flow
 
$
140

 
$
(108
)
 
Capital Expenditures
 
$
75

 
$
126

 

The company generated $140 million of free cash flow in the second quarter of fiscal 2016 as compared to negative $108 million in the second quarter of fiscal 2015. The increase over the prior year was primarily a result of lower capital expenditures, as well as a reduction in working capital attributed to lower metal prices and the company's focus on reducing inventory levels. The company continues to expect positive free cash flow for the full fiscal year after spending approximately $400 million on capital expenditures.
As of September 30, 2015, the company reported solid liquidity of $968 million.

Second Quarter of Fiscal Year 2016 Earnings Conference Call
Novelis will discuss its second quarter of fiscal year 2016 results via a live webcast and conference call for investors at 8:00 a.m. ET on Monday, November 9, 2015. To view slides and listen only, visit the web at
https://cc.callinfo.com/r/1n2iqpaihaa3e&eom. To join by telephone, dial toll-free in North America at 800 954 0625, India toll-free at 0008008521504 or the international toll line at +1 212 231 2936. Presentation materials and access information may also be found at 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 11 countries, has approximately 11,500 employees and reported $11.1 billion in revenue for its 2015 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 a subsidiary of Hindalco Industries Limited, part of the Aditya Birla Group, a multinational conglomerate based in Mumbai, India. For more information, visit novelis.com and follow us on Facebook at facebook.com/NovelisInc and 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 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 and Adjusted EBITDA excluding Metal Price Lag, Free Cash Flow, Reconciliation to Liquidity, Reconciliation to Net (Loss) Income 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,"

2

"anticipates," "plans," "estimates," "projects," "forecasts," or similar expressions.  An example of forward looking statements in this news release is the company's expectation for positive free cash flow for the full fiscal year. 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 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; 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 credit facilities and other financing agreements; the effect of taxes and changes in tax rates; our level of 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, 2015 are specifically incorporated by reference into this news release.

Media Contact:
 
Investor Contact:
Charles Belbin
 
Megan Cochard
+1 404 760 4122
 
+1 404 760 4170
charles.belbin@novelis.com
 
megan.cochard@novelis.com

3



Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in millions)



 
 
 
 
 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net sales
$
2,482

 
$
2,831

 
$
5,116

 
$
5,511

Cost of goods sold (exclusive of depreciation and amortization)
2,241

 
2,483

 
4,641

 
4,812

Selling, general and administrative expenses
100

 
103

 
200

 
211

Depreciation and amortization
89

 
90

 
176

 
179

Interest expense and amortization of debt issuance costs
82

 
82

 
162

 
163

Research and development expenses
13

 
12

 
26

 
24

Gain on assets held for sale
—

 
—

 
—

 
(11
)
Loss on extinguishment of debt
—

 
—

 
13

 
—

Restructuring and impairment, net
4

 
7

 
19

 
13

Equity in net loss of non-consolidated affiliates
1

 
—

 
2

 
2

Other (income) expense, net
(32
)
 
18

 
(62
)
 
23

 
2,498

 
2,795

 
5,177

 
5,416

(Loss) income before income taxes
(16
)
 
36

 
(61
)
 
95

Income tax (benefit) provision
(3
)
 
(2
)
 
12

 
22

Net (loss) income
(13
)
 
38

 
(73
)
 
73

Net income attributable to noncontrolling interests
—

 
—

 
—

 
—

Net (loss) income attributable to our common shareholder
$
(13
)
 
$
38

 
$
(73
)
 
$
73


























4

Novelis Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions, except number of shares)
 
September 30, 2015
 
March 31, 2015
ASSETS
 
Current assets
 
 
 
Cash and cash equivalents
$
462

 
$
628

Accounts receivable, net
 
 
 
— third parties (net of uncollectible accounts of $3 as of September 30, 2015 and March 31, 2015)
1,155

 
1,289

— related parties
55

 
53

Inventories
1,349

 
1,431

Prepaid expenses and other current assets
104

 
112

Fair value of derivative instruments
102

 
77

Deferred income tax assets
43

 
79

Assets held for sale
5

 
6

Total current assets
3,275

 
3,675

Property, plant and equipment, net
3,488

 
3,542

Goodwill
607

 
607

Intangible assets, net
566

 
584

Investment in and advances to non–consolidated affiliate
464

 
447

Deferred income tax assets
95

 
95

Other long–term assets
 
 
 
— third parties
116

 
137

— related parties
19

 
15

Total assets
$
8,630

 
$
9,102

LIABILITIES AND SHAREHOLDER’S DEFICIT
 
 
 
Current liabilities
 
 
 
Current portion of long–term debt
$
102

 
$
108

Short–term borrowings
901

 
846

Accounts payable
 
 
 
— third parties
1,435

 
1,854

— related parties
49

 
44

Fair value of derivative instruments
159

 
149

Accrued expenses and other current liabilities
593

 
572

Deferred income tax liabilities
1

 
20

Total current liabilities
3,240

 
3,593

Long–term debt, net of current portion
4,418

 
4,349

Deferred income tax liabilities
196

 
261

Accrued postretirement benefits
765

 
748

Other long–term liabilities
185

 
221

Total liabilities
8,804

 
9,172

Commitments and contingencies
 
 
 
Shareholder’s deficit
 
 
 
Common stock, no par value; unlimited number of shares authorized; 1,000 shares issued and outstanding as of September 30, 2015 and March 31, 2015
—

 
—

Additional paid–in capital
1,404

 
1,404

Accumulated deficit
(998
)
 
(925
)
Accumulated other comprehensive loss
(589
)
 
(561
)
Total deficit of our common shareholder
(183
)
 
(82
)
Noncontrolling interests
9

 
12

Total deficit
(174
)
 
(70
)
Total liabilities and deficit
$
8,630

 
$
9,102


5


Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in millions)
 
Six Months Ended September 30,
 
2015
 
2014
OPERATING ACTIVITIES
 
 
 
Net (loss) income
$
(73
)
 
$
73

Adjustments to determine net cash used in operating activities:
 
 
 
Depreciation and amortization
176

 
179

(Gain) loss on unrealized derivatives and other realized derivatives in investing activities, net
(12
)
 
14

Gain on assets held for sale
—

 
(11
)
Loss on sale of assets
1

 
3

Impairment charges
2

 
—

Loss on extinguishment of debt
13

 
—

Deferred income taxes
(44
)
 
(18
)
Amortization of fair value adjustments, net
6

 
6

Equity in net loss of non-consolidated affiliates
2

 
2

Gain on foreign exchange remeasurement of debt
(6
)
 
(3
)
Amortization of debt issuance costs and carrying value adjustments
10

 
13

Other, net
—

 
(1
)
Changes in assets and liabilities including assets and liabilities held for sale (net of effects from divestitures):
 
 
 
Accounts receivable
127

 
(187
)
Inventories
87

 
(369
)
Accounts payable
(384
)
 
295

Other current assets
10

 
(29
)
Other current liabilities
25

 
27

Other noncurrent assets
19

 
(2
)
Other noncurrent liabilities
(22
)
 
(5
)
Net cash used in operating activities
(63
)
 
(13
)
INVESTING ACTIVITIES
 
 
 
Capital expenditures
(204
)
 
(264
)
Proceeds from sales of assets, third party, net of transaction fees and hedging
1

 
34

Outflows from investments in and advances to non-consolidated affiliates, net
(4
)
 
(11
)
(Outflows) proceeds from settlement of other undesignated derivative instruments, net
(14
)
 
3

Net cash used in investing activities
(221
)
 
(238
)
FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of long-term and short-term borrowings
140

 
198

Principal payments of long-term and short-term borrowings
(135
)
 
(126
)
Revolving credit facilities and other, net
123

 
248

Return of capital to our common shareholder
—

 
(250
)
Dividends, noncontrolling interest
(1
)
 
(1
)
Debt issuance costs
(13
)
 
—

Net cash provided by financing activities
114

 
69

Net decrease in cash and cash equivalents
(170
)
 
(182
)
Effect of exchange rate changes on cash
4

 
(1
)
Cash and cash equivalents — beginning of period
628

 
509

Cash and cash equivalents — end of period
$
462

 
$
326




6


Reconciliation from Net (Loss) Income Attributable to our Common Shareholder to Adjusted EBITDA, and Adjusted EBITDA excluding Metal Price Lag (unaudited)
Novelis is providing disclosure of the reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis. To better analyze underlying operational results, the following table also shows Adjusted EBITDA to Adjusted EBITDA excluding the impact of non-operational Metal Price Lag. 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.
(in millions)
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net (loss) income attributable to our common shareholder
$
(13
)
 
$
38

 
$
(73
)
 
$
73

Income tax benefit (provision)
3

 
2

 
(12
)
 
(22
)
Interest, net
(80
)
 
(80
)
 
(158
)
 
(160
)
Depreciation and amortization
(89
)
 
(90
)
 
(176
)
 
(179
)
EBITDA
153

 
206

 
273

 
434

 
 
 
 
 
 
 
 
Unrealized (losses) gains on change in fair value of derivative instruments, net
(15
)
 
(1
)
 
20

 
—

Realized losses on derivative instruments not included in segment income
(3
)
 
—

 
(2
)
 
(1
)
Adjustment to eliminate proportional consolidation
(8
)
 
(9
)
 
(15
)
 
(17
)
Loss on sale of fixed assets
—

 
(2
)
 
(1
)
 
(3
)
Gain on assets held for sale
—

 
—

 
—

 
11

Loss on extinguishment of debt
—

 
—

 
(13
)
 
—

Restructuring and impairment, net
(4
)
 
(7
)
 
(19
)
 
(13
)
Other expense, net
1

 
(5
)
 
(6
)
 
(8
)
Adjusted EBITDA   
$
182

 
$
230

 
$
309

 
$
465

 
 
 
 
 
 
 
 
Metal price lag
(54
)
 
9

 
(139
)
 
11

Adjusted EBITDA excluding metal price lag
$
236

 
$
221

 
$
448

 
$
454


Free Cash Flow and Cash and Cash Equivalents (unaudited)
The following table shows the “Free cash flow” for the six months ended September 30, 2015 and 2014 and the ending balances of cash and cash equivalents (in millions).
 
 
Six Months Ended September 30,
 
2015
 
2014
Net cash used in operating activities
$
(63
)
 
$
(13
)
Net cash used in investing activities
(221
)
 
(238
)
Less: Proceeds from sales of assets, net of transaction fees and hedging
(1
)
 
(34
)
Free cash flow
$
(285
)
 
$
(285
)
Ending cash and cash equivalents
$
462

 
$
326


Total Liquidity (unaudited)
The following table shows available liquidity as of September 30, 2015 and March 31, 2015 (in millions).
 
September 30,
 
March 31,
 
2015
 
2015
Cash and cash equivalents
$
462

 
$
628

Availability under committed credit facilities
506

 
510

Total liquidity
$
968

 
$
1,138



7


Reconciliation of Net (Loss) Income to Net Income, excluding Special Items (unaudited)
The following table shows Net (Loss) Income attributable to our common shareholder excluding special items (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,
 
Six Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Net (loss) income attributable to our common shareholder
$
(13
)
 
$
38

 
$
(73
)
 
$
73

Special Items:
 
 
 
 
 
 
 
Gain on assets held for sale
—

 
—

 
—

 
(11
)
Loss on extinguishment of debt
—

 
—

 
13

 
—

Metal price lag
54

 
(9
)
 
139

 
(11
)
Restructuring and impairment, net
4

 
7

 
19

 
13

Tax effect on Special Items
(20
)
 
—

 
(49
)
 
—

Net income attributable to our common shareholder, excluding special items
$
25

 
$
36

 
$
49

 
$
64


Segment Information (unaudited)
The following table shows selected segment financial information (in millions, except shipments which are in kilotonnes).
Selected Operating Results Three Months Ended September 30, 2015
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
53

 
$
41

 
$
34

 
$
54

 
$
—

 
$
182

Metal price lag
 
(37
)
 
(15
)
 
(5
)
 
3

 
—

 
(54
)
Adjusted EBITDA excluding metal price lag
 
$
90

 
$
56

 
$
39

 
$
51

 
$
—

 
$
236

Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
268

 
235

 
173

 
112

 
—

 
788

Rolled products - intersegment
 
1

 
15

 
14

 
5

 
(35
)
 
—

Total rolled products
 
269

 
250

 
187

 
117

 
(35
)
 
788

Selected Operating Results Three Months Ended September 30, 2014
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
76

 
$
75

 
$
36

 
$
41

 
$
2

 
$
230

Metal price lag
 
6

 
2

 
—

 
1

 
—

 
9

Adjusted EBITDA excluding metal price lag
 
$
70

 
$
73

 
$
36

 
$
40

 
$
2

 
$
221

Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
259

 
225

 
173

 
108

 
—

 
765

Rolled products - intersegment
 
1

 
9

 
13

 
8

 
(31
)
 
—

Total rolled products
 
260

 
234

 
186

 
116

 
(31
)
 
765

Selected Operating Results Six Months Ended September 30, 2015
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
95

 
$
32

 
$
70

 
$
113

 
$
(1
)
 
$
309

Metal price lag
 
(63
)
 
(70
)
 
(8
)
 
2

 
—

 
(139
)
Adjusted EBITDA excluding metal price lag
 
$
158

 
$
102

 
$
78

 
$
111

 
$
(1
)
 
$
448

Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
529

 
466

 
355

 
206

 
—

 
1,556

Rolled products - intersegment
 
1

 
36

 
25

 
18

 
(80
)
 
—

Total rolled products
 
530

 
502

 
380

 
224

 
(80
)
 
1,556


8

Selected Operating Results Six Months Ended September 30, 2014
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
140

 
$
154

 
$
73

 
$
96

 
$
2

 
$
465

Metal price lag
 
5

 
7

 
—

 
(1
)
 
—

 
11

Adjusted EBITDA excluding metal price lag
 
$
135

 
$
147

 
$
73

 
$
97

 
$
2

 
$
454

Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
507

 
460

 
351

 
217

 
—

 
1,535

Rolled products - intersegment
 
2

 
20

 
23

 
13

 
(58
)
 
—

Total rolled products
 
509

 
480

 
374

 
230

 
(58
)
 
1,535




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