May 8, 2019 - 10-K: Annual report pursuant to Section 13 and 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 10-K



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2019



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 001-32312

Novelis Inc.

(Exact name of Registrant as specified in its charter)



Canada		98-0442987
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
3560 Lenox Road, Suite 2000, Atlanta, GA		30326
(Address of principal executive offices)		(Zip Code)

(404) 760-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. 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 ý No ¨

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 ¨ No ý

The Registrant is a voluntary filer and is not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. However, the Registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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 7, 2019, 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.

DOCUMENTS INCORPORATED BY REFERENCE: None

TABLE OF CONTENTS



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA
PART I
Item 1. Business	4
Item 1A. Risk Factors	15
Item 1B. Unresolved Staff Comments	22
Item 2. Properties	22
Item 3. Legal Proceedings	24
Item 4. Mine Safety Disclosures	24
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	25
Item 6. Selected Financial Data	25
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	49
Item 8. Financial Statements and Supplementary Data	52
Item 9. Changes In and Disagreements With Accountants On Accounting and Financial Disclosure	125
Item 9A. Controls and Procedures	125
Item 9B. Other Information	125
PART III
Item 10. Directors, Executive Officers and Corporate Governance	126
Item 11. Executive Compensation	131
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	145
Item 13. Certain Relationships and Related Transactions and Director Independence	146
Item 14. Principal Accountant Fees and Services	147
PART IV
Item 15. Exhibits and Financial Statement Schedules	148
Item 16. Form 10-K Summary	153

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA

This document contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about the industry in which we operate, and beliefs and assumptions made by our management. Such statements include, in particular, statements about our plans, strategies and prospects under the headings “Item 1. Business,” “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and variations of such words and similar expressions are intended to identify such forward-looking statements. Examples of forward-looking statements in this Annual Report on Form 10-K include, but are not limited to, our expectations with respect to the impact of metal price movements on our financial performance; the effectiveness of our hedging programs and controls; and our future borrowing availability. These statements are based on beliefs and assumptions of Novelis’ management, which in turn are based on currently available information. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking 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.

This document also contains information concerning our markets and products generally, which is forward-looking in nature and is based on a variety of assumptions regarding the ways in which these markets and product categories will develop. These assumptions have been derived from information currently available to us and to the third party industry analysts quoted herein. This information includes product shipments. Actual market results may differ from those predicted. We do not know what impact any of these differences may have on our business, our results of operations, financial condition, and cash flow. For a discussion of some of the specific factors that may cause Novelis' actual results to differ materially from those projected in any forward-looking statements, see the following sections of this report: "Part I. Item 1A. Risk Factors", "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Part II. Item 7. Critical Accounting Policies and Estimates."

In this Annual Report on Form 10-K (Form 10-K), unless otherwise specified, the terms “we,” “our,” “us,” “Company,” and “Novelis” refer to Novelis Inc., a company incorporated in Canada under the Canadian Business Corporations Act, and its subsidiaries. References herein to “Hindalco” refer to Hindalco Industries Limited, which acquired Novelis in May 2007. Unless otherwise specified, the period referenced is the current fiscal year.

Exchange Rate Data

We report our financial statements in United States (U.S.) dollars. The following table sets forth exchange rate information expressed in terms of Canadian dollars per U.S. dollar based on exchange data published daily from Citibank as of 16:00 Greenwich Mean Time (GMT) (11:00 A.M. Eastern Standard Time). The rates set forth below may differ from the actual rates used in our accounting processes and in the preparation of our consolidated financial statements.



Period	At Period End	Average Rate (A)	High	Low
Year Ended March 31, 2015	1.2666	1.1467	1.2681	1.0665
Year Ended March 31, 2016	1.2978	1.3115	1.4015	1.2065
Year Ended March 31, 2017	1.3289	1.3137	1.3439	1.2542
Year Ended March 31, 2018	1.2889	1.2826	1.3667	1.2305
Year Ended March 31, 2019	1.3360	1.3141	1.3657	1.2824

________________________


(A)	This represents the average of the 16:00 GMT buying rates on the last day of each month during the period.

All dollar figures herein are in U.S. dollars unless otherwise indicated.

Commonly Referenced Data

As used in this Form 10-K, consolidated “aluminum rolled product shipments,” “flat rolled product shipments,” or "shipments" refers to aluminum rolled product shipments to third parties. “Aluminum rolled product shipments," “flat rolled product shipments,” or "shipments" associated with the regions refers to aluminum rolled product shipments to third parties and intersegment shipments to other Novelis regions. Shipment amounts also include tolling shipments. References to “total shipments” include aluminum rolled product shipments as well as certain other non-rolled product shipments, primarily scrap, used beverage cans (UBCs), ingots, billets, and primary remelt. The term “aluminum rolled products” is synonymous with the terms “flat rolled products” and “FRP” which are commonly used by manufacturers and third party analysts in our industry. All tonnages are stated in metric tonnes. One metric tonne is equivalent to 2,204.6 pounds. One kilotonne (kt) is 1,000 metric tonnes.

A significant amount of our business is conducted under a conversion model, which allows us to pass through increases or decreases in the price of aluminum to our customers. Nearly all of our flat rolled products have a price structure with three components: (i) a base aluminum price quoted off the London Metal Exchange (LME); (ii) a local market premium (LMP); and (iii) a “conversion premium” to produce the rolled product which reflects, among other factors, the competitive market conditions for that product. The use of the term “conversion premium” in this Form 10-K, refers to the conversion costs plus a margin we charge our customers to produce the rolled product which reflects, among other factors, the competitive market conditions for that product, exclusive of the pass through aluminum price.

PART I

Item 1. Business

Overview

Novelis is the leading producer of flat rolled aluminum products and the world's largest recycler of aluminum. We work alongside our customers to provide innovative solutions to the beverage can, automotive and high-end specialty markets. Operating an integrated network of technically advanced rolling and recycling facilities across North America, South America, Europe and Asia, Novelis leverages its global manufacturing and recycling footprint to consistently deliver high-quality products around the world. In fiscal year 2019, we had shipment volumes of 3,419 kt and "Net sales" of $12,326 million for the year ended March 31, 2019.

Our History

Organization and Description of Business

Novelis was formed in Canada on September 21, 2004. On May 15, 2007, Novelis was acquired by Hindalco. All of the common shares of Novelis are owned directly by AV Metals Inc. and indirectly by Hindalco. We produce flat rolled aluminum products and provide innovative solutions to the beverage can, automotive and high-end specialty markets. As of March 31, 2019, we had manufacturing operations in ten countries on four continents: North America, South America, Europe and Asia, through 23 operating facilities, including recycling operations in twelve of these plants.

Our Industry

The aluminum rolled products market represents the global supply of, and demand for, aluminum sheet, plate and foil produced either from sheet ingot or continuously cast roll-stock in rolling mills operated by both independent aluminum rolled products producers and integrated aluminum companies.

Aluminum rolled products are semi-finished aluminum products that constitute the raw material for the manufacture of finished goods ranging from automotive structures and body panels to food and beverage cans. There are two major types of manufacturing processes for aluminum rolled products differing mainly in the process used to achieve the initial stage of processing:


•	hot mills — which require sheet ingot, a rectangular slab of aluminum, as starter material; and


•	continuous casting mills — which can convert molten metal directly into semi-finished sheet.

Both processes require subsequent rolling, which we refer to as cold rolling, and finishing steps such as annealing, coating, leveling or slitting to achieve the desired thickness, width and metal properties. Most customers receive shipments in the form of aluminum coil, a large roll of metal, which can be utilized in their fabrication processes.

Industry Sources of Metal

There are two sources of input material: (1) recycled aluminum, produced by remelting post-industrial and post-consumer scraps; and (2) primary aluminum, produced from alumina (extracted from bauxite), processed in a smelter.

Primary aluminum and sheet ingot can generally be purchased at prices set on the LME, plus a local market premium that varies by geographic region of delivery, alloying material, form (ingot or molten metal) and purity.

Recycled aluminum is generally purchased at a discount compared to the price of primary aluminum depending on type and quality of the scrap, geographic region, and other market factors.

Industry End-use Markets

Aluminum rolled products companies produce and sell a wide range of products, which can be grouped into five end-use markets: (1) packaging; (2) transportation; (3) architectural; (4) industrial; and (5) consumer durables and other. Within each end-use market, aluminum rolled products are manufactured with a variety of alloy mixtures; a range of tempers (hardness), gauges (thickness) and widths; and various coatings and finishes. Large customers typically have customized needs that require close working relationships, including technical development and support with their supplying mills.

Aluminum has a wide variety of uses in end-use markets because of its lightweight, recyclability and formability properties. 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, beverage screw caps and foil, among others. Packaging is the largest aluminum rolled products application, according to market data from Commodity Research Unit International Limited (CRU), an independent business analysis and consultancy group. Beverage cans are one of the largest aluminum rolled products applications. 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 maintains the quality and taste of the product longer. Aluminum cans are light, stackable and use space efficiently, making them convenient and cost-efficient to ship.

Beverage can sheet is sold in coil form for the production of can bodies, ends and tabs. The material can be ordered as rolled, degreased, pre-lubricated, pre-treated and/or lacquered. Typically, can makers define their own specifications for material to be delivered in terms of alloy, gauge, width and surface finish.

Foil wrap or packaging foil is another packaging application and it includes household and institutional aluminum foil. Container foil is used to produce semi-rigid containers such as pie plates and take-out food trays.

Transportation. Aluminum rolled products are used in vehicle structures (also known as "body-in-white") as well as automotive body panel applications, including hoods, doors, deck lids, fenders and lift gates. These uses typically result from cooperative efforts between aluminum rolled products manufacturers and their customers that yield solutions for specific requirements in alloy selection, fabrication procedure, surface quality and joining. There has been recent growth in certain geographic markets in passenger and commercial vehicle 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 driven by government regulations requiring improved emissions and better fuel economy; while also maintaining or improving vehicle performance and safety.

Heat exchangers, such as radiators, air conditioners, and auto fin material, are an important application for aluminum rolled products in the transportation end-use market. Original equipment manufacturers also use aluminum sheet, with specially treated surfaces and other specific properties, for interior and exterior applications. Newly developed alloys are being used in transportation tanks and rigid containers allowing for safer and more economical transportation of hazardous and corrosive materials.

Aluminum is also used in aerospace applications, as well as in the construction of ships’ hulls, superstructures and passenger rail cars because of its strength, light weight, formability and corrosion resistance.

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. Industrial applications include heat exchangers, process and electrical machinery, lighting fixtures, furniture and insulation.

Consumer Durables and Other. Aluminum’s lightweight characteristics, high formability, ability to conduct electricity and dissipate heat and its 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. Other uses of aluminum rolled products in consumer durables include microwaves, coffee makers, air conditioners and cooking utensils.

Market Structure and Competition

The aluminum rolled products market is highly competitive and is characterized by economies of scale; and significant capital investments are required to achieve and maintain technological capabilities and demanding customer qualification standards. Our primary aluminum competitors are as follows:



North America	Asia
Alcoa, Inc. (Alcoa)	Arconic
Aleris Corporation (Aleris)	Binzhou Weiqiao Aluminium Science & Technology Co., Ltd.
Arconic Inc. (Arconic)	China Zhongwang Holdings Limited
Constellium N.V. (Constellium)	Chinalco Group
Golden Aluminum	Henan Mingtai Aluminum Industrial Co., Ltd.
Gränges AB	Henan Zhongfu Industrial Co., Ltd.
Maaden - Saudi Arabian Mining Company	Kobe Steel Ltd. (Kobe)
Shandong Nanshan Aluminum Co., Ltd.	Shandong Nanshan Aluminum Co., Ltd.
UACJ Corporation/ Tri-Arrows Aluminum Inc. (Tri-Arrows)	Southwest Aluminum (Group) Co., Ltd.
	UACJ Corporation
Europe
Aleris	South America
Amag Austria Metall AG	Arconic
Arconic	Companhia Brasileira de Alumínio
Constellium	Hulamin Limited
Elval Hellenic Aluminium Industry S.A.	Norsk Hydro A.S.A.
Henan Zhongfu Industrial Co., Ltd.	Shandong Nanshan Aluminum Co., Ltd.
Norsk Hydro A.S.A.
Shandong Nanshan Aluminum Co., Ltd.

The factors influencing competition vary by region and end-use market, but generally we compete on the basis of our value proposition; which includes price, product quality, the ability to meet customers’ specifications, range of products offered, lead times, technical support and customer service. In some end-use markets, competition is also affected by fabricators’ requirements that suppliers complete a qualification process to supply their plants. This process can be rigorous and may take many months to complete. As a result, obtaining business from these customers can be a lengthy and expensive process. However, the ability to obtain and maintain these qualifications can represent a competitive advantage.

In addition to competition from others within the aluminum rolled products industry, we also face competition from non-aluminum material producers. In the packaging end-use market (primarily beverage and food cans), aluminum rolled products compete mainly with glass, PET plastic, and in some regions, steel. In the transportation end-use market, aluminum rolled products compete mainly with steel and composites. Aluminum competes with wood, plastic, cement, steel and other materials in building products applications. In the consumer durables end-use market, aluminum rolled products compete mainly with plastic, steel, and magnesium. Additionally, aluminum competes with steel, copper, plastic, glass and other materials in industrial applications. Factors affecting competition with substitute materials include price, ease to manufacture, consumer preference and performance characteristics.

Key Factors Affecting Supply and Demand

The following factors have historically affected the supply of aluminum rolled products:

Production Capacity and Alternative Technology. 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. 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; however, the continuous casting process results in a more limited range of products.

Trade. Some trade flows occur between regions despite shipping costs, import duties and the lack of 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.

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 industrial production growth. In many emerging markets, growth in demand typically exceeds industrial production growth largely because of expanding infrastructures, capital investments and rising incomes that often accompany economic growth in these markets.

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, improve performance and reduce carbon emissions in a cost-efficient manner. As a result of aluminum’s durability, strength and light weight, automobile manufacturers are substituting heavier alternatives such as steel and iron with aluminum. Carbon fiber and plastics are other lightweight material options, but their relatively high cost and limited end-of-life recyclability reduce their competitiveness as widespread material substitutes today. Consequently, demand for flat rolled aluminum products has increased. We also see strong substitution trends toward aluminum and away from steel in the beverage can market in certain regions.

Seasonality. During our third fiscal quarter, we typically experience seasonal slowdowns resulting in lower shipment volumes, although this has been less significant as our product portfolio shifts and diversifies. 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 infinitely recycled without affecting the quality of the product. Additionally, the recycling process uses approximately 95% less energy than is required to produce primary aluminum from mining and smelting, with an equivalent reduction in greenhouse gas emissions.

Our Business Strategy

Our objective as the world’s largest aluminum rolling and recycling company is to lead the aluminum industry as the partner of choice for innovative solutions. We will maximize shareholder value through free cash flow generation and increasing return on capital employed. To achieve these objectives, we will focus on the following areas:

Defend the Core

Novelis is the leading global flat rolled aluminum supplier in the beverage can and automotive markets. We intend to protect our leadership position by continuing to deliver best-in-class customer service with improved quality, service and innovative solutions that differentiate our products. We are committed to producing the best quality products and providing reliable on-time delivery in order to be a true partner in innovation and sustainable supply solutions. We are focused on building and maintaining strong, positive relationships with all of our customers. In fiscal year 2019, we announced plans to establish a global network of Customer Solution Centers to accelerate collaborative innovation between Novelis and automakers to determine how to maximize lightweight, high-strength aluminum for the next generation of vehicle design. The first center is scheduled to open in Novi, Michigan with centers in China and Europe to follow.

In addition, we will maintain a competitive cost structure by managing metal input costs and employing initiatives to improve operational efficiencies across our global network. This includes a commitment to employee safety, product quality and system reliability. As a manufacturing organization, our primary concern is the health and safety of our employees. We are committed to strengthening a culture of safety across all levels of the organization. We are focused on optimizing our manufacturing and recycling operations to increase asset utilization and productivity. We continue to pursue a standardization of our manufacturing processes where possible, while still allowing the flexibility to respond to local market demands.

Utilizing recycled material allows us to diversify our metal supply, helps control metal costs and provides environmental benefits. We define recycled content as the total amount of scrap metal used in production less melt loss. The percentage of recycled content within our aluminum rolled product shipments increased from 33% to 61% from fiscal 2011 to fiscal 2019. We work closely with our customers on innovation to drive more sustainable products for society. We are the only company of its size offering high-recycled content aluminum sheet for beverage and specialty product customers. We are also working closely with our automotive customers to redesign automotive alloys to be made with more recycled inputs, as well as purchasing the aluminum scrap resulting from our closed-loop recycling partnership with our automotive customers.

Strengthen our Product Portfolio

We maintain a focus on capturing global growth in beverage can, automotive and specialty products markets. Our management approach helps us to systematically identify opportunities that improve the profitability of our operations through product portfolio analysis. This ensures that we grow in attractive market segments, while also taking actions to exit unattractive ones. We will continue to focus on these core product markets to drive enhanced profitability, but will also continue to broaden our customer base and explore new verticals and product markets that fit within our overall strategic vision, which is to lead the aluminum industry as the partner of choice for innovative solutions.

Invest in Growth Opportunities

Over the past several years, we invested in world-class assets and technical capabilities to meet increasing global demand for aluminum within the automotive market due to our continued focus on maintaining a scalable business model and growing alongside our customers. We now have automotive finishing lines in North America, Europe, and Asia operating near full production levels. In fiscal 2018, we announced plans to build additional automotive finishing capacity in North America with a 200 kt greenfield expansion in Guthrie, Kentucky and a 100 kt brownfield expansion at our existing facility in Changzhou, China. Construction is underway at both locations. Guthrie is expected to begin commissioning towards the end of fiscal 2020, with Changzhou expected to begin commissioning in fiscal 2021. In fiscal 2019, we also announced plans to expand aluminum rolling, casting and recycling capacity at our flagship South American facility in Pindamonhangba, Brazil (Pinda) by 100 kt and 60 kt, respectively. Construction began in fiscal 2019 and is expected to be commissioned in late fiscal 2021.

In addition to these recently announced organic investments, in the second quarter of fiscal 2019, Novelis signed a definitive agreement to acquire Aleris Corporation (Aleris), a global supplier of rolled aluminum products, for approximately $2.6 billion including the assumption of debt. For Novelis, Aleris, and their customers, the proposed acquisition will deliver a number of significant benefits by:


•	Establishing a more diverse product portfolio, including aerospace, beverage can, automotive, building and construction, commercial transportation and specialty products.


•	Integrating complementary assets in Asia to include recycling, casting, rolling and finishing capabilities and allowing Novelis to more efficiently serve the growing Asia market.


•	Broadening Novelis' automotive business to meet growing demand and diversifying its global footprint and customer base.


•	Strengthening our ability to compete against steel by gaining a greater platform for production, innovation and service.


•	Executing a fully debt funded deal with leverage forecasted to peak below 4x at closing, and return to 3x in approximately two years after closing.

The acquisition is subject to customary closing conditions and regulatory approvals and is expected to close in fiscal 2020 (third quarter of calendar year 2019). Until the closing, the companies will continue to operate as separate entities. Following close, the two companies will integrate Aleris into Novelis, which will remain headquartered in Atlanta.

We will continue to explore other potential opportunities that will drive profitable volume growth in the automotive and other core end markets, while maintaining a balanced and disciplined financial approach in our decision making process.

Raw Materials and Suppliers

The input materials we use in manufacturing include primary aluminum, recycled aluminum, sheet ingot, alloying elements and grain refiners. These raw materials are generally available from several sources and are not generally subject to supply constraints in normal market conditions. We also consume considerable amounts of energy in the operation of our facilities.

Aluminum

We obtain aluminum from a number of sources, including the following:

Primary Aluminum Sourcing. We purchased or tolled approximately 1,350 kt of primary aluminum in fiscal 2019 in the form of sheet ingot, standard ingot and molten metal.

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 production scrap 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 vehicles and buildings, which are starting to become high volume sources of recycled material. We purchased or tolled approximately 1,987 kt of recycled material inputs (less melt loss) in fiscal 2019.

The overall benefit we receive from utilizing recycled metal is influenced by: 1) the overall price levels of the LME and local market premiums, 2) the spread between the price for recycled aluminum and the LME primary aluminum price and 3) our consumption levels of the recycled material inputs. We have in the past and may continue to seek to stabilize our future exposure to metal prices through the use of derivative instruments.

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 Form 10-K.

Energy

We use several sources of energy in the manufacturing and delivery of our aluminum rolled products. In fiscal 2019, 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 and during the hot rolling process. 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 use of derivative instruments. A portion of our electricity requirements are purchased pursuant to long-term contracts in the local regions in which we operate. A number of our facilities are located in regions with regulated prices, which affords relatively stable costs. We have fixed pricing on some of our energy supply arrangements.

Our Operating Segments

Due in part to the regional nature of supply and demand of aluminum rolled products and in order to best serve our customers, we manage our activities on the basis of geographical areas and are organized under four operating segments: North America, Europe, Asia and South America. Each segment manufactures aluminum sheet and light gauge products, and recycles aluminum.

The table below shows “Net sales” and total shipments by segment. For additional financial information related to our operating segments, see Note 21 — Segment, Geographical Area, Major Customer and Major Supplier Information to our accompanying consolidated financial statements.



Net sales in millions	Year Ended March 31,
Shipments in kilotonnes	2019		2018		2017
Consolidated
Net sales	$	12,326	$	11,462	$	9,591
Total shipments	3,419		3,333		3,176
North America (A)
Net sales	$	4,581	$	3,951	$	3,228
Total shipments	1,150		1,090		1,014
Europe (A)
Net sales	$	3,376	$	3,447	$	2,968
Total shipments	941		938		951
Asia (A)
Net sales	$	2,190	$	2,110	$	1,791
Total shipments	729		719		699
South America (A)
Net sales	$	2,091	$	1,931	$	1,510
Total shipments	663		653		562

_________________________


(A)	"Net sales" and "Total shipments" by segment include intersegment sales and the results of our affiliates on a proportionately consolidated basis, which is consistent with the way we manage our business segments.

The following is a description of our operating segments during all or part of March 31, 2019:

North America

Novelis North America operates eight aluminum products facilities. This includes two fully integrated aluminum rolling facilities, two dedicated recycling facilities and two facilities with recycling operations. These sites and other plants in North America manufacture 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.

In response to the lightweighting trend in the automotive industry, we have expanded our Oswego, New York facility by constructing three automotive finishing lines and supporting automotive scrap recycling capabilities. In fiscal year 2018, we announced plans to further expand our automotive finishing capacity in North America with a 200kt greenfield expansion in Guthrie. Construction is underway and is expected to begin commissioning towards the end of fiscal 2020.

Recycling is important in the manufacturing process and we have three facilities in North America that re-melt post-consumer aluminum and recycled process material. Most of the recycled material is from UBCs and automotive scrap, and the material is cast into sheet ingot at our plants in Greensboro, Georgia; Berea, Kentucky; Russellville, Kentucky; and Oswego, New York.

Europe

Novelis Europe operates ten aluminum rolled product facilities. This includes facilities with recycling activities at Sierre, Switzerland, Pieve, Italy, Latchford, United Kingdom, and at Nachterstedt and Neuss, Germany. These sites manufacture a broad range of sheet and foil products. We also have distribution centers in Italy and sales offices in several European countries. End-use markets for this segment include beverage and food can, automotive, architectural and industrial products, foil products and other products. Beverage and food can represent the largest end-use market in terms of shipment volume for Europe.

In fiscal 2019, Novelis acquired operating facilities and manufacturing assets at its Sierre, Switzerland plant that have historically been leased. Our fully integrated recycling facility at our Nachterstedt, Germany plant is the largest aluminum recycling facility in the world. The second automotive finishing line at our Nachterstedt, Germany facility has successfully expanded our production of aluminum automotive sheet products in Europe.

Asia

Novelis Asia operates three aluminum rolled product facilities. This includes two facilities with recycling operations at the Ulsan and Yeongju, South Korea plants. Novelis Asia also owns one recycling facility in Binh Doung, Vietman, which ceased operations in fiscal 2018. These sites manufacture a broad range of aluminum sheet and light gauge products. End-use markets include beverage and food cans, electronics, architectural, automotive, foil, industrial and other products. The beverage can market represents the largest end-use market in terms of volume.

In fiscal 2018, Novelis entered into a joint venture agreement to sell 50 percent of its interest in the Ulsan, South Korea facility to Kobe Steel (Kobe). Through the venture, Novelis and Kobe jointly own and operate the Ulsan facility, with each company remaining responsible for its metal supply and commercial relationships.

In fiscal 2019, we announced plans to add 100 kt of additional automotive finishing capacity at our Changzhou, China facility, which primarily focuses on heat treatment. Construction is underway and is expected to be commissioned in fiscal 2021.

South America

Novelis South America operates two aluminum rolled product facilities. This includes one facility with recycling operations. These facilities manufacture a broad range of can sheet, industrial sheet and light gauge products. 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.

In fiscal 2019, we announced plans to expand aluminum rolling, casting and recycling capacity in Pinda by 100 kt and 60 kt, respectively. Construction began in late fiscal 2019 and is expected to be complete in late fiscal 2021.

Financial Information About Geographic Areas

Certain financial information about geographic areas is contained in Note 21 — Segment, Geographical Area, Major Customer and Major Supplier Information to our accompanying consolidated financial statements.

Our Customers

We focus significant efforts on developing and maintaining close working relationships with our customers and end-users. Our major customers include:



Beverage and Food Cans		Automotive
Anheuser-Busch InBev		BMW Group
Ardagh Group		Chery Jaguar Land Rover
Ball Corporation		Daimler Group
Can-Pack S.A.		Fiat Chrysler Automobiles N.V.
Crown Holdings Inc., formerly Crown Cork & Seal Company		Ford Motor Company
Pepsico		General Motors LLC
Various bottlers of the Coca-Cola System		Hyundai Motors Corporation
		Jaguar Land Rover Limited
Construction, Industrial and Other		NIO
Agfa Graphics		Volkswagen Group
Aluflexpack
Amcor		Electronics
Facchini S.A.		LG International Corporation
Feron		Samsung Electronics Co., Ltd.
Klöckner Metals
Lotte Aluminum Co. Ltd.
Prefa
Reynolds Consumer Products LLC
Ryerson Inc.
ThyssenKrupp

Our single largest end-use product is beverage can sheet. We sell can sheet directly to beverage makers and bottlers as well as to can fabricators that sell the cans they produce to bottlers. In certain cases, we operate under umbrella agreements with beverage makers and bottlers under which they direct their can fabricators to source their requirements for beverage can body, end and tab stock from us.

Additional information related to our top customers is contained in Note 21 — Segment, Geographical Area, Major Customer and Major Supplier Information to our accompanying consolidated financial statements.

Distribution and Backlog

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



	Year Ended March 31,
	2019		2018		2017
Direct sales as a percentage of total “Net sales”	97	%	97	%	94	%
Distributor sales as a percentage of total “Net sales”	3	%	3	%	6	%

Direct Sales

We supply various end-use markets all over the world through a direct sales force operating from individual facilities or sales offices, as well as from regional sales offices. The direct sales channel typically serves very large, sophisticated fabricators and original equipment manufacturers. Longstanding relationships are maintained with leading companies in industries using aluminum rolled products. Supply contracts for large global customers generally range from one to five years in length and historically there has been a high degree of renewal business with these customers. Certain customers require suppliers to complete a lengthy and expensive qualification process. The ability to obtain and maintain these qualifications can represent a competitive advantage. Given the customized nature of products and in some cases, large order sizes, switching costs are significant, thus adding to the overall consistency of the customer base.

We also use third party agents or traders in some regions to complement our own sales force. These agents provide service to our customers in countries where we do not have local expertise.

Distributors

We also sell our products through third party aluminum distributors. Customers of distributors are widely dispersed, and sales through this channel are highly fragmented. Distributors sell mostly commodity or less specialized products into many end-use markets in small quantities, including the architectural and industrial markets. We collaborate with our distributors to develop new end-use products and improve the supply chain and order efficiencies.

Backlog

Order backlog is not a material aspect of our business.

Research and Development

The table below summarizes our “Research and development expenses”, which include mini-scale production lines equipped with hot mills, can lines and continuous casters (in millions).



	Year Ended March 31,
	2019		2018		2017
Research and development expenses	$	72	$	64	$	58

We conduct research and development activities in order to meet current and future customer requirements, improve our products and reduce our conversion costs. We have a global research and technology center in Kennesaw, Georgia, which offers state of the art research and development capabilities to help Novelis meet the global long-term demand for aluminum used for the automotive, beverage can and specialty markets. We also have a global casting engineering and technology center in Spokane, Washington specializing in molten metal processing.

Our Employees

The table below summarizes our approximate number of employees by region, including our proportionate share of those employed by less than wholly owned affiliates.



Employees	North America (A)	Europe	Asia	South America	Total
March 31, 2019	3,510	4,690	1,440	1,630	11,270
March 31, 2018	3,400	4,770	1,400	1,570	11,140

_________________________


(A)	Includes employees within our Corporate headquarters located in Atlanta, Georgia.

We consider our employee relations to be satisfactory. A substantial portion 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.

Intellectual Property

We actively review intellectual property arising from our operations and our research and development activities and, when appropriate, we apply for patents in appropriate jurisdictions. We currently hold patents and patent applications on approximately 367 different items of intellectual property. While these patents and patent applications are important to our business on an aggregate basis, no single patent or patent application is deemed to be material to our business.

We have applied for, or received registrations for, the “Novelis” word trademark and the “Novelis” logo trademark in approximately 50 countries where we have significant sales or operations. Novelis uses the “Aditya Birla” logo under license from Aditya Birla Management Corporation Private Limited.

We have also registered the word “Novelis” and several derivations thereof as domain names in numerous top level domains around the world to protect our presence on the world wide web.

Environment, Health and Safety

Our global operations are subject to environmental laws and regulations from various jurisdictions, which govern, among other things, air emissions, wastewater discharges, the handling, storage and disposal of hazardous substances and wastes, the remediation of contaminated sites, and restoration of natural resources, and employee health and safety. Future environmental regulations may impose stricter compliance requirements on the industries in which we operate. Additional equipment or process changes at some of our facilities may be needed to meet future requirements. The cost of meeting these requirements may be significant. Failure to comply with such laws and regulations could subject us to administrative, civil or criminal penalties, obligations to pay damages or other costs, and injunctions and other orders, including orders to cease operations.

We are involved in proceedings under the U.S. Comprehensive Environmental Response, Compensation, and Liability Act, also known as CERCLA or Superfund, or analogous state provisions regarding our liability arising from the usage, storage, treatment or disposal of hazardous substances and wastes at a number of sites in the United States, as well as similar proceedings under the laws and regulations of the other jurisdictions in which we have operations, including Brazil, certain countries in the European Union, and Korea. Many of these jurisdictions have laws that impose joint and several liability, without regard to fault or the legality of the original conduct, for the costs of environmental remediation, natural resource damages, third party claims, and other expenses. In addition, we are, from time to time, subject to environmental reviews and investigations by relevant governmental authorities.

We have established procedures for regularly evaluating environmental loss contingencies, including those arising from environmental reviews and investigations and any other environmental remediation or compliance matters. We believe we have a reasonable basis for evaluating these environmental loss contingencies, and we also believe we have made reasonable estimates for the costs that are reasonably possible for these environmental loss contingencies. Accordingly, we have established liabilities based on our estimates for the currently anticipated costs that are deemed probable associated with these environmental matters. Management has determined that the currently anticipated costs associated with these environmental matters will not, individually or in the aggregate, materially impair our operations or materially adversely affect our financial condition.

Available Information

We are a voluntary filer and not subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended (Exchange Act). However, we file periodic reports and other information with the Securities and Exchange Commission (SEC). We make these filings available on our website free of charge, the URL of which is http://www.novelis.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains a website (http://www.sec.gov) that contains our annual, quarterly and current reports and other information we file electronically with the SEC. Information on our website does not constitute part of this Form 10-K.

Item 1A. Risk Factors

In addition to factors discussed elsewhere in this report, the following factors could materially affect our business, financial condition or results of operations in the future. The following factors, among others, could cause our actual results to differ from those projected in any forward looking statements we make.

Competitive and Strategic Risks

Certain of our customers are significant to our revenues, and we could be adversely affected by changes in the business or financial condition of these significant customers or by the loss of their business.

Our ten largest customers accounted for approximately 65%, 65%, and 63% of our total "Net sales" for the year ended March 31, 2019, 2018 and 2017, respectively. 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, some of our customer contracts are subject to renewal and renegotiation at periodic intervals or upon changes in competitive supply conditions. Our failure to successfully renew or renegotiate such agreements could result in a reduction or loss in customer purchase volume or revenue. Additionally, consolidation among our customers may enable them to use increased leverage in negotiating prices and other contract terms. Consolidation in our customer base may also lead to reduced demand for our products or cancellations of sales orders.

We also factor trade receivables from time to time to manage working capital. Any deterioration of the financial condition or downgrade of the credit rating of certain of our customers may make it more difficult or costly for us to engage in these activities, which could negatively impact our cash flows and liquidity.

We face significant price and other forms of competition from other aluminum rolled products producers and producers of other materials.

The markets in which we operate are highly competitive. We compete primarily on the basis of our value proposition, including price, product quality, ability to meet customers' specifications, range of products offered, global footprint, technical support and customer service. Some of our competitors may benefit from more efficient technologies and lower raw material and energy costs. Increases in competition resulting from new market entrants or increases in production capacity by our competitors could cause us to lose market share or lose a large customer, or force us to reduce prices to remain competitive.

In addition, aluminum competes with other materials, such as steel, plastics, composite materials and glass for various applications, including packaging, automotive, architectural, industrial, and consumer durables end-use markets. Our customers may choose materials other than aluminum to achieve desired attributes for their products. For example, customers in the automotive industry seeking to reduce vehicle weight may increase their use of high-strength steel rather than aluminum for certain applications given the price differential between steel and aluminum.

We may not realize the anticipated benefits of acquisitions, divestitures, joint ventures or other strategic investments.

As part of our strategy for growth, we have in the past and may in the future pursue acquisitions, divestitures, joint ventures or other strategic investments, which may not be completed or, if completed, may not produce the benefits we anticipate. For example, on July 26, 2018, we announced that we had signed a definitive agreement to acquire Aleris for approximately $2.6 billion. Upon consummation of the acquisition, we will acquire 13 Aleris manufacturing facilities spanning across North America, Asia, and Europe. The acquisition is subject to customary closing conditions and regulatory approvals. We may not achieve the anticipated benefits from the Aleris acquisition, and we may incur costs in excess of what we anticipate. In addition, we announced other significant strategic investments during fiscal year 2019, including a $180 million investment in Changzhou, China to double the capacity of our existing manufacturing facility at that location and a $175 million investment in our plant in Pindamonhangaba, Brazil, to increase our production and recycling capacity. Further, we announced in the first quarter of fiscal 2019 that we broke ground on a $300 million greenfield automotive aluminum sheet manufacturing facility in Guthrie, Kentucky.

There are numerous risks commonly encountered in strategic transactions, including the risk that management’s time and energy may be diverted, disrupting our existing businesses; risks associated with managing joint ownership structures with shared decision making authority; difficulty retaining key employees of an acquired business; difficulties due to limited prior experience in new markets we may enter, including aerospace; risks that we may not be able to complete a transaction that has been announced, effectively integrate businesses acquired or generate benefits we anticipated.

Operational Risks

If we are unable to obtain sufficient quantities of primary aluminum, recycled aluminum, sheet ingot and other raw materials used in the production of our products, our ability to produce and deliver products or to manufacture products using the desired mix of metal inputs could be adversely affected.

The supply risks relating to our metal inputs vary by input type. For example, we produce some of our sheet ingot requirements internally and source the remainder from multiple third parties in various jurisdictions, usually under contracts having a duration of at least one year. If our suppliers are unable to deliver sufficient quantities of aluminum and other raw materials to the necessary locations on a timely basis, our production could be disrupted and our net sales, profitability and cash flows could be adversely affected. Although aluminum is traded on global exchanges, developing alternative suppliers of sheet ingot could be time consuming and expensive.

Our operations are energy-intensive and our profitability and cash flows may decline if energy costs were to rise, or if our energy supplies were interrupted.

We consume substantial amounts of energy in our rolling and casting operations. The factors affecting our energy costs and supply reliability tend to be specific to each of our facilities. A number of factors could materially affect our energy position adversely including:


•	increases in costs of natural gas;


•	increases in costs of supplied electricity;


•	increases in fuel oil related to transportation;


•	interruptions in energy supply due to equipment failure or other causes; and


•	the inability to extend energy supply contracts upon expiration on economical terms.

If energy costs were to rise, or if energy supplies or supply arrangements were disrupted, our profitability and cash flows could decline.

A majority of our facilities are staffed by a unionized workforce, and union disputes and other employee relations issues could materially adversely affect our financial results.

In each geographic region where we have operating facilities, a substantial portion of our employees are represented by labor unions under collective bargaining agreements with varying durations and expiration dates. Although we have not experienced a strike or work stoppage in recent years, we may not be successful in preventing such an event from occurring in the future at one or more of our manufacturing facilities. In addition, we may not be able to satisfactorily renegotiate our collective bargaining agreements when they expire.

Any work stoppages or material changes in the terms of our labor agreements could have an adverse impact on our financial condition.

Loss of our key management and other personnel, or an inability to attract and retain such management and other personnel, could adversely impact our business.

We employ all of our senior executive officers and other highly-skilled key employees on an at-will basis, and their employment can be terminated by us or them at any time, for any reason and without notice, subject, in certain cases, to severance payment obligations. Competition for qualified employees among companies that rely heavily on engineering and technology is intense, and if our highly skilled key employees leave us, we may be unable to promptly attract and retain qualified replacement personnel, which could result in our inability to improve manufacturing operations, conduct research activities successfully, develop marketable products and compete effectively for growth in key markets.

We could be adversely affected by unplanned disruptions at our operating facilities.

In the past, we have experienced production interruptions at our plants due to the breakdown of equipment, fires, weather events and external causes. For example, in May 2018, truck drivers in Brazil engaged in ten days of protest, blocking roadways across the country and preventing the normal flow of goods. The protests disrupted our supply chain, interrupted production and resulted in delayed shipments to our customers.

We may experience such disruptions in the future due to similar uncontrollable events. Because many of our customers are, to varying degrees, dependent on planned deliveries from our plants, any customers that have to reschedule their own production due to our missed deliveries could pursue claims against us and reduce their future business with us. In addition to facing claims from customers, we may incur costs to correct any of these problems. Further, our reputation among actual and potential customers may be harmed, resulting in loss of business. While we maintain insurance policies covering, among other things, physical damage, business interruptions and product liability, these policies may not cover all of our losses.

Our business has been and will continue to be exposed to various economic and political risks associated with our global operations.

Due to the global reach of our business, we are subject to financial, political, economic and other business risks in connection with doing business abroad. Operating in diverse geographic regions exposes us to a number of risks and uncertainties, such as changes in international trade regulation, including duties and tariffs; and political instability that may disrupt economic activity, including the uncertainty related to the United Kingdom’s withdrawal from the European Union.

Our financial condition and results of operations depend significantly on worldwide economic conditions. Future adverse developments in the U.S. economy or in other countries where we do business pose a risk because our customers may postpone purchases in response to negative financial news and tighter credit.

We face risks relating to certain joint ventures, subsidiaries and assets that we do not entirely control.

Some of our activities are, and will in the future be, conducted through entities that we do not entirely control or wholly-own. These entities include our Alunorf, Germany, Ulsan, Korea and Logan, Kentucky joint ventures. Under the governing documents of these businesses, we share decision making authority and operational control which may result in conflicts over management over these businesses. In addition, because we do not exercise control over the business practices of our joint venture partners, we could be subject to reputational damage or other consequences of improper conduct by our joint venture partners or their inability to fulfill their obligations under the joint venture.

Security breaches and other disruptions to our information technology networks and systems could interfere with our operations, and could compromise the confidentiality of our proprietary information.

We rely upon information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, and to manage or support a variety of business and manufacturing processes and activities. Additionally, we collect and store sensitive data, including intellectual property, proprietary business information, as well as personally identifiable information of our employees, in data centers and on information technology networks. These activities are subject to various laws and regulations in the United States and abroad regarding privacy and data security.

We have increased our management focus on and financial investments in systems and processes intended to secure our information technology systems, prevent unauthorized access to or loss of sensitive data, ensure business continuity and comply with applicable laws. These efforts include engaging third party providers from time to time to test the vulnerability of our systems and recommend solutions to upgrade the security of our systems. We also employ a number of measures to protect and defend against cyber attacks, including technical security controls, data encryption, firewalls, intrusion prevention systems, anti-virus software and frequent backups.

Despite the measures we have taken, our information technology networks and systems may be vulnerable to damage, disruptions or shutdowns due to attacks by hackers or breaches due to errors or malfeasance by employees, contractors and others who have access to our networks and systems, or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or utility failures or natural disasters or other catastrophic events. The occurrence of any of these events could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations and reduce the competitive advantage we hope to derive from our investment in new or proprietary business initiatives.

Financial Risks

Our results and short term liquidity can be negatively impacted by timing differences between the prices we pay under purchase contracts and metal prices we charge our customers.

Our purchase and sales contracts for primary aluminum are based on the LME price plus a regional market premium, which is a surcharge in addition to the LME price. There are typically timing differences between the pricing periods for purchases and sales where purchase prices we pay tend to be fixed and paid earlier than sales prices we charge our customers. This creates a price exposure we call “metal price lag.” We use derivative instruments to manage the timing differences related to LME associated with metal price lag. Under normal market conditions, the majority of our premium exposure hedging occurs in North America, although the exposure is not fully hedged. For our Europe, South America and Asia businesses, the derivative market for local market premiums is not sufficiently robust or efficient for us to offset the impacts of local market premium price movements beyond a small volume. The timing difference associated with metal price lag could positively or negatively impact our operating results and short term liquidity.

A deterioration of our financial condition, a downgrade of our ratings by a credit rating agency or other factors could limit our ability to enter into, or increase our costs of, financing and hedging transactions, and our business relationships and financial condition could be adversely affected.

A deterioration of our financial condition or a downgrade of our credit ratings for any reason could increase our borrowing costs, limit our access to the capital or credit markets, adversely affect our ability to obtain new financing on favorable terms or at all, result in more restrictive covenants and have an adverse effect on our business relationships with customers, suppliers and financial counterparties. From time to time, we enter into various forms of hedging activities against currency, interest rate, energy and metal price fluctuations. Financial strength and credit ratings are important to the availability and terms of these hedging activities. As a result, any deterioration of our financial condition or downgrade of our credit ratings may make it more difficult or costly for us to engage in these activities in the future.

In addition, in July 2017, the United Kingdom's Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. The replacement for LIBOR is uncertain at this time. It is not possible to predict entirely the effect of a LIBOR phase out on Novelis, but the costs of our variable rate indebtedness could increase as a result of these developments.

Adverse changes in currency exchange rates could negatively affect our financial results or cash flows and the competitiveness of our aluminum rolled products relative to other materials.

We are exposed to the effects of changes in the exchange rates of the U.S. dollar, the Euro, the British pound, the Brazilian real, the Korean won, the Swiss franc and other currencies. We have implemented a hedging policy to manage currency exchange rate risks to an acceptable level based on management's judgment of the appropriate trade-off between risk, opportunity and cost; however, this hedging policy may not successfully or completely eliminate the effects of currency exchange rate fluctuations, which could have a material adverse effect on our financial results and cash flows.

We prepare our consolidated financial statements in U.S. dollars, but a portion of our earnings and expenditures are denominated in other currencies, primarily the Euro, the Korean won and the Brazilian real. Changes in exchange rates will result in increases or decreases in our operating results and may also affect the book value of our assets located outside the U.S.

Our results of operations, cash flows and liquidity could be adversely affected if we were unable to transact in derivative instruments or if counterparties to our derivative instruments fail to honor their agreements.

From time to time, we use various derivative instruments to manage the risks arising from fluctuations in aluminum prices, exchange rates, energy prices and interest rates. If for any reason we were unable to transact in derivative instruments to manage these risks, our results of operations, cash flows and liquidity could be adversely affected. In addition, we may be exposed to losses in the future if the counterparties to our derivative instruments fail to honor their agreements. In particular, deterioration in the financial condition of our counterparties and any resulting failure to pay amounts owed to us or to perform obligations owed to us could have a negative effect on our business and financial condition. Further, if major financial institutions consolidate and are forced to operate under more restrictive capital constraints and regulations, there could be less liquidity, or higher costs to transact, in the derivative markets, which could have a negative effect on our ability or our costs to hedge and transact with creditworthy counterparties.

An adverse decline in the liability discount rate, lower-than-expected investment return on pension assets and other factors could affect our results of operations or amount of pension funding contributions in future periods.

Most of our pension obligations relate to funded defined benefit pension plans for our employees in the U.S., the U.K. Switzerland, and Canada, unfunded pension benefits in Germany and lump sum indemnities payable to our employees in France, Italy, and Korea upon retirement or termination. Our pension plan assets consist primarily of funds invested in stocks and bonds. Our estimates of liabilities and expenses for pensions and other postretirement benefits incorporate a number of assumptions, including expected long-term rates of return on pension plan assets and interest rates used to discount future benefits. The most significant year-end assumptions used by Novelis to estimate pension or other postretirement benefit income or expense for the following year are the discount rate applied to plan liabilities and the expected long-term rate of return on plan assets. Our results of operations, liquidity or shareholder's (deficit) equity in a particular period could be adversely affected by capital market returns that are less than their assumed long-term rate of return or a decline of the rate used to discount future benefits. These factors or others may require us to make unexpected cash contributions to the pension plans in the future, preventing the use of such cash for other purposes.

Our goodwill, other intangible assets and other long-lived assets could become impaired, which could require us to take non-cash charges against earnings.

We assess, at least annually and potentially more frequently, whether the value of our goodwill has been impaired. We assess the recoverability of finite-lived other intangible assets and other long-lived assets whenever events or changes in circumstances indicate we may not be able to recover the asset's carrying amount. Any impairment of goodwill, other intangible assets, or long-lived assets as a result of such analysis would result in a non-cash charge against earnings, which could materially adversely affect our reported results of operations. A significant and sustained decline in our future cash flows, a significant adverse change in the economic environment or slower growth rates could result in the need to perform additional impairment analysis in future periods.

Additional tax expense, tax liabilities or tax compliance costs could adversely impact our profitability.

We are subject to income taxation in many jurisdictions. Judgment is required in determining our worldwide income tax provision and accordingly there are many transactions and computations for which our final income tax determination is uncertain. We are routinely audited by income tax authorities in many tax jurisdictions. Although we believe the recorded tax estimates are reasonable, the ultimate outcome from any audit (or related litigation) could be materially different from amounts reflected in our income tax provisions and accruals. Future settlements of income tax audits may have a material effect on earnings between the period of initial recognition of tax estimates in the financial statements and the point of ultimate tax audit settlement. Additionally, it is possible that future income tax legislation in any jurisdiction to which we are subject may be enacted that could have a material impact on our worldwide income tax provision beginning with the period that such legislation becomes effective. For example, the U.S. Tax Cuts and Jobs Act of 2017 (the "Act"), which was enacted in the United States on December 22, 2017, introduced extensive reforms of the Internal Revenue Code. During 2018, the Internal Revenue Service began a number of guidance projects which serve to both interpret and implement the Act. Those guidance projects, which included both Proposed and Final Treasury Regulations, will continue into 2019. We will continue to evaluate the overall impact of the Act on our effective tax rate and balance sheet in light of current and future regulations and interpretive guidance from tax authorities. For additional discussion of the Act and tax amounts recorded in our financial statements, see “Management’s Discussion and Analysis.”

The covenants in our credit facilities and the indentures governing our Senior Notes impose operating and financial restrictions on us.

Our credit facilities and the indentures governing our Senior Notes impose certain operating and financial restrictions on us. These restrictions limit our ability and the ability of our restricted subsidiaries, among other things, to:


•	incur additional debt and provide additional guarantees;


•	pay dividends and make other restricted payments, including certain investments;


•	create or permit certain liens;


•	make certain asset sales;


•	use the proceeds from the sales of assets and subsidiary stock;


•	create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions to us;


•	engage in certain transactions with affiliates;


•	make certain acquisitions;


•	enter into sale and leaseback transactions; and


•	consolidate, merge or transfer all or substantially all of our assets or the assets of our restricted subsidiaries.

See Note 11 — Debt for additional discussion.

Other Legal and Regulatory Risks

Our global operations are subject to changes in laws and government regulations that may adversely affect our business and operations.

Compliance with U.S. and foreign laws and regulations, such as import and export requirements, embargoes and trade sanctions laws, anti-corruption laws, tax laws, foreign exchange controls and cash repatriation restrictions and data privacy regulations, increases our costs of doing business outside the U.S.

In addition, the global scale of our operations exposes us to risks relating to international trade policies including import quotas and tariffs, as well as retaliatory policies by governments against such policies. Changes in regulations and policies can impact the competitiveness of our products and negatively impact our business, results of operations and financial condition.

We are subject to a broad range of environmental, health and safety laws and regulations, and we may be exposed to substantial environmental, health and safety costs and liabilities.

We are subject to a broad range of environmental, health and safety laws and regulations in the jurisdictions in which we operate. These laws and regulations impose stringent environmental, health and safety protection standards and permitting requirements regarding, among other things, air emissions, wastewater storage, treatment and discharges, the use and handling of hazardous or toxic materials, waste disposal practices, the remediation of environmental contamination, post-mining reclamation and working conditions for our employees. The costs of complying with these laws and regulations, including participation in assessments and remediation of contaminated sites and installation of pollution control facilities, have been, and in the future could be, significant. In addition, these laws and regulations may also result in substantial environmental liabilities associated with divested assets, third party locations and past activities. The impact that our operations may have on the environment, as well as exposures to hazardous substances or wastes associated with our operations, could result in civil or criminal fines or penalties and enforcement actions issued by regulatory or judicial authorities enjoining, curtailing or closing operations or requiring corrective measures, any of which could materially and adversely affect us.

Further, increased concern over climate change has led to new and proposed legislative and regulatory initiatives, such as cap- and-trade systems and additional limits on emissions of greenhouse gases or Corporate Average Fuel Economy standards in the United States. Additional new regulation could directly and indirectly affect our customers and suppliers (through an increase in the cost of production or their ability to produce satisfactory products) or our business (through an impact on our inventory availability, cost of sales, operations or demand for the products we sell). Any increased costs of these energy sources because of new laws could be passed along to us and our customers and suppliers, which could also have a negative impact on our profitability.

We may be exposed to significant legal proceedings or investigations.

From time to time, we are involved in, or the subject of, disputes, proceedings and investigations with respect to a variety of matters, including environmental, health and safety, product liability, employee, tax, personal injury, contractual and other matters as well as other disputes and proceedings that arise in the ordinary course of business.

Any claims against us or any investigations involving us, whether meritorious or not, could be costly to defend or comply with and could divert management's attention as well as operational resources. Any such dispute, litigation or investigation, whether currently pending or threatened in the future, may have a material adverse effect on our financial results and cash flows. We generally maintain insurance against many product liability risks, but there can be no assurance that this coverage will be adequate for any liabilities ultimately incurred. In addition, there is no assurance that insurance will continue to be available on terms acceptable to us.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our global headquarters are located in Atlanta, Georgia. Our global research and technology center is located in Kennesaw, Georgia, which contains state-of-the-art research and development capabilities to help us better partner and innovate with our customers. We also have a global casting engineering and technology center in Spokane, Washington specializing in molten metal processing. Our regional headquarters are located in the following cities: North America - Atlanta, Georgia; Europe - Küsnacht, Switzerland; Asia - Seoul, South Korea; and South America - Sao Paulo, Brazil.

The total number of operating facilities within our operating segments during all or part of the year ended March 31, 2019 is shown in the table below, including operating facilities we jointly own and operate with third parties.



	Total Operating Facilities	Facilities with Recycling Operations
North America	8	4
Europe	10	5
Asia	3	2
South America	2	1
Total	23	12

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, 2019.

North America



Locations (A)	Plant Processes	Major Products
Berea, Kentucky	Recycling, sheet ingot casting	Sheet ingot from recycled metal
Fairmont, West Virginia	Cold rolling, finishing	Container, HVAC and auto fin material
Greensboro, Georgia	Recycling, sheet ingot casting	Sheet ingot from recycled metal
Kingston, Ontario	Cold rolling, finishing	Automotive sheet, construction sheet, industrial sheet
Russellville, Kentucky (B)	Hot rolling, cold rolling, finishing, remelt, casting, recycling	Can stock, industrial sheet
Oswego, New York	Sheet ingot casting, hot rolling, cold rolling, recycling, brazing, finishing, heat treatment	Can stock, automotive sheet, construction sheet, industrial sheet, semi-finished coil
Terre Haute, Indiana	Cold rolling, finishing	Container and industrial material
Warren, Ohio	Coating, finishing	Can stock coating

_________________________


(A)	In May 2018, we announced a greenfield expansion to be located in Guthrie, Kentucky that will include heat treatment and pre-treatment lines for automotive sheet finishing. The Guthrie facility is expected to begin commissioning towards the end of fiscal 2020.


(B)	Logan Aluminum Inc. (Logan) is operated as a joint venture between Novelis and Tri-Arrows Aluminum Inc. (Tri-Arrows). We own 40% of the outstanding common shares of Logan. See Note 8 — Consolidation for further information about this affiliate.

Europe



Locations	Plant Processes	Major Products
Bresso, Italy	Finishing, painting	Painted sheet, construction sheet
Göttingen, Germany	Cold rolling, finishing, painting	Can stock, food can, painted sheet
Latchford, United Kingdom	Recycling	Sheet ingot from recycled metal
Ludenscheid, Germany	Foil rolling, finishing, converting	Foil, packaging
Nachterstedt, Germany	Cold rolling, finishing, painting, recycling, heat treatment	Automotive sheet, can stock, industrial sheet, painted sheet, construction sheet, sheet ingot
Neuss, Germany (A)	Hot rolling, cold rolling, recycling	Can stock, foilstock, feeder stock for finishing operations
Ohle, Germany	Cold rolling, finishing, converting	Foil, packaging
Pieve, Italy	Continuous casting, cold rolling, finishing, recycling	Coil for finishing operations, industrial sheet
Sierre, Switzerland (B)	Sheet ingot casting, hot rolling, cold rolling, finishing, recycling	Automotive sheet, industrial sheet
Crick, United Kingdom	Finishing	Automotive sheet

_________________________


(A)	Aluminium Norf GmbH (Alunorf) is operated as a 50/50 joint venture between Novelis and Hydro Aluminium Deutschland GmbH (Hydro). See Note 9 — Investment in and Advances to Non-Consolidated Affiliates and Related Party Transactions for further information about this affiliate.


(B)	AluInfra Services SA (AluInfra) is operated as a 50/50 joint venture between Novelis and Constellium Valais SA (Constellium). See Note 9 — Investment in and Advances to Non-Consolidated Affiliates and Related Party Transactions for further information about this affiliate.

Asia



Locations	Plant Processes	Major Products
Binh Doung, Vietnam (A)
Changzhou, China	Heat treatment	Automotive sheet
Ulsan, South Korea (B)	Sheet ingot casting, hot rolling, cold rolling, recycling, finishing	Can stock, construction sheet, industrial sheet, electronics, automotive sheet for finishing operations, foilstock, and recycled material
Yeongju, South Korea	Sheet ingot casting, hot rolling, cold rolling, recycling, finishing	Can stock, construction sheet, industrial sheet, electronics, foilstock and recycled material

_________________________


(A)	We ceased operations at our Binh Doung plant in fiscal 2018, therefore we are excluding this facility from our count of total operating facilities above.


(B)	Ulsan Aluminum, Ltd. (UAL) is operated as a 50/50 joint venture between Novelis and Kobe. See Note 9 — Investment in and Advances to Non-Consolidated Affiliates and Related Party Transactions for further information about this affiliate.

South America



Locations	Plant Processes	Major Products
Pindamonhangaba, Brazil	Sheet ingot casting, hot rolling, cold rolling, recycling, finishing, coating	Can stock, construction sheet, industrial sheet, foilstock, sheet ingot
Santo Andre, Brazil	Foil rolling, finishing	Foil

Item 3. Legal Proceedings

We are a party to litigation incidental to our business from time to time. For additional information regarding litigation to which we are a party, see Note 20 — Commitments and Contingencies to our accompanying consolidated financial statements, which are incorporated by reference into this item.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

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

There is no established public trading market for the Company’s common stock. All of the common shares of Novelis are owned directly by AV Metals Inc. and indirectly by Hindalco Industries Limited. None of the equity securities of the Company are authorized for issuance under any equity compensation plan.

Dividends or returns of capital are at the discretion of the board of directors and will depend on, among other things, our financial resources, cash flows generated by our business, our cash requirements, legal restrictions under debt covenant agreements and other relevant factors.

Item 6. Selected Financial Data

The selected consolidated financial data should be read in conjunction with our consolidated financial statements for the respective periods and the related notes included elsewhere in this Form 10-K.

All of our common shares were indirectly held by Hindalco; thus, earnings per share data is not reported. Amounts in the tables below are in millions.



	March 31,
	2019		2018		2017		2016			2015
Net sales	$	12,326	$	11,462	$	9,591	$	9,872		$	11,147
Net income (loss) attributable to our common shareholder	$	434	$	635	$	45	$	(38	)	$	148



	March 31,
	2019		2018		2017			2016			2015
Total assets	$	9,563	$	9,515	$	8,373		$	8,280		$	9,102
Long-term debt (including current portion)	$	4,347	$	4,457	$	4,558		$	4,468		$	4,457
Short-term borrowings	$	39	$	49	$	294		$	579		$	846
Cash and cash equivalents	$	950	$	920	$	594		$	556		$	628
Total equity (deficit)	$	1,066	$	823	$	(77	)	$	(59	)	$	(70	)

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

OVERVIEW AND REFERENCES

Novelis is the leading producer of flat-rolled aluminum products and the world's largest recycler of aluminum. Driven by our purpose to shape a sustainable world together, we work alongside our customers to provide innovative solutions to the beverage can, automotive and high-end specialty markets (includes foil packaging, certain transportation products, architectural, industrial, and consumer durables). We have recycling operations in many of our plants to recycle both post-consumer aluminum and post-industrial aluminum. As of March 31, 2019, we had manufacturing operations in ten countries on four continents, which include 23 operating plants, and recycling operations in twelve of these plants.

The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Form 10-K, particularly in “Special Note Regarding Forward-Looking Statements and Market Data” and “Risk Factors.”

HIGHLIGHTS

Year Ended March 31, 2019 Compared with the Year Ended March 31, 2018

We reported "Net income attributable to our common shareholder" of $434 million, a decrease compared to $635 million in the prior period. The prior period recognized a one time, pre-tax gain of $318 million, partially offset by tax expense of $77 million, related to the sale of shares in Ulsan Aluminum Ltd. (UAL), and a $19 million non-cash tax benefit resulting from the Tax Cuts and Jobs Act.

We reported an increase in "Segment income" to a record $1,368 million compared to $1,215 million in the prior period. The increase is primarily due to a 3% increase in total flat rolled product shipments to a record level, favorable product mix due to portfolio optimization efforts, improved cost efficiencies and favorable metal costs and scrap spreads. As a result of these factors, net cash provided by operating activities was $728 million and free cash flow was $408 million. (Refer to “Non-GAAP Financial Measures” for our definition of Free Cash Flow).

With strong financial performance, we are well positioned to execute on our strategy to defend our core businesses, strengthen our product portfolio and invest in growth opportunities that will allow us to better serve our customers for the long term. In fiscal 2018 and fiscal 2019, we announced plans to expand our production footprint with investments in automotive finishing capacity in Guthrie, Kentucky, in the U.S, and in Changzhou, China, respectively. Construction at these facilities are well underway and progressing in line with our expectations. We also acquired key operating assets that we historically leased at our Sierre, Switzerland rolling facility from Constellium.

In fiscal 2019, we entered into an agreement to acquire Aleris, a global supplier of rolled aluminum products. Upon consummation of the transaction, we expect to acquire Aleris’ 13 production facilities across North America, Europe and Asia. We have obtained committed financing of up to $2.25 billion, subject to customary closing conditions in connection with the anticipated closing, which continues to progress and is expected to close in the second quarter of fiscal 2020 (third quarter of calendar 2019), subject to customary closing conditions and approvals.

Also in fiscal 2019, we announced plans to expand our rolling, casting and recycling capacity in Pinda, Brazil to meet growing customer demand.

Along with our strong financial performance, we have continued our focus on further improving operational efficiencies and innovation. During fiscal 2019, we introduced the first aluminum sheet battery enclosure, opened Customer Solution Centers to better collaborate with our customers and developed new, high-strength alloys that will further enhance our existing portfolio of automotive products. We are also continuing to deliver on our purpose of shaping a sustainable world by increasing the amount of recycled content in our products and maximizing the advantages of sustainable, lightweight aluminum to benefit our customers, partners and the communities where we live and work.

BUSINESS AND INDUSTRY CLIMATE

Economic growth and material substitution continue to drive increasing global demand for aluminum and rolled products. With the exception of China where can sheet overcapacity and high competition remains, favorable market conditions and increasing customer preference for sustainable packaging options is driving higher demand for infinitely recyclable aluminum beverage cans and bottles. In fiscal 2019, we announced plans to expand rolling, casting and recycling capability in Pinda, Brazil to support this demand. Further, we announced the signing of a definitive agreement to acquire Aleris which will further diversify our global footprint and product portfolio. The acquisition continues to progress and remains subject to customary closing conditions and approvals.

Meanwhile, the demand for aluminum in the automotive industry continues to grow, which drove the investments we made in our automotive sheet finishing capacity in North America, Europe and Asia in recent years, and is driving the additional investments in Aleris, Guthrie, Kentucky (U.S.) and Changzhou, China. This demand has been primarily driven by the benefits that result from using light weight aluminum in vehicle structures and components, as companies respond to stricter government emissions and fuel economy regulations, while maintaining or improving vehicle safety and performance.

Key Sales and Shipment Trends



(in millions, except shipments which are in kt)
	Three Months Ended												Year Ended			Three Months Ended												Year Ended
	Jun 30, 2017			Sep 30, 2017			Dec 31, 2017			Mar 31, 2018			Mar 31, 2018			Jun 30, 2018			Sep 30, 2018			Dec 31, 2018			Mar 31, 2019			Mar 31, 2019
Net sales	$	2,669		$	2,794		$	2,933		$	3,066		$	11,462		$	3,097		$	3,136		$	3,009		$	3,084		$	12,326
Percentage increase (decrease) in net sales versus comparable previous year period	16		%	18		%	27		%	17		%	20		%	16		%	12		%	3		%	1		%	8		%
Rolled product shipments:
North America	273			274			269			273			1,089			274			295			279			294			1,142
Europe	235			237			222			236			930			232			229			211			246			918
Asia	180			180			177			174			711			175			168			182			198			723
South America	110			131			146			136			523			126			126			142			143			537
Eliminations	(13		)	(20		)	(18		)	(14		)	(65		)	(10		)	(11		)	(14		)	(11		)	(46		)
Total	785			802			796			805			3,188			797			807			800			870			3,274

The following summarizes the percentage increase (decrease) in rolled product shipments versus the comparable previous year period:
North America	13		%	9		%	9		%	1		%	8		%	—		%	8		%	4		%	8		%	5		%
Europe	(4		)%	—		%	(2		)%	—		%	(1		)%	(1		)%	(3		)%	(5		)%	4		%	(1		)%
Asia	1		%	2		%	9		%	—		%	3		%	(3		)%	(7		)%	3		%	14		%	2		%
South America	7		%	8		%	17		%	9		%	10		%	15		%	(4		)%	(3		)%	5		%	3		%
Total	4		%	4		%	6		%	2		%	4		%	2		%	1		%	1		%	8		%	3		%

Business Model and Key Concepts

Conversion Business Model

A significant amount of our business is conducted under a conversion model, which allows us to pass through increases or decreases in the price of aluminum to our customers. Nearly all of our flat rolled products have a price structure with three components: (i) a base aluminum price quoted off the LME; (ii) a local market premium; and (iii) a “conversion premium” to produce the rolled product which reflects, among other factors, the competitive market conditions for that product. Base aluminum prices are typically driven by macroeconomic factors and global supply and demand for aluminum. The local market premiums tend to vary based on the supply and demand for metal in a particular region and associated transportation costs.

In North America, Europe and South America, we pass through local market premiums to our customers which are recorded through "Net sales." In Asia we purchase our metal inputs based on the LME and incur a local market premium; however, many of our competitors in this region price their metal off the Shanghai Futures Exchange, which does not include a local market premium, making it difficult for us to fully pass through this component of our metal input cost to some of our customers.

LME Base Aluminum Prices and Local Market Premiums

The average (based on the simple average of the monthly averages) and closing prices for aluminum set on the LME for the years ended March 31, 2019, 2018, and 2017 are as follows:



							Percent Change
	Year Ended March 31,						Year Ended March 31, 2019 versus March 31, 2018		Year Ended March 31, 2018 versus March 31, 2017
	2019		2018		2017		Year Ended March 31, 2019 versus March 31, 2018		Year Ended March 31, 2018 versus March 31, 2017
London Metal Exchange Prices
Aluminum (per metric tonne, and presented in U.S. dollars):
Closing cash price as of beginning of period	$	1,997	$	1,947	$	1,492	3	%	30	%
Average cash price during period	$	2,035	$	2,045	$	1,688	—	%	21	%
Closing cash price as of end of period	$	1,900	$	1,997	$	1,947	(5	)%	3	%

For the years ended March 31, 2019, 2018, and 2017, the weighted average local market premium was as follows:




							Percent Change
	Year Ended March 31,						Year Ended March 31, 2019 versus March 31, 2018		Year Ended March 31, 2018 versus March 31, 2017
	2019		2018		2017		Year Ended March 31, 2019 versus March 31, 2018		Year Ended March 31, 2018 versus March 31, 2017
Weighted average local market premium (per metric tonne, and presented in U.S. dollars)	$	268	$	192	$	151	40	%	27	%

Metal Price Lag and Related Hedging Activities

Increases or decreases in the price of aluminum based on the average LME base aluminum prices and local market premiums directly impact “Net sales,” “Cost of goods sold (exclusive of depreciation and amortization)” and working capital. The timing of these impacts varies based on contractual arrangements with customers and metal suppliers in each region. These timing impacts are referred to as metal price lag. Metal price lag exists due to: (i) the period of time between the pricing of our purchases of metal, holding and processing the metal, and the pricing of the sale of finished inventory to our customers, and (ii) certain customer contracts containing fixed forward price commitments which result in exposure to changes in metal prices for the period of time between when our sales price fixes and the sale actually occurs.

We use LME aluminum forward contracts to preserve our conversion margins and manage the timing differences associated with the LME base metal component of “Net sales,” and “Cost of goods sold (exclusive of depreciation and amortization)." These derivatives directly hedge the economic risk of future LME base metal price fluctuations to better match the purchase price of metal with the sales price of metal. The majority of our local market premium hedging occurs in North America depending on market conditions; however, exposure here is not fully hedged. In our Europe, Asia and South America regions, the derivative market for local market premiums is not robust or efficient enough for us to offset the impacts of LMP price movements beyond a small volume. As a consequence, volatility in local market premiums can have a significant impact on our results of operations and cash flows.

We elect to apply hedge accounting to better match the recognition of gains or losses on certain derivative instruments with the recognition of the underlying exposure being hedged in the statement of operations. For undesignated metal derivatives, there are timing differences between the recognition of unrealized gains or losses on the derivatives and the recognition of the underlying exposure in the statement of operations. The recognition of unrealized gains and losses on undesignated metal derivative positions typically precedes inventory cost recognition, customer delivery and revenue recognition. The timing difference between the recognition of unrealized gains and losses on undesignated metal derivatives and cost or revenue recognition impacts “Income before income taxes” and “Net income.” Gains and losses on metal derivative contracts are not recognized in “Segment income” until realized.

Foreign Currency and Related Hedging Activities

We operate a global business and conduct business in various currencies around the world. We have exposure to foreign currency risk as fluctuations in foreign exchange rates impact our operating results as we translate the operating results from various functional currencies into our U.S. dollar reporting currency at current average rates. We also record foreign exchange remeasurement gains and losses when business transactions are denominated in currencies other than the functional currency of that operation. Global economic uncertainty is contributing to higher levels of volatility among the currency pairs in which we conduct business. The following table presents the exchange rates as of the end of each period and the average of the month-end exchange rates for the years ended March 31, 2019, 2018, and 2017:



	Exchange Rate as of Year Ended March 31,			Average Exchange Rate Year Ended March 31,
	2019	2018	2017	2019	2018	2017
U.S. dollar per Euro	1.123	1.230	1.068	1.155	1.180	1.098
Brazilian real per U.S. dollar	3.897	3.324	3.168	3.809	3.231	3.290
South Korean won per U.S. dollar	1,138	1,067	1,116	1,114	1,106	1,148
Canadian dollar per U.S. dollar	1.336	1.289	1.329	1.314	1.283	1.314
Swiss franc per Euro	1.118	1.178	1.069	1.142	1.139	1.084

Exchange rate movements have an impact on our operating results. In Europe, where we have predominantly local currency selling prices and operating costs, we benefit as the Euro strengthens, but are adversely affected as the Euro weakens. For our Swiss operations, where operating costs are incurred primarily in the Swiss franc and a large portion of revenues are denominated in the Euro, we benefit as the Franc weakens but are adversely affected as the Franc strengthens. In South Korea, where we have local currency operating costs and U.S. dollar denominated selling prices for exports, we benefit as the won weakens but are adversely affected as the won strengthens. In Brazil, where we have predominately U.S. dollar selling prices and local currency manufacturing costs, we benefit as the real weakens, but are adversely affected as the real strengthens. We use foreign exchange forward contracts and cross-currency swaps to manage our exposure arising from recorded assets and liabilities, firm commitments, and forecasted cash flows denominated in currencies other than the functional currency of certain operations, which include capital expenditures and net investment in foreign subsidiaries.

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

Results of Operations

Year Ended March 31, 2019 Compared with the Year Ended March 31, 2018

"Net Sales" were $12,326 million, an increase of 8%, driven by a 40% increase in average local market premiums and a 3% increase in flat rolled product shipments.

“Cost of goods sold (exclusive of depreciation and amortization)” was $10,422 million, an increase of 7%, also related to higher average local market premiums and increases in flat rolled product shipments. Total metal input costs included in "Cost of goods sold (exclusive of depreciation and amortization)” increased $522 million.

"Income before income taxes" was $636 million compared to $855 million. The following items also affected "Income before income taxes:"


•	A "Gain on sale of a business, net" in the prior year of $318 million, related to the sale of shares of UAL to Kobe and the deconsolidation of the remaining assets to form the equity method investment in the prior year;


•	An increase in "Selling, general and administrative expenses" of $36 million primarily related to increases in employment related costs, factoring expenses and other business and professional fees;


•	"Business acquisition and other integration related costs" of $33 million in the current year related to costs associated with our pending acquisition of Aleris;


•	"Restructuring and impairment, net" decreased $32 million related to the closure of certain non-core operations in Europe during the prior fiscal year; and


•	"Interest expense and amortization of debt issuance costs" increased by $13 million primarily due to increases in LIBOR and increased average borrowings;

We recognized $202 million of tax expense, which resulted in an effective tax rate of 32%. This rate is due to tax losses in jurisdictions where we believe it more likely than not that we will not be able to utilize those losses and therefore have a valuation allowance recorded and income taxed at tax rates that differ from the 25% Canadian tax rate, including withholding taxes. We recognized $233 million in the prior period, which resulted in an effective tax rate of 27%. This rate was due to a $77 million expense resulting from the "Gain on sale of a business, net" and losses in jurisdictions where we believe it more likely than not that we will not be able to utilize those losses and therefore have a valuation allowance recorded, offset by a non-cash income tax benefit of $19 million for the remeasurement of deferred tax assets and liabilities in accordance with the Tax Cuts and Jobs Act.

“Net income attributable to our common shareholder” was $434 million compared to $635 million primarily as a result of the factors discussed above.

Segment Review

Due in part to the regional nature of supply and demand of aluminum rolled products and in order to best serve our customers, we manage our activities on the basis of geographical regions and are organized under four operating segments: North America, Europe, Asia and South America.

The tables below illustrate selected segment financial information (in millions, except shipments which are in kt). For additional financial information related to our operating segments including the reconciliation of "Net income attributable to our common shareholder" to "Segment income," see Note 21 — Segment, Geographical Area, Major Customer and Major Supplier Information. In order to reconcile the financial information for the segments shown in the tables below to the relevant U.S. GAAP-based measures, "Eliminations and other" must adjust for proportional consolidation of each line item for our Logan affiliate because we consolidate 100% of the Logan joint venture for U.S. GAAP, but we manage our Logan affiliate on a proportionately consolidated basis, and eliminate intersegment shipments (in kt).



Selected Operating Results Year Ended March 31, 2019	North America		Europe		Asia		South America		Eliminations and other			Total
Net sales	$	4,581	$	3,376	$	2,190	$	2,091	$	88		$	12,326
Shipments
Rolled products - third party	1,142		896		710		526		—			3,274
Rolled products - intersegment	—		22		13		11		(46		)	—
Total rolled products	1,142		918		723		537		(46		)	3,274
Non-rolled products	8		23		6		126		(18		)	145
Total shipments	1,150		941		729		663		(64		)	3,419



Selected Operating Results Year Ended March 31, 2018	North America		Europe		Asia		South America		Eliminations and other			Total
Net sales	$	3,951	$	3,447	$	2,110	$	1,931	$	23		$	11,462
Shipments
Rolled products - third party	1,083		914		696		495		—			3,188
Rolled products - intersegment	6		16		15		28		(65		)	—
Total rolled products	1,089		930		711		523		(65		)	3,188
Non-rolled products	1		8		8		130		(2		)	145
Total shipments	1,090		938		719		653		(67		)	3,333

The following table reconciles changes in “Segment income” for the year ended March 31, 2018 to the year ended March 31, 2019 (in millions).



Changes in Segment income	North America			Europe			Asia			South America			Eliminations (A)			Total
Segment income - Year Ended March 31, 2018	$	474		$	219		$	167		$	363		$	(8	)	$	1,215
Volume	59			(16		)	8			15			22			88
Conversion premium and product mix	42			(33		)	10			1			(12		)	8
Conversion costs	(9		)	68			31			17			(9		)	98
Foreign exchange	2			(1		)	(15		)	4			—			(10		)
Selling, general & administrative and research & development costs (B)	(16		)	(9		)	(6		)	(12		)	10			(33		)
Other changes	—			(2		)	1			6			(3		)	2
Segment income - Year Ended March 31, 2019	$	552		$	226		$	196		$	394		$	—		$	1,368

_________________________

(A)

The recognition of "Segment income" by a region on an intersegment shipment could occur in a period prior to the recognition of "Segment income" on a consolidated basis, depending on the timing of when the inventory is sold to the third party customer. The "Eliminations" column adjusts regional "Segment income" for intersegment shipments that occur in a period prior to recognition of "Segment income" on a consolidated basis. The "Eliminations" column also reflects adjustments for changes in regional volume, conversion premium and product mix related to intersegment shipments for consolidation.


(B)	Selling, general & administrative costs and research & development costs include costs incurred directly by each segment and all corporate related costs.

North America

“Net sales” increased $630 million, or 16%, primarily due to higher can and automotive shipments.

“Segment income” was $552 million, an increase of 16%, primarily due to higher volumes, favorable pricing and product mix coupled with favorable metal costs and scrap spreads partially offset by increased selling, general and administrative expenses and operating costs.

Europe

“Net sales” decreased $71 million, or 2%, primarily due to lower automotive and specialty shipments, partially offset by higher can shipments.

“Segment income” was $226 million, an increase of 3%, primarily due to favorable metal mix and operating efficiencies partially offset by unfavorable can and automotive pricing.

Asia

“Net sales” increased $80 million, or 4%, primarily due to higher can shipments partially offset by lower specialty shipments.

“Segment income” was $196 million, an increase of 17%, primarily due to favorable metal mix and scrap spreads, favorable product mix and higher volumes partially offset by unfavorable foreign currency impacts.

South America

“Net sales” increased $160 million, or 8%, due to higher can shipments partially offset by lower specialty shipments and lower pricing.

“Segment income” was $394 million, an increase of 9%, primarily due to favorable metal mix and scrap spreads coupled with higher volume partially offset by increased selling, general and administrative expenses.

Results of Operations

Year Ended March 31, 2018 Compared with the Year Ended March 31, 2017

"Net Sales" were $11,462 million, an increase of 20%, driven by a 30% increase in average base aluminum prices, a 4% increase in flat rolled product shipments, and a 27% increase in local market premiums.

“Cost of goods sold (exclusive of depreciation and amortization)” was $9,719 million, an increase of 21%, primarily due to an increase in flat rolled product shipments and higher average aluminum prices. Total metal input costs included in "Cost of goods sold (exclusive of depreciation and amortization)” increased $1,521 million.

"Income before income taxes" for the year ended March 31, 2018 was $855 million, compared to $197 million for the year ended March 31, 2017. In addition to the factors noted above, the following items affected "Income before income taxes:"


•	An increase in "Selling, general and administrative expenses" of $68 million primarily related to an increase in the fair value of Long Term Incentive Plan (LTIP) awards, increases in factoring expense and professional fees;


•	A decline in interest expense of $39 million due to the refinancing of the 2017 Notes, 2020 Notes and Term Loan at lower interest rates;


•	"Loss on extinguishment of debt" in the prior year of $134 million related to the extinguishment of the 2017 Notes, 2020 Notes and Term Loan;


•	A gain on sale of a business of $318 million, related to the sale of shares of UAL to Kobe and the deconsolidation of the remaining assets to form the equity method investment in September 2017. This gain was compared to a loss of $27 million in the prior fiscal year, which was recognized on the sale of our interest in Aluminium Company of Malaysia Berhad (ALCOM);


•	"Restructuring and impairment, net" of $34 million primarily related to restructuring actions in Europe, compared to $10 million of restructuring expenses in the prior fiscal year, related to severance and other charges across our regions; and


•	Increased stability in the current year local market premiums, resulted in a $4 million metal price lag gain, compared to a $31 million metal price lag loss during the prior fiscal year.

We recognized $233 million of tax expense for the year ended March 31, 2018, which resulted in an effective tax rate of 27%. This rate is due to a $77 million expense on the sale of a business, tax losses in jurisdictions where we believe it more likely than not that we will not be able to utilize those losses and therefore have a valuation allowance recorded, offset by a non-cash income tax benefit of $19 million for the remeasurement of deferred tax assets and liabilities in accordance with the Tax Cuts and Jobs Act. We recognized $151 million of tax expense for the year ended March 31, 2017, primarily due to tax losses in jurisdictions where we believe it to be more likely than not that we will not be able to utilize those losses and therefore have a valuation allowance recorded and the net impact of foreign exchange translation and remeasurement of deferred income taxes, offset by dividends not subject to tax.

We reported “Net income attributable to our common shareholder” of $635 million for the current year, compared to “Net income attributable to our common shareholder” of $45 million for the prior year, primarily as a result of the factors discussed above.

Segment Review

The tables below illustrate selected segment financial information (in millions, except shipments which are in kt). For additional financial information related to our operating segments including the reconciliation of "Net income attributable to our common shareholder" to Segment income, see Note 21 — Segment, Geographical Area, Major Customer and Major Supplier Information. In order to reconcile the financial information for the segments shown in the tables below to the relevant U.S. GAAP-based measures, "Eliminations and other" must adjust for proportional consolidation of each line item for our Logan affiliate because we consolidate 100% of the Logan joint venture for U.S. GAAP, but we manage our Logan affiliate on a proportionately consolidated basis, and eliminate intersegment shipments (in kt).



Selected Operating Results Year Ended March 31, 2018	North America		Europe		Asia		South America		Eliminations and other			Total
Net sales	$	3,951	$	3,447	$	2,110	$	1,931	$	23		$	11,462
Shipments
Rolled products - third party	1,083		914		696		495		—			3,188
Rolled products - intersegment	6		16		15		28		(65		)	—
Total rolled products	1,089		930		711		523		(65		)	3,188
Non-rolled products	1		8		8		130		(2		)	145
Total shipments	1,090		938		719		653		(67		)	3,333



Selected Operating Results Year Ended March 31, 2017	North America		Europe		Asia		South America		Eliminations and other			Total
Net sales	$	3,228	$	2,968	$	1,791	$	1,510	$	94		$	9,591
Shipments
Rolled products - third party	1,009		927		682		449		—			3,067
Rolled products - intersegment	1		16		8		25		(50		)	—
Total rolled products	1,010		943		690		474		(50		)	3,067
Non-rolled products	4		8		9		88		—			109
Total shipments	1,014		951		699		562		(50		)	3,176

The following table reconciles changes in “Segment income” for the year ended March 31, 2017 to the year ended March 31, 2018 (in millions).



Changes in Segment income	North America			Europe			Asia			South America			Eliminations (A)			Total
Segment income - Year Ended March 31, 2017	$	380		$	208		$	163		$	337		$	(3	)	$	1,085
Volume	84			(15		)	24			59			(13		)	139
Conversion premium and product mix	10			9			(22		)	(45		)	9			(39		)
Conversion costs	22			6			9			24			4			65
Foreign exchange	1			25			1			(12		)	—			15
Selling, general & administrative and research & development costs (B)	(28		)	(12		)	(2		)	(25		)	(5		)	(72		)
Other changes (C)	5			(2		)	(6		)	25			—			22
Segment income - Year Ended March 31, 2018	$	474		$	219		$	167		$	363		$	(8	)	$	1,215

_________________________

(A)

The recognition of "Segment income" by a region on an intersegment shipment could occur in a period prior to the recognition of "Segment income" on a consolidated basis, depending on the timing of when the inventory is sold to the third party customer. The "Eliminations" column adjusts regional "Segment income" for intersegment shipments that occur in a period prior to recognition of "Segment income" on a consolidated basis. The "Eliminations" column also reflects adjustments for changes in regional volume, conversion premium and product mix, and conversion costs related to intersegment shipments for consolidation.


(B)	Selling, general & administrative costs and research & development costs include costs incurred directly by each segment and all corporate related costs.


(C)	In relation to the South America segment, this line includes items such as the State of Espirito Santo indirect tax incentive (ICMS) for companies who fulfill certain requirements. According to this incentive, the Company can recognize a presumed ICMS credit, thus reducing the amounts due to the State. The mentioned incentive is recorded in our consolidated results of operations.

North America

“Net sales” increased $723 million, or 22%, primarily due to higher average aluminum prices and higher can and automotive shipments.

“Segment income” was $474 million, an increase of 25%, primarily due to favorable operating and metal costs as well as higher automotive and can volumes, higher pricing and favorable product mix as a result of automotive growth. These positive factors were partially offset by unfavorable selling, general and administrative costs.

Europe

“Net sales” increased $479 million, or 16%, primarily due to higher average aluminum prices and higher automotive shipments; partially offset by lower can and specialty shipments.

“Segment income” was $219 million, an increase of 5%, primarily due to favorable product mix as a result of our portfolio optimization efforts, favorable currency impact, higher automotive volumes and favorable cost absorption. These positive factors were partially offset by lower can and specialties volumes, and higher selling, general and administrative costs.

Asia

“Net sales” increased $319 million, or 18%, due to higher average aluminum prices and higher can and automotive shipments; partially offset by lower specialty shipments.

“Segment income” was $167 million, a increase of 2%, primarily due to higher automotive and can shipments and favorable operating and metal costs, partially offset by lower can pricing and product mix.

South America

“Net sales” increased $421 million, or 28%, due to higher average aluminum prices and higher specialties and can shipments.

“Segment income” was $363 million, an increase of 8%, primarily due to higher can and specialties volumes and favorable operating and metal costs. These positive factors were partially offset by unfavorable price and product mix and higher selling, general and administrative costs.

Liquidity and Capital Resources

Our primary liquidity sources are cash flows from operations, working capital management, cash and liquidity under our debt agreements. Our recent business investments were funded through cash flows generated by our operations and a combination of local financing and our senior secured credit facilities. Most of our recent strategic expansion projects are operating close to full capacity and are generating additional operating cash flow. We expect to be able to fund our continued expansions, service our debt obligations, and provide sufficient liquidity to operate our business through one or more of the following: the generation of operating cash flows, working capital management, our existing debt facilities (including refinancing) and new debt issuances, as necessary.

In fiscal 2018 and fiscal 2019, we announced plans to expand our production footprint with investments in automotive finishing capacity in Guthrie, Kentucky (United States) and Changzhou, China, respectively. In fiscal 2019, we announced plans to expand our rolling, casting and recycling capacity in Pinda, Brazil. Further, we completed the acquisition of operating assets that we historically leased at our Sierre, Switzerland rolling facility from Constellium for €197.5 million (approximately $231 million). We simultaneously acquired a 50% ownership for €2.5 million (approximately $3 million) in a service company (AluInfra) that is jointly owned and operated by both Novelis and Constellium to provide certain services to the parties at the Sierre facility.

Also in fiscal 2019, we entered into an agreement to acquire Aleris, a global supplier of rolled aluminum products. Upon consummation of the transaction, we expect to acquire Aleris’ 13 production facilities across North America, Europe and Asia. We have obtained committed financing of up to $2.25 billion, subject to customary closing conditions in connection with the anticipated closing, which continues to progress and is expected to close in the second quarter of fiscal 2020, subject to customary closing conditions and approvals.

Non-Guarantor Information

As of March 31, 2019, the Company’s subsidiaries that are not guarantors represented the following approximate percentages of (a) net sales, (b) Adjusted EBITDA (segment income), and (c) total assets of the Company, on a consolidated basis (including intercompany balances):



Item Description	Ratio
Consolidated net sales represented by net sales to third parties by non-guarantor subsidiaries (for the year ended March 31, 2019)	20	%
Consolidated Adjusted EBITDA represented by the non-guarantor subsidiaries (for the year ended March 31, 2019)	13	%
Consolidated assets are owned by non-guarantor subsidiaries (as of March 31, 2019)	17	%

In addition, for the years ended March 31, 2019 and March 31, 2018, the Company’s subsidiaries that are not guarantors had net sales of $2.9 billion and $3.0 billion, respectively, and, as of March 31, 2019, those subsidiaries had assets of $2.1 billion and debt and other liabilities of $1.4 billion (including inter-company balances).

Available Liquidity

Our available liquidity as of March 31, 2019 and 2018 is as follows (in millions):



	March 31,
	2019		2018
Cash and cash equivalents	$	950	$	920
Availability under committed credit facilities (A)	897		998
Total available liquidity	$	1,847	$	1,918

_________________________

(A) Our availability under committed credit facilities does not include the committed financing for Aleris.

The decrease in total available liquidity is primarily attributable to acquisition related costs of $239 million for the purchase of operating assets at Sierre, Switzerland that were historically leased, net payments on short-term and long-term borrowings, and reductions in credit facility lines. These decreases were partially offset by positive free cash flow of $408 million. See Note 11 — Debt for more details about our availability under committed credit facilities as well as committed financing relating to the proposed Aleris acquisition.

The “Cash and cash equivalents” balance above includes cash held in foreign countries in which we operate. As of March 31, 2019, we held $21 million of "Cash and cash equivalents" in Canada, in which we are incorporated, with the rest held in other countries in which we operate. As of March 31, 2019, we held $545 million of cash in jurisdictions for which we have asserted that earnings are permanently reinvested and we plan to continue to fund operations and local expansions with cash held in those jurisdictions. Cash held outside of Canada is free from significant restrictions that would prevent the cash from being accessed to meet the Company's liquidity needs including, if necessary, to fund operations and service debt obligations in Canada. Upon the repatriation of any earnings to Canada, in the form of dividends or otherwise, we could be subject to Canadian income taxes (subject to adjustment for foreign taxes paid and the utilization of the large cumulative net operating losses we have in Canada) and withholding taxes payable to the various foreign jurisdictions. As of March 31, 2019, we do not believe adverse tax consequences exist that restrict our use of “Cash or cash equivalents” in a material manner.

We use derivative contracts to manage risk as well as liquidity. Under our terms of credit with counterparties to our derivative contracts, we do not have any material margin call exposure. No material amounts have been posted by Novelis nor do we hold any material amounts of margin posted by our counterparties. We settle derivative contracts in advance of billing on the underlying physical inventory and collecting payment from our customers, which temporarily impacts our liquidity position. The lag between derivative settlement and customer collection typically ranges from 30 to 90 days.

Free Cash Flow

Refer to "Non-GAAP Financial Measures" for our definition of Free Cash Flow.

The following table shows the “Free cash flow” for the year ended March 31, 2019, 2018 and 2017, the change between periods, as well as the ending balances of cash and cash equivalents (in millions).



										Change
	Year Ended March 31,									2019 versus 2018			2018 versus 2017
	2019			2018			2017			2019 versus 2018			2018 versus 2017
Net cash provided by operating activities	$	728		$	573		$	563		$	155		$	10
Net cash (used in) provided by investing activities	(557		)	96			(200		)	(653		)	296
Plus: Cash used in the acquisition of assets under a capital lease (A)	239			—			—			239			—
Less: Proceeds from sales of assets and business, net of transactions fees, cash income taxes and hedging (B)	(2		)	(263		)	(2		)	261			(261		)
Free cash flow	$	408		$	406		$	361		$	2		$	45
Ending cash and cash equivalents	$	950		$	920		$	606		$	30		$	314

_________________________


(A)	This line item includes $239 million of outflows related to the acquisition of operating assets that we historically leased at our Sierre, Switzerland rolling facility during the year ended March 31, 2019. The impact is recognized as "Acquisition of assets under a capital lease".

(B)

This line item includes the proceeds from the sale of shares in Ulsan Aluminum Ltd., to Kobe during the year ended March 31, 2018 in the amount of $314 million, net of $42 million and $11 million, in cash taxes and transaction fees paid, respectively. This line item also includes "Outflows from the sale of a business, net of transaction fees" which is comprised of cash of $13 million held by ALCOM, which was a consolidated entity sold during fiscal 2017.

Operating Activities

The increase in net cash provided by operating activities was primarily related to higher "Segment income". The following summarizes changes in working capital accounts (in millions).



										Change
	Year Ended March 31,									2019 versus 2018			2018 versus 2017
	2019			2018			2017			2019 versus 2018			2018 versus 2017
Net cash (used in) provided by operating activities due to changes in working capital:
Accounts receivable	$	(71	)	$	(415	)	$	(166	)	$	344		$	(249	)
Inventories	32			(151		)	(193		)	183			42
Accounts payable	(74		)	336			253			(410		)	83
Other current assets and liabilities	31			16			17			15			(1		)
Net change in working capital	$	(82	)	$	(214	)	$	(89	)	$	132		$	(125	)

Working capital improvements in the current period were primarily due to favorable changes in inventories due to increased sales as well as favorable changes in other current assets and liabilities. The lower quantities of inventory on hand is the result of increased shipments due to customer demand. These factors were offset by the timing of cash outflows related to accounts payable and lower base aluminum prices.

In the prior periods, working capital was primarily impacted by increases in "Accounts receivable, net" due to the timing of cash collections on certain receivables' balances coupled with an increase in sales and increased average metal prices. Additionally, higher quantities of inventory on hand was the result of capacity expansions and longer supply chains to support the automotive sector. Favorable accounts payable impacts were primarily related to the timing of payments to vendors.

Investing Activities

The following table presents information regarding our “Net cash (used in) provided by investing activities” (in millions).



										Change
	Year Ended March 31,									2019 versus 2018			2018 versus 2017
	2019			2018			2017			2019 versus 2018			2018 versus 2017
Capital expenditures	$	(351	)	$	(226	)	$	(224	)	$	(125	)	$	(2	)
Acquisition of assets under a capital lease	(239		)	—			—			(239		)	—
Proceeds (outflows) from settlement of derivative instruments, net	7			(23		)	8			30			(31		)
Proceeds from sales of assets, third party, net of transaction fees and hedging	2			2			4			—			(2		)
Proceeds (outflows) from the sale of a business	—			314			(2		)	(314		)	316
Proceeds from investment in and advances to non-consolidated affiliates, net	12			16			2			(4		)	14
Other	12			13			12			(1		)	1
Net cash (used in) provided by investing activities	$	(557	)	$	96		$	(200	)	$	(653	)	$	296

For the year ended March 31, 2019, "Net cash used in investing activities" was primarily attributable to increased "Capital expenditures" related to strategic investments and the acquisition of operating assets that we historically leased at our Sierre, Switzerland rolling facility recognized as "Acquisition of assets under a capital lease". Additionally, in the prior period, we received "Proceeds from the sale of a business" in the amount of $314 million due to the sale of shares in UAL.

Financing Activities

The following table presents information regarding our “Net cash used in financing activities” (in millions).



										Change
	Year Ended March 31,									2019 versus 2018		2018 versus 2017
	2019			2018			2017			2019 versus 2018		2018 versus 2017
Proceeds from issuance of long-term and short-term borrowings	$	—		$	—		$	4,572		$	—	$	(4,572	)
Principal payments of long-term and short-term borrowings	(112		)	(174		)	(4,477		)	62		4,303
Revolving credit facilities and other, net	(2		)	(211		)	(229		)	209		18
Debt issuance costs	(4		)	(5		)	(191		)	1		186
Net cash used in financing activities	$	(118	)	$	(390	)	$	(325	)	$	272	$	(65	)

Year Ended March 31, 2019

During the year ended March 31, 2019, there were no issuances of long-term borrowings. We made principal repayments of $90 million in Korean long-term debt, $18 million on our Term Loan Facility, $3 million on capital leases and $1 million in other principal repayments. We incurred $4 million in debt issuance costs.

Year Ended March 31, 2018

During the year ended March 31, 2018, there were no issuances of long-term borrowings. We made principal repayments of $50 million on short-term loans in Brazil, $18 million on our Term Loan Facility, $97 million in Korean long-term debt, $8 million on capital leases and $1 million in other principal repayments. The net cash repayments from our credit facilities balance is related to payments of $185 million on our ABL Revolver and $26 million on our China credit facility.

Year Ended March 31, 2017

During the year ended March 31, 2017, we received proceeds of $4.5 billion related to the refinancing of the Term Loan, 2017 and 2020 Notes as well as issuances of new loans in Brazil and Vietnam, and other locations of $81 million, $40 million, and $2 million, respectively. Additionally, we made principal repayments of $1.8 billion on our Term Loan Facility related to the refinancing, $1.1 billion and $1.4 billion on our 2017 and 2020 Notes, respectively, $108 million on short-term loans in Brazil, $49 million on Vietnam principal repayments, $17 million in Korean loan repayments, $10 million on capital leases, and $5 million in other principal repayments. The change in our credit facilities balance is related to net incremental repayments of $196 million on our ABL Revolver partially offset by net proceeds of $16 million in our China credit facilities. As of March 31, 2017, our short-term borrowings were $294 million consisting of $184 million of loans under our ABL Revolver, $50 million in Novelis Brazil loans, $59 million in Novelis China loans, and $1 million in other short-term borrowings. The weighted average interest rate on our total short-term borrowings was 2.92% as of March 31, 2017. As of March 31, 2017, $20 million of the ABL Revolver was utilized for letters of credit, reducing our availability under that facility.

During the year ended March 31, 2017, we incurred costs of $191 million related to the refinancing of our Term Loan and Senior Notes facilities.

OFF-BALANCE SHEET ARRANGEMENTS

In accordance with SEC rules, the following qualify as off-balance sheet arrangements:


•	any obligation under certain derivative instruments;


•	any obligation under certain guarantees or contracts;


•	a retained or contingent interest in assets transferred to an unconsolidated entity or similar entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets; and


•	any obligation under a material variable interest held by the registrant in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the registrant, or engages in leasing, hedging or research and development services with the registrant.

The following discussion addresses the applicable off-balance sheet items for our Company.

Derivative Instruments

See Note 15 — Financial Instruments and Commodity Contracts to our accompanying consolidated financial statements for a full description of derivative instruments.

Guarantees of Indebtedness

We have issued guarantees on behalf of certain of our subsidiaries. The indebtedness guaranteed is for trade accounts payable to third parties. Some of the guarantees have annual terms while others have no expiration and have termination notice requirements. Neither we nor any of our subsidiaries holds any assets of any third parties as collateral to offset the potential settlement of these guarantees. Since we consolidate wholly-owned and majority-owned subsidiaries in our consolidated financial statements, all liabilities associated with trade payables and debt facilities for these entities are already included in our consolidated balance sheets.

See Note 9 — Investment in and Advances to Non-Consolidated Affiliates and Related Party Transactions for details on a guarantee of indebtedness to Alunorf, our non-consolidated affiliate.

Factoring of Trade Receivables

See Note 4 — Accounts Receivable for a summary of disclosures of factored financial amounts.

Other

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as special purpose entities (SPEs), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of March 31, 2019 and 2018, we were not involved in any unconsolidated SPE transactions.

CONTRACTUAL OBLIGATIONS

We have future obligations under various contracts relating to debt and interest payments, capital and operating leases, long-term purchase obligations, and postretirement benefit plans. The following table presents our estimated future payments under contractual obligations that exist as of March 31, 2019, based on undiscounted amounts (in millions). The future cash flow commitments we may have related to derivative contracts are excluded from our contractual obligations table as these are fair value measurements determined at an interim date within the contractual term of the arrangement and, accordingly, do not represent the ultimate contractual obligation (which could ultimately become a receivable). As a result, the timing and amount of the ultimate future cash flows related to our derivative contracts, including the $94 million of derivative liabilities recorded on our balance sheet as of March 31, 2019, are uncertain. In addition, stock compensation is excluded from the table below as these are fair value measurements determined at an interim date and is not considered a contractual obligation. Furthermore, due to the difficulty in determining the timing of settlements, the table excludes $24 million of uncertain tax positions. See Note 19 — Income Taxes to our accompanying consolidated financial statements.



	Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years		Total
Debt (A)	$	58	$	39	$	1,706	$	2,649	$	4,452
Interest on long-term debt (B)	206		410		324		237		1,177
Capital leases (C)	—		—		—		1		1
Operating leases (D)	29		38		22		17		106
Purchase obligations (E)	3,371

Form: 10-K

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