Form: 8-K

Current report filing

November 2, 2017

Documents

Exhibit 99.1
novelislogonewa01.jpg
News Release

Novelis Reports Record Fiscal 2018 Second Quarter Results
Company performance delivers best-ever quarterly results; raises FY18 guidance

Second Quarter Fiscal Year 2018 Highlights
•
Net income a record $307 million; excluding special items, net income increased 30% YoY
•
Record Adjusted EBITDA increased 12% YoY from $270 million to $302 million
•
Net Sales increased 18% YoY to $2.8 billion
•
Record shipments of 802 kilotonnes increased 4% YoY; automotive shipments increased 12%
•
Received $314 million in cash proceeds for joint venture transaction at Ulsan Aluminum
•
Raised full fiscal year 2018 Adjusted EBITDA guidance to $1,150-$1,200 million

ATLANTA, November 2, 2017 – Novelis, the world leader in aluminum rolling and recycling, today reported net income of $307 million for the second quarter of fiscal year 2018, compared to a net loss of $89 million in the prior year period. Excluding tax-affected special items in both years, the company reported net income of $78 million in the second quarter of fiscal 2018, up from $60 million reported in the second quarter of fiscal 2017.
The increase in net income, excluding special items, is mainly due to a 12 percent increase in Adjusted EBITDA to a record high $302 million for the second quarter of fiscal 2018. The year-over-year improvement in Adjusted EBITDA is primarily a result of higher shipments, favorable metal costs and operational efficiencies, partially offset by lower beverage can pricing. Adjusted EBITDA reached $377 per ton in the quarter.
Net sales increased 18 percent over the prior year to $2.8 billion for the second quarter of fiscal 2018, driven by higher average aluminum prices and higher total shipments. Shipments of flat rolled products increased four percent to an all-time quarterly record 802 kilotonnes. All regions reported higher total shipments year-over-year. Automotive sheet shipments increased 12 percent, as production has continued to successfully ramp to meet strong customer demand in this growing market.
“As an industry, we are seeing increasing demand for lightweight, high-strength aluminum from global automotive customers based on aluminum’s ability to provide equal or better quality, strength and safety compared to other materials,” said Steve Fisher, President and Chief Executive Officer for Novelis. “At Novelis, our strategy to grow alongside our customers who are adopting innovative aluminum solutions to meet their design, performance and sustainability needs has resulted in a strong balance sheet and the ability to raise our full year guidance. With this increased strategic flexibility we are now actively seeking organic investment opportunities to further expand our leadership position in the growing automotive aluminum sector.”
The company reported free cash flow of $101 million for the second quarter of fiscal 2018, despite a significant rise in aluminum prices during the quarter. The $57 million improvement in free cash flow over the prior year is primarily a result of higher Adjusted EBITDA and lower cash interest payments due to refinancing savings and timing. Capital expenditures in the second quarter of fiscal 2018 were $43 million, $3 million less than the prior year.

1


"Our continued strong financial performance and proceeds from the Ulsan joint venture transaction further improved our net leverage position in the quarter, and we remain on track to generate record free cash flow this fiscal year,” said Devinder Ahuja, Senior Vice President and Chief Financial Officer for Novelis.
As of September 30, 2017, the company reported a very strong liquidity position of $1.6 billion.

Full Year Fiscal 2018 Guidance
With strong first half performance and positive momentum going into the second half of the fiscal year, the company raises its fiscal 2018 Adjusted EBITDA guidance to be between $1,150-$1,200 million for the full year. The guidance for fiscal 2018 free cash flow to be between $400-450 million is unchanged, as the company balances working capital headwinds due to higher average aluminum prices with a stronger Adjusted EBITDA outlook.
(in $ millions)
Revised Guidance
 
Previous Guidance
Adjusted EBITDA
$1,150-$1,200
 
$1,100-$1,150
Free Cash Flow
$400-$450
 
$400-$450

Second Quarter of Fiscal Year 2018 Earnings Conference Call
Novelis will discuss its second quarter of fiscal year 2018 results via a live webcast and conference call for investors at 10:30 a.m. ET on Thursday, November 2, 2017. To view slides and listen only, visit the web at https://cc.callinfo.com/r/1erixr8ypzgbq&eom. To join by telephone, dial toll-free in North America at 800 920 4317, India toll-free at 18002662118 or the international toll line at +1 212 231 2925. 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 10 countries, has approximately 11,000 employees and reported $10 billion in revenue for its 2017 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. Novelis is a subsidiary of Hindalco Industries Limited, an industry leader in aluminum and copper, and metals flagship company 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, Free Cash Flow, Reconciliation to Liquidity, Reconciliation to Net Income excluding Certain Items, and Segment Information.


2

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 the company's ability to achieve record free cash flow for fiscal 2018. 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; 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, 2017 are specifically incorporated by reference into this news release.

Media Contact:
 
Investor Contact:
Matthew Bianco
 
Megan Cochard
+1 404 760 4159
 
+1 404 760 4170
matthew.bianco@novelis.adityabirla.com
 
megan.cochard@novelis.adityabirla.com












3


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

 
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net sales
$
2,794

 
$
2,361

 
$
5,463

 
$
4,657

Cost of goods sold (exclusive of depreciation and amortization)
2,361

 
1,980

 
4,622

 
3,910

Selling, general and administrative expenses
124

 
108

 
230

 
200

Depreciation and amortization
91

 
90

 
181

 
179

Interest expense and amortization of debt issuance costs
64

 
81

 
128

 
164

Research and development expenses
16

 
14

 
31

 
27

Gain on assets held for sale
—

 
(1
)
 
—

 
(2
)
(Gain) loss on sale of a business, net
(318
)
 
27

 
(318
)
 
27

Loss on extinguishment of debt
—

 
112

 
—

 
112

Restructuring and impairment, net
7

 
1

 
8

 
3

Equity in net loss of non-consolidated affiliates
1

 
—

 
1

 
—

Other expense, net
25

 
11

 
13

 
39

 
2,371

 
2,423

 
4,896

 
4,659

Income (loss) before income taxes
423

 
(62
)
 
567

 
(2
)
Income tax provision
116

 
27

 
159

 
63

Net income (loss)
307

 
(89
)
 
408

 
(65
)
Net income attributable to noncontrolling interests
—

 
—

 
—

 
—

Net income (loss) attributable to our common shareholder
$
307

 
$
(89
)
 
$
408

 
$
(65
)























4

Novelis Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions, except number of shares)
 
September 30,
2017
 
March 31,
2017
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
949

 
$
594

Accounts receivable, net
 
 
 
— third parties (net of uncollectible accounts of $7 and $6 as of September 30, 2017 and March 31, 2017)
1,290

 
1,067

— related parties
180

 
60

Inventories
1,488

 
1,333

Prepaid expenses and other current assets
118

 
137

Fair value of derivative instruments
71

 
113

Assets held for sale
3

 
3

Total current assets
4,099

 
3,307

Property, plant and equipment, net
3,067

 
3,357

Goodwill
607

 
607

Intangible assets, net
433

 
457

Investment in and advances to non–consolidated affiliates
799

 
451

Deferred income tax assets
80

 
86

Other long–term assets
 
 
 
— third parties
96

 
94

— related parties
8

 
15

Total assets
$
9,189

 
$
8,374

LIABILITIES AND SHAREHOLDER’S EQUITY (DEFICIT)
 
 
 
Current liabilities
 
 
 
Current portion of long–term debt
$
144

 
$
121

Short–term borrowings
342

 
294

Accounts payable
 
 
 
— third parties
1,957

 
1,722

— related parties
57

 
51

Fair value of derivative instruments
125

 
151

Accrued expenses and other current liabilities
558

 
580

Total current liabilities
3,183

 
2,919

Long–term debt, net of current portion
4,403

 
4,437

Deferred income tax liabilities
142

 
98

Accrued postretirement benefits
803

 
799

Other long–term liabilities
232

 
198

Total liabilities
8,763

 
8,451

Commitments and contingencies
 
 
 
Shareholder’s equity (deficit)
 
 
 
Common stock, no par value; unlimited number of shares authorized;
1,000 shares issued and outstanding as of September 30, 2017 and March 31, 2017
—

 
—

Additional paid–in capital
1,404

 
1,404

Accumulated deficit
(510
)
 
(918
)
Accumulated other comprehensive loss
(450
)
 
(545
)
Total equity (deficit) of our common shareholder
444

 
(59
)
Noncontrolling interests
(18
)
 
(18
)
Total equity (deficit)
426

 
(77
)
Total liabilities and equity (deficit)
$
9,189

 
$
8,374


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Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in millions)
 
Six Months Ended September 30,
 
2017
 
2016
OPERATING ACTIVITIES
 
 
 
Net income (loss)
$
408

 
$
(65
)
Adjustments to determine net cash provided by operating activities:
 
 
 
Depreciation and amortization
181

 
179

Loss (gain) on unrealized derivatives and other realized derivatives in investing activities, net
12

 
(1
)
Gain on assets held for sale
—

 
(2
)
(Gain) loss on sale of business
(318
)
 
27

Loss on sale of assets
2

 
6

Impairment charges
6

 
—

Loss on extinguishment of debt
—

 
112

Deferred income taxes
47

 
(4
)
Amortization of fair value adjustments, net
—

 
6

Equity in net loss of non-consolidated affiliates
1

 
—

(Gain) loss on foreign exchange remeasurement of debt
(2
)
 
2

Amortization of debt issuance costs and carrying value adjustments
10

 
9

Other, net
4

 
—

Changes in assets and liabilities including assets and liabilities held for sale (net of effects from divestitures):
 
 
 
Accounts receivable
(310
)
 
(159
)
Inventories
(107
)
 
(115
)
Accounts payable
163

 
22

Other current assets
26

 
6

Other current liabilities
(31
)
 
(90
)
Other noncurrent assets
(2
)
 
(9
)
Other noncurrent liabilities
4

 
49

Net cash provided by (used in) operating activities
94

 
(27
)
INVESTING ACTIVITIES
 
 
 
Capital expenditures
(82
)
 
(90
)
Proceeds from sales of assets, third party, net of transaction fees and hedging
1

 
1

Proceeds (outflows) from the sale of a business, net of certain transaction fees
314

 
(13
)
Proceeds from investment in and advances to non-consolidated affiliates, net
8

 
9

Proceeds from settlement of other undesignated derivative instruments, net
1

 
6

Net cash provided by (used in) investing activities
242

 
(87
)
FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of long-term and short-term borrowings
—

 
2,765

Principal payments of long-term and short-term borrowings
(64
)
 
(2,609
)
Revolving credit facilities and other, net
88

 
(3
)
Debt issuance costs
(4
)
 
(134
)
Net cash provided by financing activities
20

 
19

Net increase (decrease) in cash and cash equivalents
356

 
(95
)
Effect of exchange rate changes on cash
(1
)
 
12

Cash and cash equivalents — beginning of period
594

 
556

Cash and cash equivalents — end of period
$
949

 
$
473




6

Reconciliation of Net income (loss) attributable to our common shareholder to Adjusted EBITDA (unaudited)
The following table reconciles Net income (loss) attributable to our common shareholder to Adjusted EBITDA, a non-GAAP financial measure, for the three and six months ended September 30, 2017 and 2016.
(in millions)
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net income (loss) attributable to our common shareholder
$
307

 
$
(89
)
 
$
408

 
$
(65
)
Income tax provision
116

 
27

 
159

 
63

Interest, net
62

 
79

 
124

 
159

Depreciation and amortization
91

 
90

 
181

 
179

EBITDA
576

 
107

 
872

 
336

 
 
 
 
 
 
 
 
Unrealized losses (gains) on change in fair value of derivative instruments, net
18

 
(4
)
 
2

 
3

Realized gains on derivative instruments not included in segment income
—

 
—

 
(1
)
 
(1
)
Adjustment to reconcile proportional consolidation
8

 
8

 
16

 
16

Loss on sale of fixed assets
1

 
2

 
2

 
6

Gain on assets held for sale
—

 
(1
)
 
—

 
(2
)
Loss on extinguishment of debt
—

 
112

 
—

 
112

Restructuring and impairment, net
7

 
1

 
8

 
3

(Gain) loss on sale of a business, net
(318
)
 
27

 
(318
)
 
27

Metal price lag (A)
5

 
14

 
6

 
27

Other, net
5

 
4

 
4

 
11

Adjusted EBITDA
$
302

 
$
270

 
$
591

 
$
538


(A)
Effective in the first quarter of fiscal 2018, management removed the impact of metal price lag from Adjusted EBITDA in order to enhance the visibility of the underlying operating performance of the company. The impact of metal price lag is now reported as a separate line item in this reconciliation. This change does not impact our condensed consolidated financial statements. Adjusted EBITDA for the prior period presented has been updated to reflect this change.

Free Cash Flow (unaudited)
The following table shows “Free cash flow” for the six months ended September 30, 2017 and 2016.
 (in millions)
Six Months Ended September 30,
 
2017
 
2016
Net cash used in operating activities
$
94

 
(27
)
Net cash used in investing activities
242

 
(87
)
Less: Proceeds from the sale of a business, net of transaction fees, cash income taxes and hedging
(312
)
 
12

Free cash flow (A)
$
24

 
$
(102
)

(A)
Effective in the second quarter of fiscal 2018, management clarified the definition of “Free cash flow” (a non-GAAP measure) to reduce "Proceeds on the sale of assets, net of transaction fees and hedging" by cash income taxes to further enable users of the financial statements to understand cash generated internally by the company. This change does not impact the condensed consolidated financial statements or significantly impact prior periods.

7



Cash and Cash Equivalents and Total Liquidity (unaudited)
The following table reconciles the ending balances of cash and cash equivalents to total liquidity as of September 30, 2017 and March 31, 2017.
(in millions)
September 30, 2017
 
March 31,
 2017
Cash and cash equivalents
$
949

 
$
594

Availability under committed credit facilities
700

 
701

Total liquidity
$
1,649

 
$
1,295


Reconciliation of Net income (loss) attributable to our common shareholder to Net income attributable to our common shareholder, excluding special items (unaudited)
The following table presents Net Income attributable to our common shareholder excluding special items. We adjust for items which may recur in varying magnitude which affect the comparability of the operational results of our underlying business.
(in millions)
Three Months Ended September 30,
 
Six Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net income (loss) attributable to our common shareholder
$
307

 
$
(89
)
 
$
408

 
$
(65
)
Special Items:
 
 
 
 
 
 
 
Gain on assets held for sale
—

 
(1
)
 
—

 
(2
)
(Gain) loss on sale of a business, net
(318
)
 
27

 
(318
)
 
27

Loss on extinguishment of debt
—

 
112

 
—

 
112

Metal price lag
5

 
14

 
6

 
27

Restructuring and impairment, net
7

 
1

 
8

 
3

Tax effect on special items
77

 
(4
)
 
77

 
(9
)
Net income attributable to our common shareholder, excluding special items
$
78

 
$
60

 
$
181

 
$
93


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, 2017
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA (A)
 
$
124

 
$
51

 
$
37

 
$
90

 
$
—

 
$
302

 
 
 
 
 
 
 
 
 
 
 
 
 
Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
270

 
234

 
178

 
120

 
—

 
802

Rolled products - intersegment
 
4

 
3

 
2

 
11

 
(20
)
 
—

Total rolled products
 
274

 
237

 
180

 
131

 
(20
)
 
802


8

Selected Operating Results Three Months Ended September 30, 2016
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA (A)
 
$
93

 
$
49

 
$
46

 
$
82

 
$
—

 
$
270

 
 
 
 
 
 
 
 
 
 
 
 
 
Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
252

 
232

 
175

 
114

 
—

 
773

Rolled products - intersegment
 
—

 
4

 
1

 
7

 
(12
)
 
—

Total rolled products
 
252

 
236

 
176

 
121

 
(12
)
 
773



Selected Operating Results Six Months Ended September 30, 2017
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA (A)
 
$
240

 
$
108

 
$
81

 
$
162

 
$
—

 
$
591

 
 
 
 
 
 
 
 
 
 
 
 
 
Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
541

 
465

 
354

 
227

 
—

 
1,587

Rolled products - intersegment
 
6

 
7

 
6

 
14

 
(33
)
 
—

Total rolled products
 
547

 
472

 
360

 
241

 
(33
)
 
1,587


Selected Operating Results Six Months Ended September 30, 2016
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA (A)
 
$
186

 
$
106

 
$
92

 
$
154

 
$
—

 
$
538

 
 
 
 
 
 
 
 
 
 
 
 
 
Shipments
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
493

 
473

 
351

 
211

 
—

 
1,528

Rolled products - intersegment
 
1

 
9

 
3

 
13

 
(26
)
 
—

Total rolled products
 
494

 
482

 
354

 
224

 
(26
)
 
1,528



(A)
Effective in the first quarter of fiscal 2018, management removed the impact of metal price lag from Adjusted EBITDA. Adjusted EBITDA for prior periods presented has been updated to reflect this change.

9