Form: 8-K

Current report filing

February 11, 2020

Documents


Exhibit 99.1
novelislogonewa26.jpg
News Release

Novelis Reports Third Quarter of Fiscal 2020 Results
Advancing strategic initiatives and investments while delivering strong financial results

Third Quarter Fiscal Year 2020 Highlights
•
Net income attributable to common shareholder of $107 million, up 37% YoY; excluding special items, net income of $132 million, up 31% YoY
•
Adjusted EBITDA of $343 million, up 7% YoY
•
Net sales of $2.7 billion, down 10% YoY
•
Shipments of 797 kilotonnes, flat YoY
•
Net leverage ratio of 2.3x

ATLANTA, February 11, 2020 – Novelis Inc., the world leader in aluminum rolling and recycling, today reported net income attributable to its common shareholder of $107 million for the third quarter of fiscal year 2020, compared to $78 million in the prior year period. Excluding tax-effected special items in both years, the company reported net income of $132 million in the third quarter of fiscal 2020, compared to $101 million in the prior year period. This 31 percent increase is primarily due to higher Adjusted EBITDA.
Adjusted EBITDA increased seven percent to $343 million in the third quarter of fiscal 2020 compared to $322 million in the prior year period, primarily driven by portfolio optimization efforts, operating cost efficiencies, and favorable foreign exchange, partially offset by less favorable recycling benefits due to lower aluminum prices. Adjusted EBITDA per ton reached $430 in the quarter, as compared to $403 in the prior year.
Net sales decreased ten percent from the prior year period to $2.7 billion for the third quarter of fiscal 2020, driven by lower average LME aluminum prices and local market premiums. Flat rolled product shipments were in line with the prior year, at 797 kilotonnes.
"Novelis continues to perform very well both operationally and financially, delivering another set of strong results in the third quarter,” said Steve Fisher, President and CEO, Novelis Inc. “At the same time, we have made excellent progress advancing our major organic expansion projects in the U.S., China and Brazil, allowing us to continue to grow with our customers and better compete against steel and other materials.”
Each of these projects continue to progress on time and on budget. Notably, the company's greenfield automotive finishing plant in Guthrie, Kentucky, is in the commissioning process, with commercial shipments to customers expected to commence in the coming months.
Fiscal year-to-date free cash flow before capital expenditures improved 43 percent over the prior year to $483 million, driven primarily by higher Adjusted EBITDA as well as favorable working capital combined with lower aluminum prices. Capital expenditures doubled year-over-year to $422 million for the first nine months of fiscal 2020, mainly to support strategic investments in incremental rolling, recycling and automotive finishing capacity. As a result of this increased capital spending, fiscal 2020 free cash flow of $61 million compares to $127 million in the prior year period.


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(in $ millions, non-GAAP measures)
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2019
 
2018
 
2019
 
2018
Free cash flow
$
43

 
$
23

 
$
61

 
$
127

Capital expenditures
122

 
96

 
422

 
210

Free cash flow before capital expenditures
$
165

 
$
119

 
$
483

 
$
337


"Our recent successful bond issuance in January is a reflection of the consistently strong financial performance Novelis has delivered quarter after quarter, as well as our ability to maintain disciplined net leverage levels despite a significant increase in capital expenditures to fuel future growth,” said Devinder Ahuja, Senior Vice President and Chief Financial Officer, Novelis Inc.
As of December 31, 2019, the company reported a strong total liquidity position of $1.9 billion, and reduced its net leverage ratio to 2.3x as compared to 2.8x in the prior year period.

Aleris Acquisition
On July 26, 2018, Novelis announced it signed a definitive agreement to acquire Aleris Corporation. Novelis has received approval from antitrust regulators in China, the U.S., and the European Commission (EC) to close the transaction. In the U.S., Novelis' ability to acquire Aleris' automotive plant in Lewisport, Kentucky, will be resolved through an arbitration proceeding in the fourth quarter. The EC's approval is conditioned on Novelis entering into an agreement to divest Aleris’ Duffel plant to a buyer approved by the EC. The EC is currently reviewing the proposed buyer of the plant, Liberty House Group, a UK-based industrial conglomerate. Novelis remains fully committed to completing the transaction and continues to work with all relevant parties to do so as quickly as possible.


Third Quarter of Fiscal Year 2020 Earnings Conference Call
Novelis will discuss its third quarter of fiscal year 2020 results via a live webcast and conference call for investors at 7:30 a.m. ET on Tuesday, February 11, 2020. To view slides and listen only, visit the web at https://cc.callinfo.com/r/1mkvqup88oyng&eom. To join by telephone, dial toll-free in North America at 800 918 9577, India toll-free at 1800 266 0834 or the international toll line at +1 212 231 2930. Presentation materials and access information may also be found at novelis.com/investors.

About Novelis
Novelis Inc. is driven by its purpose to shape a sustainable world together. As a global leader in innovative products and services and the world's largest recycler of aluminum, we partner with customers in the automotive, beverage can and specialties industries to deliver solutions that maximize the benefits of lightweight aluminum throughout North America, Europe, Asia and South America. The company is headquartered in Atlanta, Georgia, operates 23 facilities in nine countries, has approximately 11,000 employees and recorded $12.3 billion in revenue for its 2019 fiscal year. Novelis is a subsidiary of Hindalco Industries Limited, an industry leader in aluminum and copper, and the metals flagship company of the Aditya Birla Group, a multinational conglomerate based in Mumbai, India. For more information, visit novelis.com.
 
Non-GAAP Financial Measures
This news release and the presentation slides for the earnings call contain non-GAAP financial measures as defined by SEC rules. We believe these measures are helpful to investors in measuring our financial performance and liquidity and comparing our performance to our peers. However, our non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures used by other companies. These non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP financial measures. To the extent we discuss any non-

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GAAP financial measures on the earnings call, a reconciliation of each measure to the most directly comparable GAAP measure will be available in the presentation slides filed as Exhibit 99.2 to our Current Report on Form 8-K furnished to the SEC concurrently with the issuance of this press release. In addition, the Form 8-K includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.

Attached to this news release are tables showing the Condensed Consolidated Statements of Operations, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows, Reconciliation to Adjusted EBITDA, Free Cash Flow, Liquidity, Net Income excluding Special Items, and Segment Information.


Forward-Looking Statements
Statements made in this news release which describe Novelis' intentions, expectations, beliefs or predictions may be forward-looking statements within the meaning of securities laws. Forward-looking statements include statements preceded by, followed by, or including the words "believes," "expects," "anticipates," "plans," "estimates," "projects," "forecasts," or similar expressions. Examples of forward looking statements in this news release are statements about our expectation that commercial shipments from our new Guthrie, Kentucky plant will commence in the coming months. Novelis cautions that, by their nature, forward-looking statements involve risk and uncertainty and Novelis' actual results could differ materially from those expressed or implied in such statements. We do not intend, and we disclaim any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise. Factors that could cause actual results or outcomes to differ from the results expressed or implied by forward-looking statements include, among other things: changes in the prices and availability of aluminum (or premiums associated with such prices) or other materials and raw materials we use; the capacity and effectiveness of our hedging activities; relationships with, and financial and operating conditions of, our customers, suppliers and other stakeholders; fluctuations in the supply of, and prices for, energy in the areas in which we maintain production facilities; our ability to access financing including in connection with potential acquisitions and investments; risks relating to, and our ability to consummate, pending and future acquisitions, investments or divestitures, including the proposed acquisition of Aleris Corporation and related divestitures; changes in the relative values of various currencies and the effectiveness of our currency hedging activities; factors affecting our operations, such as litigation, environmental remediation and clean-up costs, breakdown of equipment and other events; economic, regulatory and political factors within the countries in which we operate or sell our products, including changes in duties or tariffs; competition from other aluminum rolled products producers as well as from substitute materials such as steel, glass, plastic and composite materials; changes in general economic conditions including deterioration in the global economy; changes in government regulations, particularly those affecting taxes, derivative instruments, environmental, health or safety compliance; changes in interest rates that have the effect of increasing the amounts we pay under our credit facilities and other financing agreements; and our ability to generate cash. The above list of factors is not exhaustive. Other important risk factors are included under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

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




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

 
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2019
 
2018
 
2019
 
2018
Net sales
$
2,715

 
$
3,009

 
$
8,491

 
$
9,242

Cost of goods sold (exclusive of depreciation and amortization)
2,239

 
2,568

 
7,001

 
7,816

Selling, general and administrative expenses
131

 
129

 
380

 
373

Depreciation and amortization
91

 
88

 
267

 
260

Interest expense and amortization of debt issuance costs
59

 
67

 
185

 
201

Research and development expenses
21

 
18

 
58

 
50

Restructuring and impairment, net
3

 
1

 
36

 
2

Equity in net (income) loss of non-consolidated affiliates
1

 
(1
)
 
1

 
(2
)
Other (income) expenses, net
(3
)
 
10

 
3

 
33

Business acquisition and other integration related costs
17

 
14

 
46

 
24

 
$
2,559

 
$
2,894

 
$
7,977

 
$
8,757

Income before income taxes
156

 
115

 
514

 
485

Income tax provision
49

 
37

 
157

 
154

Net income
$
107

 
$
78

 
$
357

 
$
331

Net income attributable to noncontrolling interest
—

 
—

 
—

 
—

Net income attributable to our common shareholder
$
107

 
$
78

 
$
357

 
$
331
























4

Novelis Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions, except number of shares)
 
December 31,
2019
 
March 31,
2019
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
1,031

 
$
950

Accounts receivable, net
 
 
 
— third parties (net of allowance for uncollectible accounts of $9 and $7 as of December 31, 2019 and March 31, 2019, respectively)
1,247

 
1,417

— related parties
170

 
164

Inventories
1,494

 
1,460

Prepaid expenses and other current assets
116

 
121

Fair value of derivative instruments
51

 
70

Assets held for sale
5

 
3

Total current assets
$
4,114

 
$
4,185

Property, plant and equipment, net
3,524

 
3,385

Goodwill
607

 
607

Intangible assets, net
311

 
351

Investment in and advances to non–consolidated affiliates
794

 
792

Deferred income tax assets
141

 
142

Other long–term assets
215

 
101

Total assets
$
9,706

 
$
9,563

LIABILITIES AND SHAREHOLDER’S EQUITY
 
 
 
Current liabilities
 
 
 
Current portion of long–term debt
$
19

 
$
19

Short–term borrowings
51

 
39

Accounts payable
 
 
 
— third parties
1,744

 
1,986

— related parties
200

 
175

Fair value of derivative instruments
59

 
87

Accrued expenses and other current liabilities
541

 
616

Total current liabilities
$
2,614

 
$
2,922

Long–term debt, net of current portion
4,355

 
4,328

Deferred income tax liabilities
252

 
223

Accrued postretirement benefits
821

 
844

Other long–term liabilities
240

 
180

Total liabilities
$
8,282

 
$
8,497

Commitments and contingencies
 
 
 
Shareholder’s equity
 
 
 
Common stock, no par value; unlimited number of shares authorized; 1,000 shares issued and outstanding as of December 31, 2019 and March 31, 2019
—

 
—

Additional paid–in capital
1,404

 
1,404

Retained earnings
560

 
203

Accumulated other comprehensive income (loss)
(509
)
 
(506
)
Total equity of our common shareholder
$
1,455

 
$
1,101

Noncontrolling interest
(31
)
 
(35
)
Total equity
$
1,424

 
$
1,066

Total liabilities and equity
$
9,706

 
$
9,563







5


Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in millions)
 
Nine Months Ended December 31,
 
2019
 
2018
OPERATING ACTIVITIES
 
 
 
Net income
$
357

 
$
331

Adjustments to determine net cash provided by operating activities:
 
 
 
Depreciation and amortization
267

 
260

(Gain) loss on unrealized derivatives and other realized derivatives in investing activities, net
(32
)
 
(4
)
(Gain) loss on sale of assets
(1
)
 
4

Impairment charges
13

 
—

Deferred income taxes, net
30

 
38

Equity in net (income) loss of non-consolidated affiliates
1

 
(2
)
Amortization of debt issuance costs and carrying value adjustments
14

 
14

Other, net
2

 
(1
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
143

 
—

Inventories
(42
)
 
(214
)
Accounts payable
(176
)
 
(17
)
Other assets
(3
)
 
(30
)
Other liabilities
(109
)
 
(55
)
Net cash provided by (used in) operating activities
$
464

 
$
324

INVESTING ACTIVITIES
 
 
 
Capital expenditures
(422
)
 
(210
)
Acquisition of assets under a capital lease
—

 
(239
)
Proceeds from sales of assets, third party, net of transaction fees and hedging
3

 
2

Proceeds from investment in and advances to non-consolidated affiliates, net
6

 
1

Proceeds (outflows) from the settlement of derivative instruments, net
3

 
2

Other
10

 
10

Net cash provided by (used in) investing activities
$
(400
)
 
$
(434
)
FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of long-term and short-term borrowings
79

 
—

Principal payments of long-term and short-term borrowings
(16
)
 
(95
)
Revolving credit facilities and other, net
(38
)
 
109

Debt issuance costs
(3
)
 
(2
)
Net cash provided by (used in) financing activities
$
22

 
$
12

Net increase (decrease) in cash, cash equivalents and restricted cash
86

 
(98
)
Effect of exchange rate changes on cash
(4
)
 
(25
)
Cash, cash equivalents and restricted cash — beginning of period
960

 
932

Cash, cash equivalents and restricted cash — end of period
$
1,042

 
$
809

 
 
 
 
Cash and cash equivalents
$
1,031

 
$
797

Restricted cash (Included in "Other long-term assets")
11

 
12

Cash, cash equivalents and restricted cash — end of period
$
1,042

 
$
809





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Reconciliation of Net income attributable to our common shareholder to Adjusted EBITDA (unaudited)
The following table reconciles Net income attributable to our common shareholder to Adjusted EBITDA, a non-GAAP financial measure.
(in millions)
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2019
 
2018
 
2019
 
2018
Net income attributable to our common shareholder
$
107

 
$
78

 
$
357

 
$
331

Noncontrolling interests
—

 
—

 
—

 
—

Income tax provision
49

 
37

 
157

 
154

Interest, net
57

 
64

 
177

 
193

Depreciation and amortization
91

 
88

 
267

 
260

EBITDA
$
304

 
$
267

 
$
958

 
$
938

 
 
 
 
 
 
 
 
Unrealized (gains) losses on change in fair value of derivative instruments, net
(6
)
 
6

 
(15
)
 
9

Realized (gains) losses on derivative instruments not included in segment income
(1
)
 
—

 
2

 
(1
)
Adjustment to reconcile proportional consolidation
13

 
14

 
42

 
45

(Gain) loss on sale of fixed assets
1

 
2

 
(1
)
 
4

Restructuring and impairment, net
3

 
1

 
36

 
2

Metal price lag
11

 
13

 
18

 
(21
)
Business acquisition and other integration related costs
17

 
14

 
46

 
24

Other, net
1

 
5

 
3

 
11

Adjusted EBITDA
$
343

 
$
322

 
$
1,089

 
$
1,011


Free Cash Flow (unaudited)
The following table presents “Free cash flow”.
 (in millions)
Nine Months Ended December 31,
 
2019
 
2018
Net cash provided by (used in) operating activities
$
464

 
$
324

Net cash provided by (used in) investing activities
(400
)
 
(434
)
Plus: Cash used in the acquisition of assets under a capital lease
—

 
239

Less: Proceeds from sales of assets and business, net of transaction fees, cash income taxes and hedging
(3
)
 
(2
)
Free cash flow
$
61

 
$
127


Cash and Cash Equivalents and Total Liquidity (unaudited)
The following table reconciles the ending balances of cash and cash equivalents to total liquidity.
(in millions)
December 31, 2019
 
March 31, 2019
Cash and cash equivalents
$
1,031

 
$
950

Availability under committed credit facilities
838

 
897

Total liquidity
$
1,869

 
$
1,847


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Reconciliation of Net income attributable to our common shareholder to Net income attributable to our common shareholder, excluding special items (unaudited)
The following table presents Net income attributable to our common shareholder excluding special items. We adjust for items which may recur in varying magnitude which affect the comparability of the operational results of our underlying business.
(in millions)
Three Months Ended December 31,
 
Nine Months Ended December 31,
 
2019
 
2018
 
2019
 
2018
Net income attributable to our common shareholder
$
107

 
$
78

 
$
357

 
$
331

Special Items:
 
 
 
 
 
 
 
Business acquisition and other integration related costs
17

 
14

 
46

 
24

Metal price lag
11

 
13

 
18

 
(21
)
Restructuring and impairment, net
3

 
1

 
36

 
2

Tax effect on special items
(6
)
 
(5
)
 
(20
)
 
2

Net income attributable to our common shareholder, excluding special items
$
132

 
$
101

 
$
437

 
$
338


Segment Information (unaudited)
The following table presents selected segment financial information (in millions, except shipments which are in kilotonnes).

Selected Operating Results Three Months Ended December 31, 2019
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
127

 
$
47

 
$
55

 
$
116

 
$
(2
)
 
$
343

 
 
 
 
 
 
 
 
 
 
 
 
 
Shipments (in kt)
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
269

 
218

 
170

 
140

 
—

 
797

Rolled products - intersegment
 
—

 
6

 
3

 
6

 
(15
)
 
—

Total rolled products
 
269

 
224

 
173

 
146

 
(15
)
 
797


Selected Operating Results Three Months Ended December 31, 2018
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
125

 
$
48

 
$
49

 
$
100

 
$
—

 
$
322

 
 
 
 
 
 
 
 
 
 
 
 
 
Shipments (in kt)
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
279

 
206

 
176

 
139

 
—

 
800

Rolled products - intersegment
 
—

 
5

 
6

 
3

 
(14
)
 
—

Total rolled products
 
279

 
211

 
182

 
142

 
(14
)
 
800


Selected Operating Results Nine Months Ended December 31, 2019
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
468

 
$
160

 
$
154

 
$
309

 
$
(2
)
 
$
1,089

 
 
 
 
 
 
 
 
 
 
 
 
 
Shipments (in kt)
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
844

 
678

 
529

 
411

 
—

 
2,462

Rolled products - intersegment
 
—

 
25

 
5

 
15

 
(45
)
 
—

Total rolled products
 
844

 
703

 
534

 
426

 
(45
)
 
2,462



8

Selected Operating Results Nine Months Ended December 31, 2018
 
North
America
 
Europe
 
Asia
 
South
America
 
Eliminations and Other
 
Total
Adjusted EBITDA
 
$
395

 
$
170

 
$
151

 
$
295

 
$
—

 
$
1,011

 
 
 
 
 
 
 
 
 
 
 
 
 
Shipments (in kt)
 
 
 
 
 
 
 
 
 
 
 
 
Rolled products - third party
 
848

 
656

 
514

 
386

 
—

 
2,404

Rolled products - intersegment
 
—

 
16

 
11

 
8

 
(35
)
 
—

Total rolled products
 
848

 
672

 
525

 
394

 
(35
)
 
2,404




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