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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2021
or
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 No.)
3560 Lenox Road, Suite 2000
Atlanta, GA
30326
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (404) 760-4000
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.    Yes   ¨    No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes     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 Securities Exchange Act of 1934 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 
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      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.
Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer
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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  
The registrant is a privately held corporation. As of September 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, there was no established public trading market for the common stock of the registrant and therefore, an aggregate market value of the registrant’s common stock is not determinable.
As of May 11, 2021, 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



PART I
PART II
PART III
PART IV

2


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 belief that, as a result of the Aleris acquisition, we can more efficiently serve the automotive market and unlock synergies; the expected timing and results from investments in certain operating facilities; our projections regarding financial performance, liquidity, capital expenditures and investments; and the possible future impacts of the COVID-19 pandemic and the actions taken against it, including expectations about the impact of any changes in demand as well as volatility and uncertainty in general economic conditions. 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.
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 arising out of the Aleris acquisition, including uncertainties inherent in the acquisition method of accounting; disruption to our global aluminum production and supply chain as a result of COVID-19; 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; the risks of pandemics or other public health emergencies, including the continued spread and impact of, and the governmental and third party response to, the ongoing COVID-19 outbreak; 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.
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 but is not limited to product shipments and share of production. 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."
3


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA
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. Reference to "fiscal 2021," "fiscal 2020," "fiscal 2019," "fiscal 2018," or "fiscal 2017" refers to the fiscal year ended March 31, 2021, 2020, 2019, 2018, or 2017, respectively.
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(1)
High Low
Fiscal 2017
1.3289  1.3137  1.3439  1.2542 
Fiscal 2018
1.2889  1.2826  1.3667  1.2305 
Fiscal 2019
1.3360  1.3141  1.3657  1.2824 
Fiscal 2020
1.4245  1.3333  1.4245  1.2969 
Fiscal 2021
1.2566  1.3179  1.3889  1.2566 
________________________
(1)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. Regional "aluminum rolled product shipments," "flat-rolled product shipments," or "shipments" 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.
4


PART I
Item 1. Business.
Overview
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 partner with customers in beverage can, automotive, aerospace, and specialty markets (including foil packaging, certain transportation products, architectural, building and construction, industrial, and consumer durables) to deliver solutions that maximize the benefits of lightweight aluminum throughout North America, Europe, Asia and South America. 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 the fiscal year ended March 31, 2021, we had shipment volumes of 3,839 kt and net sales of $12.3 billion.
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, aerospace, and specialty markets. As of March 31, 2021, we had manufacturing operations in nine countries on four continents: North America, South America, Europe, and Asia, through 33 operating facilities, including recycling operations in 15 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 characteristics, 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.
5


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. Aluminum remains the most sustainable packaging material for beverage brands. 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. Flat-rolled aluminum sheet is also used in the production of battery enclosures for the growing electric vehicle market. 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.
6


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
Arconic Inc. ("Arconic") Binzhou Weiqiao Aluminium Science & Technology Co., Ltd.
Commonwealth Rolled Products 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.
JW Aluminum Kobe Steel, Ltd. ("Kobe")
Kaiser Aluminum Ma'aden
Ma'aden - Saudi Arabian Mining Company ("Ma'aden")
Shandong Nanshan Aluminum Co., Ltd.
Shandong Nanshan Aluminum Co., Ltd. Southwest Aluminum (Group) Co., Ltd.
UACJ Corporation/Tri-Arrows Aluminum Inc. ("Tri-Arrows") UACJ Corporation
Europe South America
ALVANCE Arconic
AMAG Austria Metall AG Companhia Brasileira de Alumínio
Arconic Hulamin Limited
Constellium Norsk Hydro A.S.A.
Elval Hellenic Aluminium Industry S.A. Shandong Nanshan Aluminum Co., Ltd.
Henan Zhongfu Industrial 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.
7


Trade. Some trade flows occur between regions despite shipping costs, import duties, tariffs, 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 in the beverage can market. With aluminum being the most sustainable packaging material for beverages, demand for infinitely recyclable aluminum remains strong. Package mix shift from other materials like glass, steel and PET into aluminum, and new beverage introductions – such as energy drinks, canned cocktails, spiked seltzer, and sparkling waters – all support demand levels.
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, particularly increased consumer preference for more sustainable beverage packaging options. 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
Novelis is driven by its purpose to shape a sustainable world together. Our ambition is to be the world's leading provider of low-carbon, sustainable aluminum solutions that advance our business, industry, and society toward the benefits of a circular economy. 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. We have established 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.
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.
8


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 2021. 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, aerospace, 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 have invested in world-class assets and technical capabilities to meet increasing global demand for aluminum, particularly within the automotive market due to our continued focus on maintaining a scalable business model and growing alongside our customers.
With strong markets, innovative products, solid customer partnerships, financial flexibility, and decades of manufacturing and recycling experience, we expect to see robust growth and organic investment opportunities for many years to come. We have identified over $1.5 billion of growth capital spend opportunities over the next five years. Novelis has the strength and financial flexibility to invest in growth, while at the same time meeting deleveraging and return commitments. We will continue to implement world class manufacturing initiatives, leverage digital technologies, and other advancements in R&D and IT to unlock capacity, capture growth, and support sustainability initiatives. We will also look at casting and recycling capacity projects to support carbon reduction and further automotive finishing as the automotive market continues to evolve.
This spend is also focused on completing announced expansions that are underway. With our existing automotive finishing lines in North America, Europe, and Asia contracted, we are increasing our automotive finishing capacity through two new investments in the U.S. and China. During fiscal 2021, commissioning continued on a 200 kt greenfield facility in Guthrie, Kentucky and a 100 kt brownfield expansion at our existing facility in Changzhou, China. During the year, both expansion projects shipped their first coils for customer qualification. Customer qualification and production at these facilities is expected to ramp up over the next several quarters in line with demand.
Additionally, we have announced an investment of approximately $325 - $375 million into our operating facility in Zhenjiang, China, aimed at expanding its automotive aluminum capabilities and recycling operations. This investment is expected to begin during the first half of fiscal 2022.
We are also investing in new capacity to meet growing demand for aluminum beverage can sheet. Construction is underway to add 100 kt of aluminum rolling and 60 kt of casting and recycling capacity at our flagship South American facility in Pindamonhangaba, Brazil. Commissioning is expected to begin in mid-fiscal 2022.
In addition to these organic investments, Novelis closed on its acquisition of Aleris Corporation ("Aleris"), a global supplier of rolled aluminum products, on April 14, 2020. We expect the acquisition to deliver a number of significant benefits by:
Establishing a more diverse product portfolio, which will now include 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; and
Leveraging Novelis’ deep manufacturing and recycling expertise to optimize Aleris’ assets and unlock valuable synergies.
We will continue to explore other potential opportunities that will drive profitable volume growth in our core end markets, while maintaining a balanced and disciplined financial approach in our decision making process.
Working Capital
We manage working capital based on cash needs as well as attempting to balance the timing of trade payables and receivables.
9


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 1,378 kt of primary aluminum in fiscal 2021 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 to 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 2,203 kt of recycled material inputs (less melt loss) in fiscal 2021.
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 Purpose Report, which can be found at www.novelis.com/purpose. Information in our Purpose 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 2021, natural gas and electricity represented approximately 98% 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.
10


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, while our Asia and Europe segments also produce aerospace and industrial plate.
The table below shows net sales and total shipments by segment. For additional financial information related to our operating segments, see Note 24 – Segment, Geographical Area, Major Customer and Major Supplier Information to our accompanying consolidated financial statements.
Fiscal Year Ended March 31,
Net sales in millions/shipments in kt 2021 2020 2019
Consolidated
Net sales $ 12,276  $ 11,217  $ 12,326 
Total shipments 3,839  3,429  3,419 
North America(1)
Net sales $ 4,558  $ 4,118  $ 4,581 
Total shipments 1,381  1,155  1,150 
Europe(1)
Net sales $ 3,552  $ 3,095  $ 3,376 
Total shipments 1,099  940  941 
Asia(1)
Net sales $ 2,182  $ 1,969  $ 2,190 
Total shipments 751  724  729 
South America(1)
Net sales $ 1,798  $ 1,904  $ 2,091 
Total shipments 671  675  663 
_________________________
(1)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.
A description of our operating segments during all or part of March 31, 2021 follows.
North America
Novelis North America operates 17 aluminum products facilities. This includes seven facilities with recycling operations 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 at our plants in Berea, Kentucky; Davenport, Iowa; Greensboro, Georgia; Russellville, Kentucky; Oswego, New York; Richmond, Virginia; and Uhrichsville, Ohio.
Our facilities in North America manufacture a broad range of aluminum sheet and light gauge products. End-use markets for this segment primarily include beverage and food cans, containers and packaging, automotive and other transportation applications, architectural, and other industrial applications. Beverage and food can represent the largest end-use market in terms of shipment volume for North America.
A significant portion of North America’s volumes is also directed toward the aluminum automotive sheet market, currently produced out of our Oswego, New York and Kingston, Ontario plants. In response to continued strong demand for lightweight, automotive aluminum sheet, we have further expanded our automotive finishing capacity in North America with a 200 kt greenfield expansion in Guthrie, Kentucky, which began shipping its first commercial coils for customer qualification in fiscal 2021.
Europe
Novelis Europe operates ten aluminum rolled product facilities, including five facilities with recycling operations. Recycling activities occur at Pieve, Italy; Latchford, United Kingdom; and Nachterstedt, Neuss, and Voerde, Germany. Our Nachterstedt plant is the largest recycling facility in the world.
These sites manufacture a broad range of sheet, plate, and foil products. End-use markets for this segment include beverage and food can, automotive, architectural and industrial products, foil products, aerospace, and other products. Beverage and food can represent the largest end-use market in terms of shipment volume for Europe.
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Asia
Novelis Asia operates four aluminum rolled product facilities, including two facilities with recycling operations. Recycling activities occur at the Ulsan and Yeongju, South Korea plants. The Ulsan facility operates as a 50/50 joint venture with Kobe. Our Asia facilities manufacture a broad range of aluminum sheet, plate, and light gauge products. End-use markets include beverage and food cans, electronics, architectural, automotive, foil, industrial, aerospace, and other products. The beverage can market represents the largest end-use market in terms of volume.
Due to strong demand for lightweight, automotive aluminum sheet, we are adding 100 kt of additional automotive finishing capacity at our Changzhou, China facility, which began shipping its first commercial coils for customer qualification at the end of fiscal 2021.
In response to increased customer demand for innovative, lightweight aluminum solutions, we have also announced an investment of approximately $325 - $375 million into our operating facility in Zhenjiang, China, aimed at expanding its automotive aluminum capabilities and recycling operations. This investment is expected to begin during the first half of fiscal 2022.
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.
Due to strong consumer demand for sustainable beverage packaging, we are expanding our Pindamonhangaba, Brazil facility to add 100 kt of aluminum rolling and casting capacity and 60 kt of recycling capacity. Construction is underway and commissioning is expected to begin in mid-fiscal 2022.
Financial Information About Geographic Areas
Certain financial information about geographic areas is contained in Note 24 – Segment, Geographical Area, Major Customer and Major Supplier Information to our accompanying consolidated financial statements.

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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 Daimler Group
Ball Corporation Ford Motor Company
Can-Pack S.A. General Motors LLC
Crown Holdings Inc. Hyundai Motors Corporation
PepsiCo Jaguar Land Rover
Various bottlers of the Coca-Cola System NIO
Renault-Nissan-Mitsubishi Alliance
Construction, Industrial, and Other
Stellantis
Agfa Graphics Tesla, Inc.
Aluflexpack Volkswagen Group
Amcor
Facchini S.A. Electronics
Feron LG International Corporation
Gentek Samsung Electronics Co., Ltd.
Klöckner Metals
Lotte Aluminium Co., Ltd. Aerospace
Ply Gem Airbus
Prefa Boeing
Reynolds Consumer Products LLC Bombardier
Ryerson Inc. Embraer
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, can end stock, and tab stock from us.
Additional information related to our top customers is contained in Note 24 – 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.
  Fiscal Year Ended March 31,
  2021 2020 2019
Direct sales as a percentage of total net sales 94  % 95  % 97  %
Distributor sales as a percentage of total net sales
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.
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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 ("R&D") expenses, which include mini-scale production lines equipped with hot mills, can lines, and continuous casters. 
  Fiscal Year Ended March 31,
in millions 2021 2020 2019
Research and development expenses $ 83  $ 84  $ 72 
We conduct R&D 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 specialties markets. We also have a global casting engineering and technology center in Spokane, Washington specializing in molten metal processing, an automotive research and technology center in Shanghai, China, an automotive research and technology center in Sierre, Switzerland, a research and technology center in Göttingen, Germany specializing in the development of new products and processes for our can and specialties customers, an automotive customer solution center in Novi, Michigan, a R&D center in Aachen, Germany, and aerospace innovation centers in Koblenz, Germany and Zhenjiang, China.
Human Capital Resources
Our Employee Base
Novelis operates an integrated network of 33 technically advanced rolling and recycling facilities across North America, Europe, Asia, and South America. We operate 17 operating facilities in North America, ten in Europe, four in Asia, and two in South America. After our acquisitions of the Aleris business, we have approximately 12,540 employees in nine countries.
The table below summarizes our approximate number of employees by region, excluding our proportionate share of those employed by less than wholly owned affiliates. 
North America(1)
Europe Asia South America Total
March 31, 2021
4,400  4,750  1,710  1,680  12,540 
_________________________
(1)Includes employees within our Corporate headquarters located in Atlanta, Georgia and our R&D facility located in Kennesaw, Georgia.
Purpose and Culture
We are proud of our purpose – Shaping a Sustainable World Together – which is driven by our vision – To Lead the Aluminum Industry as Partner of Choice for Innovative Solutions. To help us deliver on that vision, we have identified a set of five pillars of focus – the “Focused 5.” For fiscal 2022, the “Focused 5” will consist of (1) Safety, (2) Customer Centricity, (3) Environmental Footprint, (4) Operation Excellence, and (5) People.
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To achieve the “Focused 5” in the right way. To do so, we have established a framework of shared beliefs that we champion with our employees:
Do It Right - I safely deliver quality, cost-effective solutions to my customers
Say Anything - I listen actively, speak candidly and challenge respectfully
Own It! - I take accountability to deliver the Focused 5
Get Focused - I demonstrate discipline and follow through to accelerate flawless execution
Win Together - I constantly reach out across boundaries to ensure Novelis succeeds
Our commitment to doing things the right way is further supported by regular Code of Conduct training, which reminds our people of that we are committed to operating at the highest ethical standards and supporting a culture of integrity. In addition, given that safety is our top priority, we have developed the Novelis Safety System to provide a comprehensive, systemic approach to ensure the health and well-being of our workforce.
Diversity and Inclusion
We believe that the diverse backgrounds, expertise, and perspectives of our employee base contributes to our success and helps us achieve our ambitious goals. Consistent with that belief, we are committed to increase the diversity in our senior technical and executive ranks, enhance existing infrastructure to support and empower our employees, and educate and equip our managers to lead inclusively and by example.
Talent Development
At Novelis, we make it a priority to identify the very best talent and provide them with the right growth and development opportunities. We are proud of programs that help us and our people succeed, such as:
Global Accelerated Leadership Program – Designed to equip our most promising talent and develop them for possible future leadership roles.
Global Technical Training – High-impact technical training topics, relevant for entry-level or mid-career technical employees, identified through our talent management process.
Engineering Development Program – Technical talent pipeline enhancer which exposes participants to leaders from across the organization and courses on a wide-variety of technical and business subjects.
Employee Relations
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 R&D activities and, when appropriate, we apply for patents in appropriate jurisdictions. We currently hold approximately 2,941 patents and patent applications on approximately 387 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 41 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.
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Environment, Health and Safety
As a purpose-driven company, Novelis is committed to protecting and preserving the environment and the health, safety, and well-being of our colleagues, customers, and communities. Our investments in safety, infrastructure, global partnerships, innovation, and our people have advanced our purpose and positioned our company for long-term sustainable growth. During fiscal 2021, we recycled over 74 billion used beverage cans, and recycled content made up 61% of total input in our aluminum rolled product. Our plant operations around the globe continue to reduce greenhouse gas emissions, limit water consumption, and lower electricity usage while producing year-over-year improvements in overall production. To further underscore our commitment to safety, we launched several new safety initiatives at our facilities worldwide to help ensure that safety remains our primary focus and is fulfilled every day. During fiscal 2021, 11 facilities achieved major safety milestones by operating 365 consecutive days without a recordable injury. For more information on the initiatives Novelis has implemented, please read our latest Purpose Report, found at novelis.com/purpose. In addition, to learn more about our new Sustainability Platform, including our commitments to becoming a fully circular business, along with a more diverse, inclusive and safe workplace, visit novelis.com/sustainability. Information in our Purpose Report and/or our latest Sustainability brochure does not constitute part of this Form 10-K.
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 U.S., 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 (the "Exchange Act"). However, we file periodic reports and other information with the Securities and Exchange Commission (the "SEC"). We make these filings available on our website free of charge, the URL of which is 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 (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.
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Competitive and Strategic Risks
Certain of our customers are significant to our revenues, and we could be adversely affected by disruptions or 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 55%, 63%, and 65% of our total net sales for the fiscal years ended March 31, 2021, 2020, and 2019, respectively. A significant disruption in the business or downturn in the financial condition of our significant customers could materially adversely affect our results of operations and cash flows. Some of our customers are dependent upon the continued ability of their suppliers to deliver key components necessary for the manufacturing of their products, and a disruption of such supply chains can cause such customers to alter production schedules or suspend production entirely. For example, a global semiconductor supply shortage is having wide-ranging effects across multiple industries, particularly the automotive industry, and it has impacted multiple suppliers that incorporate semiconductors into the parts they supply to some of our customers. As a result, the semiconductor supply shortage has had, and will continue to have, an impact on vehicle production, which could in turn adversely affect customer demand for aluminum.
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 contractual 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 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 may increase their use of high-strength steel rather than aluminum for certain applications due to the price differential between steel and aluminum.
We may not realize the anticipated benefits of 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. For example, we have announced significant strategic investments in multiple geographic locations, including a $180 million investment in automotive finishing capacity in Changzhou, China, a $175 million investment in recycling and casting capacity at our plant in Pindamonhangaba, Brazil, and a $300 million greenfield automotive finishing expansion 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, and risk that we may not be able to complete a project that has been announced, complete such project on time or generate the synergies and other benefits we anticipated.
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The integration of Aleris into our operations will continue to require significant management attention and may not produce the benefits we anticipate.
Our acquisition of Aleris involves known and unknown risks that could cause our growth or operating results to differ from our expectations, including:
diversion of management’s attention from regular business by the need to integrate operations;
lack of institutional experience in key markets in which Aleris operates, including aerospace;
problems retaining key employees of Aleris or Novelis;
challenges assimilating intellectual property and information technology systems;
disruption of ongoing relationships with customers, suppliers and contractors;
difficulties maintaining uniform standards, controls, procedures and policies, including an effective system of internal control over financial reporting;
impairment losses related to acquired goodwill and other intangible assets; and
potential adverse short-term effects of increased operating expenses.
An inability to successfully integrate Aleris into our operations without substantial costs, delays or other problems could impede us from realizing the intended benefits of the acquisition, including the synergies and growth opportunities we expect. Our failure to overcome these risks could materially and adversely affect our business, financial condition and future results of operations.
Operational Risks
If we are unable to obtain sufficient quantities of primary aluminum, scrap 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.
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 disrupted.
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 favorable terms.
If energy costs were to rise, or if energy supplies or supply arrangements were disrupted, our profitability and cash flows could decline.
Our business and operations, and the operations of our suppliers and customers, may be adversely affected by public health crises, such as the COVID-19 pandemic.
We face risks related to public health crises, including outbreaks of communicable diseases. The outbreak of such a communicable disease could result in a widespread health crisis that could adversely affect general commercial activity and the economies and financial markets of many countries. For example, the outbreak of the coronavirus ("COVID-19") spread across the globe to many countries in which we do business and impacted worldwide economic activity.
A public health crisis, including the COVID-19 pandemic, poses the risk that we or our employees, contractors, suppliers, customers and other business partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities, or that such crisis may otherwise interrupt or impair business activities.
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Additionally, as a result of the Aleris acquisition, we expect to derive future revenues from customers in the aerospace end-use market. Due to severe impacts from the global COVID-19 pandemic, demand for air travel has declined dramatically in the past year, resulting in airline capacity reductions. Consequently, we have experienced a significant decline in orders from aerospace customers, which has negatively impacted our business.
While it is not possible to predict the impact that a global health crisis could have on our operations and those of our suppliers and customers, the measures taken by the governments of countries affected, actions taken to protect employees, and the impact of any such crisis on various business activities in affected countries could adversely affect our financial condition, results of operations and cash flows.
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. Furthermore, a portion of Aleris’ workforce is unionized, which increases the percentage of our workforce represented by labor unions as a result of the acquisition. 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 and maintain strong partnerships with the Aleris workforce unions following the acquisition. 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 operating facilities.
In the past, we have experienced production interruptions at our plants due to the breakdown of equipment, fires, weather events, public health crises, and other causes.
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 must 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; political instability that may disrupt economic activity, including the continuing uncertainty related to the United Kingdom’s withdrawal from the European Union; economic and commercial instability; and civil unrest, war or terrorist activities.
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 demand reductions, 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, Logan, Kentucky and Sierre, Switzerland 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.
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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 are vulnerable to damage, disruptions and 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 a significant cybersecurity event 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. Although we are insured against cyber risks and security breaches up to an annual aggregate limit, our liability insurance may be inadequate and may not fully cover the costs of any claim or any damages we might be required to pay, and we may not be able to obtain adequate liability insurance in the future on commercially desirable or reasonable terms or at all.
Increased freight costs on imported products could decrease earnings and liquidity.
We have also experienced an increase in costs for freight and shortages in freight capacity, which can negatively impact our ability to ship volume predictably and on a lower cost basis. We may not be able to obtain sufficient freight capacity on a timely basis or at favorable shipping rates and, therefore, may not be able to receive products from suppliers or deliver products to customers in a timely and cost-effective manner. There can be no assurance that we will be successful in increasing prices or recouping increased freight surcharges in the future.
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. We generally do not hedge more than a small fraction of our regional market premium exposure because we do not believe the derivatives markets are sufficiently robust and efficient to meet our needs. The timing difference associated with metal price lag could positively or negatively impact our operating results and short-term liquidity.
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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.
Certain of our debt agreements use LIBOR as a reference rate for interest rate calculations. In July 2017, the U.K.’s Financial Conduct Authority ("FCA"), which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. In March 2021, the FCA announced that it now intends to cease the U.S. dollar LIBOR setting on June 30, 2023. At this time, we cannot predict how markets will respond to the proposed alternative rates or the effect of any changes to LIBOR or the discontinuation of LIBOR. If LIBOR is no longer available or if our lenders have increased costs due to changes in LIBOR, we may experience potential increases in interest rates on our variable rate debt, which could adversely impact our results of operations. In addition, some of our debt agreements that use LIBOR as a reference rate do not contain fallback reference rates. If LIBOR is discontinued, we may incur additional costs related to contract renegotiation for such agreements. Alteration of the terms of a debt instrument or a modification of the terms of other types of contracts to replace an interbank offered rate with a new reference rate could result in a taxable exchange and the realization of income and gain/loss for U.S. federal income tax purposes.
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.
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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, funded and unfunded pension benefits in Germany and lump sum indemnities payable to our employees in France, Italy, and South 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. President Biden and Senate Finance Committee Chairman Ron Wyden have set forth several tax proposals that would, if enacted into law, make significant changes to U.S. tax laws. We will continue to evaluate the overall impact of current, future, and proposed regulations and interpretive guidance from tax authorities on our effective tax rate and consolidated balance sheets.
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 14 – Debt for additional discussion.
22


Other Legal and Regulatory Risks
Our global operations are subject to increasingly complex and stringent laws and government regulations that may adversely affect our business and operations.
We operate in complex regulated environments in the U.S. and in the other countries in which we operate and could be adversely affected by changes to existing legal requirements including related interpretations and enforcement practices, new legal requirements and/or any failure to comply with applicable regulations.
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, increases our costs of doing business outside the U.S. We are also subject to data privacy and protection laws regulating the collection, use, retention, disclosure, transfer and processing of personal information, such as the European Union’s General Data Protection Regulation. The potential effects of these laws are far-reaching and may require us to modify our data processing practices and policies and to incur substantial costs and expenses to comply. In recent years, a number of new laws and regulations have been adopted, there has been expanded enforcement of certain existing laws and regulations, and the interpretation of certain laws and regulations have become increasingly complex.
In addition, the global scale of our operations exposes us to risks relating to international trade policies, including import quotas, tariffs and taxes on goods imported from countries where we procure or manufacture products or raw materials as well as retaliatory policies by governments against such policies. For example, the U.S. and Chinese governments have imposed a series of significant incremental tariffs to certain imported goods. In addition, determinations by destination countries about unfairly priced and subsidized products can normalize prices, benefiting the company in some instances, while potentially disrupting supply chains. The impact and duration of such tariffs and other trade restrictions, as well as the potential for additional tariffs by the U.S., China or other countries, remain uncertain. Our ability to implement strategies to mitigate the impact of such restrictions and our exposure to the risks described above as well as the impact of changes in regulations and policies could impact the competitiveness of our products and negatively impact our business, results of operations and financial condition.
The impact of new laws, regulations and policies or decisions or interpretations by authorities applying those laws and regulations, cannot be predicted. Compliance with any new laws, regulations or policies may increase our operating costs or require significant capital expenditures. Any failure to comply with applicable laws, regulations or policies in the U.S. or in any of the other countries in which we operate could result in substantial fines or possible revocation of our authority to conduct our operations, which could adversely affect us.
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. Furthermore, in connection with our acquisition of Aleris, we agreed to assume certain environmental liabilities. 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.
23


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 intellectual property, 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.
In November 2019, ALVANCE agreed to acquire Duffel for €310 million. At closing on September 30, 2020, we received €210 million ($246 million as of September 30, 2020) in cash. The parties have agreed to a post-closing arbitration process regarding the payment of the remaining €100 million. There is no assurance as to when we expect the post-closing arbitration process to conclude and whether we will receive any of the remaining €100 million payment.
Item 1B. Unresolved Staff Comments.
None.
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Item 2. Properties.
Our global headquarters are located in Atlanta, Georgia. Our global research and technology center, located in Kennesaw, Georgia, 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 in addition to several facilities with R&D operations worldwide, including facilities with specified research in automotive and aerospace technologies. Our regional headquarters are located in Atlanta, Georgia (North America), Küsnacht, Switzerland (Europe), Seoul, South Korea (Asia), and Sao Paulo, Brazil (South America).
The total number of operating facilities within our operating segments as of March 31, 2021 is shown in the table below, including operating facilities we jointly own and operate with third parties.
Operating Facilities Facilities with Recycling Operations
North America 17 
Europe 10 
Asia
South America
Total 33  15 
The following tables provide information, by operating segment, about the plant locations, processes and major end-use markets or applications for the aluminum rolled products, recycling, and primary metal facilities we operated as of March 31, 2021.
North America 
Locations Plant Processes Major Products
Ashville, Ohio Coating and finishing Coated coil for specialties
Berea, Kentucky Recycling and sheet ingot casting Sheet ingot from recycled metal for can body and can end stock
Buckhannon, West Virginia Cold rolling and finishing Mill finish coil and light-gauge sheet for specialties
Clayton, New Jersey Cold rolling and finishing Foil and light-gauge coiled sheet for specialties
Davenport, Iowa(1)
Casting, hot rolling, and recycling Hot rolled coil from recycled material
Davenport, Iowa(1)
Cold rolling and finishing Painted coil and mill finish coil
Fairmont, West Virginia Cold rolling and finishing Aluminum sheet and light-gauge foil for specialties
Greensboro, Georgia Recycling and sheet ingot casting Sheet ingot from recycled metal for can body and can end stock
Guthrie, Kentucky(2)
Pre-treatment and heat treatment Automotive sheet
Kingston, Ontario Cold rolling and finishing Automotive sheet and specialty material
Lincolnshire, Illinois Cold rolling and finishing Mill finish coil
Oswego, New York Sheet ingot casting, hot rolling, cold rolling, recycling, and finishing Can stock, automotive sheet, construction sheet, industrial sheet, and painted sheet
Richmond, Virginia Pellet casting, hot rolling, cold rolling, finishing, and recycling Mill finish sheet for building and construction
Russellville, Kentucky(3)
Sheet ingot casting, hot rolling, cold rolling, finishing, and recycling Can stock and aluminum sheet and coil for specialties
Terre Haute, Indiana Cold rolling and finishing Foil stock for specialties
Uhrichsville, Ohio Casting, hot rolling, cold rolling, finishing, and recycling Transportation sheet and aluminum sheet for specialties
Warren, Ohio Coating and finishing Coated can sheet
_________________________
(1)The Company operates two separate facilities in Davenport, Iowa, one finishing mill and one casting facility.
(2)In January 2018, we announced a greenfield expansion to be located in Guthrie, Kentucky that would include heat treatment and pre-treatment lines for automotive sheet finishing. The first customer coils were shipped from the Guthrie facility in fiscal 2021. Customer qualifications will continue into fiscal 2022, and production at this facility is expected to increase in the coming fiscal year.
(3)Logan Aluminum Inc. ("Logan"), located in Russellville, Kentucky, is operated as a joint venture between Novelis and Tri-Arrows. We own 40% of the outstanding common shares of Logan. See Note 10 – Consolidation for further information about this affiliate.
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Europe
Locations(1)
Plant Processes Major Products
Bresso, Italy Coating, embossing, and finishing Painted sheet, painted construction sheet, and automotive sheet
Göttingen, Germany Finishing and coating Can end stock, food can, and painted sheet
Koblenz, Germany Sheet ingot casting, hot rolling, cold rolling, and finishing Sheet ingot for aerospace, aerospace sheet, commercial plate, and heat exchangers
Latchford, United Kingdom Recycling and sheet ingot casting Sheet ingot from recycled metal
Nachterstedt, Germany Cold rolling, finishing, coating, recycling, sheet ingot casting, and heat treatment Automotive sheet, can end stock, industrial sheet, painted sheet, construction sheet, and sheet ingot from recycled metal
Neuss, Germany(2)
Recycling, sheet ingot casting, hot rolling, cold rolling, and finishing Can body stock, foil stock, and feeder stock for finishing operations
Ohle, Germany Cold rolling, finishing, and converting Foil, packaging, and flexible tubes
Pieve, Italy Continuous casting, cold rolling, finishing, and recycling Coil for finishing operations, industrial sheet, foil stock, and closure stock
Sierre, Switzerland(3)
Sheet ingot casting, hot rolling, cold rolling, finishing, and continuous heat treatment Automotive sheet and industrial sheet
Voerde, Germany Casting and recycling Sheet ingot for automotive and specialties
_________________________ 
(1)Production at our Crick, United Kingdom ("U.K.") facility ceased during fiscal 2021. The location continues to be operated by a third party service provider as a warehouse and distribution facility.
(2)Aluminium Norf GmbH ("Alunorf") is operated as a 50/50 production joint venture between Novelis and Hydro Aluminium Deutschland GmbH. See Note 11 – Investment in and Advances to Non-Consolidated Affiliates and Related Party Transactions for further information about this affiliate.
(3)Novelis operates a wholly owned facility in Sierre, Switzerland. In addition to this facility, AluInfra Services SA ("AluInfra") is operated as a 50/50 joint venture between Novelis and Constellium Valais SA ("Constellium") and provides utility services to each partner. See Note 11 – Investment in and Advances to Non-Consolidated Affiliates and Related Party Transactions for further information about this affiliate.
Asia
Locations Plant Processes Major Products
Changzhou, China Heat treatment and finishing Automotive sheet
Ulsan, South Korea(1)
Sheet ingot casting, hot rolling, cold rolling, recycling, and finishing Can stock, construction sheet, industrial sheet, electronics, automotive sheet for finishing operations, foil stock, and recycled material
Yeongju, South Korea Sheet ingot casting, hot rolling, cold rolling, recycling, and finishing Can stock, construction sheet, industrial sheet, electronics, foil stock, and recycled material
Zhenjiang, China Sheet ingot casting, hot rolling, and heat treatment Aerospace sheet, commercial plate, and industrial sheet
_________________________ 
(1)Ulsan Aluminum, Ltd. ("UAL") is operated as a 50/50 joint venture between Novelis and Kobe. See Note 11 – 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, and coating Can stock, construction sheet, industrial sheet, foil stock, sheet ingot, and transportation sheet
Santo Andre, Brazil Foil rolling and finishing Foil stock

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 23 – Commitments and Contingencies to our accompanying consolidated financial statements, which are incorporated by reference into this item.
Item 4. Mine Safety Disclosures.
Not applicable.

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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 to our shareholder are made in accordance with our capital allocation policy and at the discretion of the board of directors. Such payments will depend on, among other things, our financial resources, cash flows generated by our business, our cash requirements, restrictions under the instruments governing our indebtedness, and other relevant factors.
Item 6. Selected Financial Data.
The selected financial data previously required by Item 301 of Regulation S-K has been omitted in reliance on SEC Release No. 33-10890.
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 partner with customers in the beverage can, automotive, aerospace, and specialty markets (including foil packaging, certain transportation products, architectural, industrial, and consumer durables) to deliver solutions that maximize the benefits of lightweight aluminum throughout North America, Europe, Asia, and South America. 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. We have recycling operations in many of our plants to recycle both post-consumer aluminum and post-industrial aluminum. As of March 31, 2021, we had manufacturing operations in nine countries on four continents, through 33 operating facilities, which include any combination of hot or cold rolling, finishing, casting, or recycling capabilities. We have recycling operations in 15 of these operating facilities.
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 Part I, Item 1A. Risk Factors.
Discussion and analysis of fiscal 2019 and year-over-year comparisons between fiscal 2020 and fiscal 2019 not included in this Form 10-K can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the SEC on May 7, 2020. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes and other financial information included elsewhere in this Form 10-K.
BUSINESS AND INDUSTRY CLIMATE
On April 14, 2020, Novelis closed its acquisition of Aleris Corporation and is now integrating the two companies. The acquisition provides a number of strategic benefits, including increasing the Company’s footprint as an aluminum rolled products manufacturer and diversifying its product and customer portfolio, including by providing entry into the aerospace market. In addition, more than $180 million of run-rate synergies have been identified, through traditional integration cost synergies and strategic synergies created by enhancing and integrating operations in Asia. In the months since closing the transaction, $79 million of run-rate cost synergies have already been achieved. The results from continuing operations reported for the period ending March 31, 2021 reflect the Aleris acquisition.
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The early months of fiscal 2021 were negatively impacted by a short-term reduction in demand for aluminum rolled products as a result of the COVID-19 pandemic and restrictions put in place to combat the virus. Some industries such as automotive, aerospace, and some specialty markets, including heat exchangers and transportation, experienced a sharper demand decline than the more resilient beverage can segment. However, demand strengthened considerably in the second fiscal quarter across most end markets and remained favorable through the remainder of the fiscal year. While aerospace demand is expected to remain muted into fiscal 2022, some end markets, including automotive and specialties, have returned to pre-COVID demand levels due to strong consumer demand. We believe the long-term trends for flat-rolled aluminum products remain strong. Economic growth, material substitution, and sustainability considerations, including increased environmental awareness around polyethylene terephthalate ("PET") plastics, continue to support long-term increasing global demand for aluminum and rolled products. With the exception of China where can sheet overcapacity and strong competition remains, favorable market conditions and increasing customer preference for sustainable packaging options is driving higher demand for recyclable aluminum beverage cans and bottles. At the end of fiscal 2019, we began expanding rolling, casting and recycling capability in Pindamonhangaba, Brazil to support this demand.
Meanwhile, the long-term 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 our additional investments in Guthrie, Kentucky (U.S.), Changzhou, China, and Zhenjiang, China. This demand has been primarily driven by the benefits that result from using lightweight 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, resulting in increased competition with high-strength steel.
We expect long-term demand for building and construction and other specialty products will grow due to increased customer preference for lightweight, sustainable materials and demand for aluminum plate in Asia to grow driven by the development and expansion of industries serving aerospace, semiconductor, rail, and other technically demanding applications.
We believe significant aircraft industry order backlogs for key original equipment manufacturers ("OEMs"), including Airbus and Boeing, will translate into growth in the future, and we believe our multi-year supply agreements have positioned us to benefit from future expected demand.
COVID-19 Response
The COVID-19 pandemic continues to cause travel and business disruption and economic volatility. Government mandates to stay at home or avoid large gatherings of people, as well as infected employees or individuals on-site, have caused some of our customers to temporarily shut down their manufacturing facilities due to lack of demand, government decree, or public health concerns. Although many government-mandated restrictions have been gradually lifted, a resurgence in COVID-19 cases may lead to the reimposition of previously lifted business restrictions and closure requirements, the imposition of new restrictions, or the issuance of new or revised local or national health guidance. We are encouraged by the resiliency of the beverage can market and the recovery in the automotive and specialty markets. We continue working closely with our customers to adjust production based on their sales forecasts.
With our primary focus being the health and well-being of our employees, we are closely monitoring the changing landscape with respect to COVID-19 and taking actions to manage our business and support our customers. We have bolstered our own environmental health and safety protocols and aligned them with guidance from global health authorities and government agencies across our operations to help ensure the safety of our employees, customers, suppliers, communities, and other stakeholders. For example, we have implemented social distancing standards and control measures for common work areas, including desks, workstations, meeting rooms, break rooms, cafeterias, and clock-in areas. We have controlled distancing during shift changes by staggering shift change times and creating one-way flows marked on floors. In addition, we have distributed personal protective equipment ("PPE") such as facemasks, face shields, and gloves, as well as cleaning stations, personal hygiene products, and disinfection products to our sites. For our non-production workforce, we have strongly encouraged virtual meetings to reduce employee contact and have switched to paperless work environments where possible. The recent approval of COVID-19 vaccines is another positive resource available to help further ensure the health of our employees, facilities, and communities.
Liquidity Position
We believe that we have substantial liquidity to navigate the current dynamic environment. Our cash and cash equivalents and long-term committed available borrowings aggregated to $2.2 billion of liquidity at March 31, 2021.
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Due to some uncertainty on how the COVID-19 pandemic may evolve, early in fiscal 2021 we took a prudent approach to capital and prioritized spending on maintenance activities and organic strategic capacity expansions projects. With more confidence in end market conditions, we increased our capital expenditures expectation for fiscal 2022 to approximately $600 - $700 million. This includes approximately $300 million for maintenance spend, as well as strategic spending to complete automotive capacity expansions now commissioning in the U.S. and China, the Brazil rolling and casting capacity expansion, and initial spend associated with a strategic capacity expansion in China.
Market Trends
While there has been limited short-term impact resulting from the COVID-19 pandemic in some end markets, long-term demand trends for flat-rolled aluminum products remain broadly intact. Beverage can represents the largest share of our shipment product portfolio, and has historically been a relatively recession resistant product. Our beverage can sheet shipments increased versus the prior year, as demand for aluminum cans as a package type was very strong, particularly across the Americas.
The automotive industry was severely impacted by the slowdown resulting from COVID-19 in the first quarter of fiscal 2021, as major U.S. and European automotive OEMs temporarily shut down production. However, the resumption of customer operations beginning in May 2020, combined with strong demand for larger vehicles like pick-up trucks and SUVs, as well as strengthening demand in China for electric vehicles, has driven demand for automotive aluminum sheet to above pre-pandemic levels by the fourth quarter. While we do see some short-term demand reduction resulting from the semi-conductor shortage impact on OEM production rates in the first half of calendar 2021, the long-term demand trends for automotive aluminum sheet remain strong.
Demand for specialties products has recovered from some short-term reduced demand driven by COVID-19-related impacts early in fiscal 2021. Demand remains particularly strong for aluminum sheet in the electronics market in Asia, as well as building and construction, transportation, and foil packaging in North America and Asia.
In aerospace, sharply lower consumer travel is expected to drive soft demand for aerospace sheet and plate for the next several quarters.
We are closely monitoring the changing landscape with respect to COVID-19 and taking actions to manage our business and support our customers, while focusing on the health and safety of our employees.
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 fiscal years ended March 31, 2021, 2020, and 2019 are as follows.
    Percent Change
  Fiscal Year Ended March 31,
Fiscal Year Ended
March 31, 2021
versus
March 31, 2020
Fiscal Year Ended
March 31, 2020
versus
March 31, 2019
2021 2020 2019
Aluminum (per metric tonne, and presented in U.S. dollars):
Closing cash price as of beginning of period $ 1,489  $ 1,900  $ 1,997  (22) % (5) %
Average cash price during period 1,802  1,749  2,035  (14)
Closing cash price as of end of period 2,213  1,489  1,900  49  (22)
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For the fiscal years ended March 31, 2021, 2020, and 2019, the weighted average local market premium was as follows.
Percent Change
  Fiscal Year Ended March 31,
Fiscal Year Ended
March 31, 2021
versus
March 31, 2020
Fiscal Year Ended
March 31, 2020
versus
March 31, 2019
  2021 2020 2019
Weighted average local market premium (per metric tonne, and presented in U.S. dollars) $ 199  $ 204  $ 268  (2) % (24) %
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 there is not fully hedged. In Europe, Asia, and South America, 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. In connection with the acquisition of Aleris, the Company acquired a portfolio of derivative financial instruments executed to hedge various price risk exposures. Historically, Aleris did not designate derivative financial instruments as hedges and therefore, both realized and unrealized gains and losses on derivatives were recorded immediately in the consolidated statement of operations. In fiscal 2021, the Company designated certain Aleris LME aluminum forward sales contracts as cash flow hedges of the metal price risk associated with our future metal sales and certain foreign currency exchange contracts designated as hedges of expected future foreign currency transactions. 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 from continuing operations before income tax provision and net income. Gains and losses on metal derivative contracts are not recognized in segment income until realized.
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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 fiscal years ended March 31, 2021, 2020, and 2019.
  Exchange Rate as of
Fiscal Year Ended March 31,
Average Exchange Rate
Fiscal Year Ended March 31,
  2021 2020 2019 2021 2020 2019
Euro per U.S. dollar 0.851  0.911  0.890  0.853  0.901  0.866 
Brazilian real per U.S. dollar 5.697  5.199  3.897  5.471  4.168  3.809 
South Korean won per U.S. dollar 1,134  1,223  1,138  1,158  1,186  1,114 
Canadian dollar per U.S. dollar 1.257  1.425  1.336  1.318  1.333  1.314 
Swiss franc per euro 1.106  1.061  1.118  1.078  1.095  1.142 
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 Swiss 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 South Korean 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 Brazilian 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
For fiscal 2021, we reported net income attributable to our common shareholder of $236 million, which is a decrease compared to $420 million in fiscal 2020. This decrease is primarily due to a $221 million net loss from discontinued operations. Net income from continuing operations was $458 million for fiscal 2021, an increase from $420 million in fiscal 2020. This increase is primarily due to an increase of 16% in segment income to $1.7 billion in fiscal 2021 from $1.5 billion in fiscal 2020. Operational performance was primarily driven by a $200 million positive segment income contribution from the acquired Aleris business, favorable metal costs, cost containment efforts, and favorable foreign exchange rates, partially offset by negative impacts on volume and product mix resulting from the COVID-19 pandemic early in the fiscal year.
The favorable factors in net income were partially offset by $50 million charitable contribution to support COVID-19 relief efforts in the current year, as well as higher depreciation and amortization and interest expense primarily related to the acquired Aleris business. In addition, the current year includes $11 million of unrealized derivative losses and a $29 million purchase price accounting adjustment resulting from the relief of an inventory step-up, both primarily related to the acquired Aleris business.
As a result of these factors, net cash provided by operating activities was $1.1 billion and free cash flow was $612 million for fiscal 2021. Refer to Non-GAAP Financial Measures for our definition of free cash flow.
The actions we have taken over the past several years to grow the business, strengthen our product portfolio, optimize and enhance the reliability of our operations, and deliver innovative products and excellent customer service are evidenced by our ability to successfully navigate through the challenges of the COVID-19 pandemic and deliver strong financial performance with a robust balance sheet.
Our strategy to grow the business both organically and inorganically will help us achieve our long-term goals. This includes recent organic investments to expand automotive finishing capacity in the U.S. and China and rolling, casting, and recycling capacity in Brazil, as well as our planned cold mill investment in China. We expect to achieve further growth and diversification with our acquisition of Aleris.
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We are also continuing to deliver on our purpose of shaping a sustainable world by utilizing high levels 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. Novelis’ ambition is to be the world’s leading provider of low-carbon, sustainable aluminum solutions that advance our business, industry, and society toward the benefits of a circular economy.
Key Sales and Shipment Trends
Three Months Ended Fiscal Year Ended Three Months Ended Fiscal Year Ended
in millions, except shipments which are in kt
June 30,
2019
Sep 30,
2019
Dec 31,
2019
Mar 31,
2020
Mar 31,
2020
June 30,
2020
Sep 30,
2020
Dec 31,
2020
Mar 31,
2021
Mar 31,
2021
Net sales $ 2,925  $ 2,851  $ 2,715  $ 2,726  $ 11,217  $ 2,426  $ 2,978  $ 3,241  $ 3,631  $ 12,276 
Percentage (decrease) increase in net sales versus comparable previous year period (6) % (9) % (10) % (12) % (9) % (17) % % 19  % 33  % %
Rolled product shipments:
North America 289  286  269  267  1,111  272  367  347  362  1,348 
Europe 234  245  224  220  923  212  240  253  272  977 
Asia 184  177  173  184  718  184  178  184  201  747 
South America 139  141  146  148  574  113  148  158  159  578 
Eliminations (16) (14) (15) (8) (53) (7) (10) (9) (11) (37)
Total 830  835  797  811  3,273  774  923  933  983  3,613 
The following summarizes the percentage increase (decrease) in rolled product shipments versus the comparable prior period:
North America % (3) % (4) % (9) % (3) % (6) % 28  % 29  % 36  % 21  %
Europe % % % (11) % % (9) % (2) % 13  % 24  % %
Asia % % (5) % (7) % (1) % —  % % % % %
South America 10  % 12  % % % % (19) % % % % %
Total % % —  % (7) % —  % (7) % 11  % 17  % 21  % 10  %
Fiscal 2021 Compared to Fiscal 2020
Net sales was $12.3 billion for fiscal 2021, an increase of 9% compared to fiscal 2020, driven primarily by a 10% increase in rolled product shipments.
Income from continuing operations before income tax provision was $696 million for fiscal 2021, an increase of 16% compared to fiscal 2020. In addition to the factor noted above, the following items affected the change in income from continuing operations before income tax provision.
Cost of Goods Sold (Exclusive of Depreciation and Amortization)
Cost of goods sold (exclusive of depreciation and amortization) was $10 billion for fiscal 2021, an increase of 8% compared to fiscal 2020, driven primarily by higher volume and an increase of $291 million in total metal input costs included in cost of goods sold (exclusive of depreciation and amortization). Cost of goods sold (exclusive of depreciation and amortization) in fiscal 2021 also included $29 million related to the relief of the inventory step-up on the acquired Aleris business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") was $551 million for fiscal 2021 compared to $498 million for fiscal 2020. The increase is related to the additional SG&A from the acquired Aleris business, mostly offset by cost savings measures and initial acquisition cost synergies realized in fiscal 2021.
Depreciation and Amortization
Depreciation and amortization was $543 million for fiscal 2021 compared to $361 million for fiscal 2020. The increase primarily relates to the depreciation of acquired Aleris assets.
Interest Expense and Amortization of Debt Issuance Costs
Interest expense and amortization of debt issuance costs increased $19 million primarily due to a higher average level of debt held during fiscal 2021 as a result of the Aleris acquisition, partially offset by lower average borrowing rates.
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Loss on Extinguishment of Debt
Loss on extinguishment of debt decreased $57 million. The $71 million in costs associated with the refinancing of Novelis Corporation's 6.25% Senior Notes due 2024 in fiscal 2020 was higher than the $14 million in costs in fiscal 2021 which relate to the refinancing of a portion of our secured term loan credit facility ("Term Loan Facility") and the issuance of our new 2029 Senior Notes. See Note 14 – Debt.
Restructuring and Impairment, Net
Restructuring and impairment, net in fiscal 2021 primarily relate to the reorganization and right-sizing of the acquired Aleris business. Restructuring and impairment, net in fiscal 2020 related primarily to the closure of certain non-core operations in Europe. See Note 5 – Restructuring and Impairment.
Business Acquisition and Other Related Costs
Business acquisition and other related costs decreased $52 million in fiscal 2021 compared to fiscal 2020 primarily related to the timing of the Aleris acquisition and associated professional fees.
Other Expenses, Net
Other expenses, net was $103 million for fiscal 2021 compared to $18 million for fiscal 2020. The increase primarily relates to a $50 million charitable contribution made to support COVID-19 relief efforts in fiscal 2021 and $11 million of unrealized derivatives losses in fiscal 2021, compared to a $4 million gain in fiscal 2020, primarily resulting from the acquired Aleris business. Additionally, fiscal 2020 included a $7 million gain on Brazilian tax litigation, net.
Taxes
We recognized $238 million of income tax provision in fiscal 2021, which resulted in an effective tax rate of 34%. This rate was primarily driven by the results of operations taxed at foreign statutory tax rates that differ from the 25% Canadian tax rate, including withholding taxes, changes in valuation allowances, changes to the Brazilian real foreign exchange rate, and changes in tax credits (as defined in Note 22 – Income Taxes). We recognized $178 million in fiscal 2020, which resulted in an effective tax rate of 30%. This rate was primarily driven by the results of operations, including changes in valuation allowances, the favorable impact of Brazilian real devaluation, and changes in tax credits.
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 24 – 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. However, we manage our Logan affiliate on a proportionately consolidated basis and eliminate intersegment shipments.
Selected Operating Results
Fiscal Year Ended March 31, 2021
North America Europe Asia South America Eliminations and other Total
Net sales $ 4,558  $ 3,552  $ 2,182  $ 1,798  $ 186  $ 12,276 
Shipments (in kt):
Rolled products - third party 1,348  947  740  578  —  3,613 
Rolled products - intersegment —  30  (37) — 
Total rolled products 1,348  977  746  579  (37) 3,613 
Non-rolled products 33  122  92  (26) 226 
Total shipments 1,381  1,099  751  671  (63) 3,839 

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Selected Operating Results
Fiscal Year Ended March 31, 2020
North America Europe Asia South America Eliminations and other Total
Net sales $ 4,118  $ 3,095  $ 1,969  $ 1,904  $ 131  $ 11,217 
Shipments (in kt):
Rolled products - third party 1,111  892  711  559  —  3,273 
Rolled products - intersegment —  31  15  (53) — 
Total rolled products 1,111  923  718  574  (53) 3,273 
Non-rolled products 44  17  101  (12) 156 
Total shipments 1,155  940  724  675  (65) 3,429 
The following table reconciles changes in segment income for the fiscal year ended March 31, 2020 to the fiscal year ended March 31, 2021 (in millions).
Changes in segment income
North America Europe Asia South America
Eliminations and other(1)
Total
Segment income - Fiscal Year Ended March 31, 2020
$ 590  $ 246  $ 210  $ 421  $ $ 1,472 
Volume 182  163  70  11  431 
Conversion premium and product mix (75) (42) 30  (23) 31  (79)
Conversion costs (12) (59) (16) 30  (38) (95)
Foreign exchange 18  33 
Selling, general & administrative and research & development costs(2)
(25) (22) (10) 13  (4) (48)
Other changes (4) (5) — 
Segment income - Fiscal Year Ended March 31, 2021
$ 663  $ 285  $ 305  $ 449  $ 12  $ 1,714 
_________________________
(1)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 and other" 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 and other" column also reflects adjustments for changes in regional volume, conversion premium and product mix, and conversion costs related to intersegment shipments for consolidation. "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.
(2)"Selling, general & administrative and research & development costs" include costs incurred directly by each segment and all corporate related costs.
North America
Net sales increased $440 million, or 11%, driven by sales associated with the acquired Aleris business and higher can volumes from strong demand for beverage can sheet, partially offset by lower automotive volumes impacted by the COVID-19 pandemic. Segment income was $663 million, an increase of 12%, primarily due to higher total volume, favorable metal mix and spreads, and operating and selling, general and administrative cost reduction initiatives, partially offset by unfavorable product mix and higher fixed and selling, general and administrative costs associated with the acquired business.
Europe
Net sales increased $457 million, or 15%, driven by sales associated with the acquired Aleris business and higher can volumes from strong demand, partially offset by lower automotive and specialty volumes impacted by the COVID-19 pandemic early in the fiscal year. Segment income was $285 million, an increase of 16%, primarily driven by higher total volume, favorable metal mix, and operating and selling, general and administrative cost reduction initiatives, partially offset by unfavorable product mix and higher fixed and selling, general and administrative costs associated with acquired business.
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Asia
Net sales increased $213 million, or 11%, driven by higher automotive volumes from a strong recovery in the Chinese automotive market post-COVID-19 pandemic and sales associated with the acquired Aleris businesses, partially offset by lower can and specialty volumes. Segment income was $305 million, an increase of 45%, primarily due to higher volume, favorable product mix, operating and selling, general and administrative cost reduction initiatives, favorable metal mix and spreads, and favorable foreign exchange, partially offset by higher fixed and selling, general and administrative costs associated with the acquired business and higher freight cost.
South America
Net sales decreased $106 million, or 6%, driven primarily by lower can pricing and lower specialty volume due to capacity constraints, partially offset by higher can volume. Segment income was $449 million, an increase of 7%, primarily due to favorable metal mix and spreads, product mix, foreign exchange, and operating and selling, general and administrative cost reduction initiatives, partially offset by lower can pricing.
LIQUIDITY AND CAPITAL RESOURCES
We continue to maintain adequate liquidity levels through a combination of cash and availability under committed credit facilities. Our cash and cash equivalents and availability under committed credit facilities aggregated to $2.2 billion of liquidity as of March 31, 2021. Our primary liquidity sources are cash flows from operations, working capital management, cash, and liquidity under our debt agreements. Our recent business investments are being funded through cash flows generated by our operations and a combination of local financing and our senior secured credit facilities. 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.
Available Liquidity
Our available liquidity as of March 31, 2021 and 2020 is as follows. 
March 31,
in millions 2021 2020
Cash and cash equivalents $ 998  $ 2,392 
Availability under committed credit facilities(1)
1,223  186 
Total available liquidity $ 2,221  $ 2,578 
_________________________
(1)Our availability under committed credit facilities does not include the committed financing for Aleris.
The decrease in total available liquidity is primarily due to the outflow of $2.6 billion in cash for the acquisition of Aleris, net of cash received, partially offset by positive free cash flow of $612 million and proceeds from the sale of discontinued operations of $403 million. The decrease in cash and cash equivalents is partially offset by an increase in our availability under committed credit facilities primarily due to payments on our ABL revolver. See Note 14 – Debt for more details on our availability under committed credit facilities.
Cash and cash equivalents includes cash held in foreign countries in which we operate. As of March 31, 2021, we held $3 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, 2021, we held $678 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, 2021, we do not believe adverse tax consequences exist that restrict our use of cash and 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.
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Non-Guarantor Information
As of March 31, 2021, 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 fiscal year ended March 31, 2021)
21  %
Consolidated Adjusted EBITDA represented by the non-guarantor subsidiaries (for the fiscal year ended March 31, 2021)
17  %
Consolidated assets are owned by non-guarantor subsidiaries (as of March 31, 2021)
16  %
Refer to Non-GAAP Financial Measures for our definition of Adjusted EBITDA (segment income). In addition, for the years ended March 31, 2021 and March 31, 2020, the Company’s subsidiaries that are not guarantors had net sales of $2.9 billion and $2.7 billion, respectively, and, as of March 31, 2021, those subsidiaries had assets of $3.0 billion and debt and other liabilities of $1.7 billion (including inter-company balances).
Free Cash Flow
Refer to Non-GAAP Financial Measures for our definition of free cash flow.
The following table shows free cash flow for the fiscal year ended March 31, 2021, 2020 and 2019, the change between periods, as well as the ending balances of cash and cash equivalents.
    Change
  Fiscal Year Ended March 31,
Fiscal 2021
versus
Fiscal 2020
Fiscal 2020
versus
Fiscal 2019
in millions 2021 2020 2019
Net cash provided by operating activities - continuing operations $ 1,209  $ 973  $ 730  $ 236  $ 243 
Net cash used in investing activities - continuing operations (3,079) (586) (559) (2,493) (27)
Plus: Cash used in the acquisition of assets under a finance lease(1)
—  —  239  —  (239)
Plus: Cash used in the acquisition of business, net of cash and restricted cash acquired(2)
2,614  —  —  2,614  — 
Less: Proceeds from sales of assets and business, net of transactions fees, cash income taxes and hedging (4) (3) (2) (1) (1)
Free cash flow from continuing operations 740  384  408  356  (24)
Net cash used in operating activities - discontinued operations (82) —  —  (82) — 
Net cash provided by investing activities - discontinued operations 357  —  —  357  — 
Less: Proceeds from sales of assets and business, net of transaction fees, cash income taxes and hedging - discontinued operations(3)
(403) —  —  (403) — 
Free cash flow $ 612  $ 384  $ 408  228  (24)
Cash and cash equivalents
$ 998  $ 2,392  $ 950  $ (1,394) $ 1,442 
_________________________
(1)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 fiscal year ended March 31, 2019. The impact is recognized as acquisition of assets under a finance lease.
(2)The total of acquisition of business, net of cash and restricted cash acquired represents $2.8 billion of merger consideration plus $4 million related to the translation adjustment of the €55 million capital improvement investment for Duffel upon payout, net of $105 million of cash and cash equivalents, $9 million of restricted cash, $41 million of discontinued operations cash and cash equivalents acquired, and $9 million in contingent consideration paid in the acquisition of business.
(3)Proceeds from the sales of assets and business, net of transaction fees, cash income taxes and hedging - discontinued operations represents the proceeds from the sale of Duffel, net of cash sold of $23 million, and the proceeds from the sale of Lewisport.
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Cash Flow Summary
Change
Fiscal Year Ended March 31, Fiscal 2021
versus
Fiscal 2020
Fiscal 2020
versus
Fiscal 2019
in millions 2021 2020 2019
Net cash provided by operating activities
$ 1,127  $ 973  $ 730  $ 154  $ 243 
Net cash used in investing activities
(2,722) (586) (559) (2,136) (27)
Net cash provided by (used in) financing activities
180  1,064  (118) (884) 1,182 
Operating Activities
The increase in net cash provided by operating activities over the prior fiscal year primarily relates to higher segment income, partially offset by net cash used in operating activities - discontinued operations of $82 million.
Investing Activities
The increase in net cash used in investing activities over the prior fiscal year is primarily attributable to the acquisition cost of Aleris, net of cash acquired, amounting to $2.6 billion, partially offset by net cash provided by investing activities - discontinued operations of $357 million and a decrease capital expenditures from $610 million in fiscal 2020 to $485 million in fiscal 2021.
Financing Activities
During the fiscal year ended March 31, 2021, there were $3 billion issuances of long-term and short-term borrowings, including $1.1 billion in issuances on our existing short-term credit agreement (the "Short Term Credit Agreement") and $775 million in issuances in incremental term loans on our Term Loan Facility (the "2020 Term Loans"). The proceeds of these issuances were used to pay a portion of the consideration payable in the acquisition of Aleris. We also issued $588 million in new senior notes.
Additionally, we entered into $500 million in additional term loans under our existing Term Loan Facility (the "2021 Term Loans"), of which $480 million were funded as of March 31, 2021 and $20 million were funded on April 1, 2021. The proceeds of the 2021 Term Loans were utilized to pay a portion of our $1.8 billion of term loans borrowed in 2017 (the "2017 Term Loans") under our Term Loan Facility.
Additionally, we issued $63 million of short-term debt in Brazil and $36 million on our China bank loans. As a result of our issuances, we paid $44 million in debt issuance costs. We made principal repayments of $1.1 billion on our Short Term Credit Agreement, $1.0 billion on our 2017 Term Loans, $70 million on our short-term debt in Brazil, $22 million on our term loan facility borrowed by Aleris Aluminum (Zhenjiang) Co., Ltd. (the "Zhenjiang Term Loans"), $8 million on our 2020 Term Loans, and $7 million on finance leases and other repayments. The net cash outflows from our revolving credit facilities relates to net outflows of $472 million on our ABL Revolver and outflows of $90 million on our Korea credit facilities, net of $56 million of net proceeds from our China credit facilities. Additionally, we paid $9 million for contingent consideration in the acquisition of Aleris.
During the fiscal year ended March 31, 2020, there were $1.7 billion of issuances of long-term borrowings, primarily related to the issuance of $1.6 billion in senior notes. We made principal repayments of $1.2 billion, primarily related to the refinancing of our 2024 Senior Notes, along with $18 million of payments on our Term Loan Facility. Additionally, the net cash proceeds from our revolving credit facilities is related to draw downs of $555 million on our ABL Revolver and $98 million on our Korea credit facility. We incurred $40 million of debt issuance costs.
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.
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The following discussion addresses the applicable off-balance sheet items for our Company.
Derivative Instruments
See Note 18 – 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 and capital expenditures. 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 short-term debt facilities for these entities are already included in our consolidated balance sheets.
Factoring of Trade Receivables
See Note 6 – 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, 2021 and 2020, we were not involved in any unconsolidated SPE transactions.
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CONTRACTUAL OBLIGATIONS
We have future obligations under various contracts relating to debt and interest payments, finance and operating leases, long-term purchase obligations, and postretirement benefit plans. The following table presents our estimated future payments under significant contractual obligations that exist as of March 31, 2021, based on undiscounted amounts. 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 $285 million of derivative liabilities recorded on our balance sheet as of March 31, 2021, 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 $69 million of uncertain tax positions. See Note 22 – Income Taxes to our accompanying consolidated financial statements.
in millions Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years Total
Debt(1)
$ 301  $ 725  $ 819  $ 4,173  $ 6,018 
Interest on long-term debt(2)
229  436  352  399  1,416 
Finance leases(3)
23 
Operating leases(4)
28  36  19  17  100 
Purchase obligations(5)
4,708  3,916  1,026  515  10,165 
Unfunded pension plan benefits(6)
17  30  31