Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 7, 2023

Documents

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
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.)
3550 Peachtree Road NE, Suite 1100
Atlanta, GA
 30326
(Address of principal executive offices) (Zip Code)
(404) 760-4000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
N/A N/A N/A
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ☒
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 6, 2023, the registrant had 1,000 shares of common stock, no par value, outstanding. All of the registrant's outstanding shares were held indirectly by Hindalco Industries Ltd., the registrant's parent company.


TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
PART II—OTHER INFORMATION

2

COMMONLY USED OR DEFINED TERMS
Term Definition
Adjusted EBITDA
Aleris Aleris Corporation
AluInfra AluInfra Services
Alunorf Aluminium Norf GmbH
ASC FASB Accounting Standards Codification
Exchange Act Securities Exchange Act of 1934, as amended
FASB Financial Accounting Standards Board
fiscal 2016 Fiscal year ended March 31, 2016
fiscal 2020
Fiscal year ended March 31, 2020
fiscal 2021
Fiscal year ended March 31, 2021
fiscal 2022
Fiscal year ended March 31, 2022
fiscal 2023
Fiscal year ended March 31, 2023
fiscal 2024
Fiscal year ending March 31, 2024
fiscal 2026
Fiscal year ending March 31, 2026
Form 10-Q Quarterly Report on Form 10-Q
FRP Flat-rolled products
GAAP Generally Accepted Accounting Principles
Kobe Kobe Steel, Ltd.
kt kilotonne (One kt is 1,000 metric tonnes.)
LME The London Metals Exchange
LMP Local market premium
Logan Logan Aluminum Inc.
MMBtu One decatherm or 1 million British Thermal Units
OEM Original equipment manufacturer
RSUs Restricted stock units
SARs Stock appreciation rights
SEC United States Securities and Exchange Commission
SG&A Selling, general and administrative expenses
Tri-Arrows Tri-Arrows Aluminum Inc.
UAL Ulsan Aluminum Ltd.
UBC Used beverage can
U.S. United States
U.K. United Kingdom
VIE Variable interest entity
2023 Form 10-K
Our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, as filed with the SEC on May 10, 2023
3

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 
Three Months Ended
September 30,
Six Months Ended
September 30,
in millions 2023 2022 2023 2022
Net sales $ 4,107  $ 4,799  $ 8,198  $ 9,888 
Cost of goods sold (exclusive of depreciation and amortization) 3,477  4,140  6,978  8,405 
Selling, general and administrative expenses 182  181  356  345 
Depreciation and amortization 136  134  267  272 
Interest expense and amortization of debt issuance costs 78  65  155  123 
Research and development expenses 23  23  48  46 
Loss on extinguishment of debt, net
 5  —  5  — 
Restructuring and impairment expenses, net
 4  1  7  2 
Equity in net income of non-consolidated affiliates
 (4) (4) (7) (8)
Other (income) expenses, net
 (2) 10  (29) 60 
3,899  4,550  7,780  9,245 
Income from continuing operations before income tax provision
 208  249  418  643 
Income tax provision
 51  65  105  152 
Net income from continuing operations
 157  184  313  491 
Loss from discontinued operations, net of tax
 —  (1) —  (2)
Net income
 157  183  313  489 
Net loss attributable to noncontrolling interests
 —  —  —  (1)
Net income attributable to our common shareholder
 $ 157  $ 183  $ 313  $ 490 
____________________
See accompanying notes to the condensed consolidated financial statements.

4
Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
 
Three Months Ended
September 30,
Six Months Ended
September 30,
in millions 2023 2022 2023 2022
Net income
 $ 157  $ 183  $ 313  $ 489 
Other comprehensive (loss) income:
Currency translation adjustment (63) (188) (79) (361)
Net change in fair value of effective portion of cash flow hedges (251) (110) (84) 803 
Net change in pension and other benefits (3) 6  (7) 15 
Other comprehensive (loss) income before income tax effect
 (317) (292) (170) 457 
Income tax (benefit) provision related to items of other comprehensive (loss) income
 (68) (29) (26) 205 
Other comprehensive (loss) income, net of tax
 (249) (263) (144) 252 
Comprehensive (loss) income
 (92) (80) 169  741 
Comprehensive income (loss) attributable to noncontrolling interests, net of tax
 —  —  —  (1)
Comprehensive (loss) income attributable to our common shareholder
 $ (92) $ (80) $ 169  $ 742 
____________________
See accompanying notes to the condensed consolidated financial statements.
5
Novelis Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
in millions, except number of shares September 30,
2023		 March 31,
2023
ASSETS
Current assets:
Cash and cash equivalents $ 1,158  $ 1,498 
Accounts receivable, net
— third parties (net of allowance for credit losses of $7 and $5 as of September 30, 2023, and March 31, 2023, respectively)
 1,811  1,751 
— related parties 135  156 
Inventories 2,761  2,729 
Prepaid expenses and other current assets 175  178 
Fair value of derivative instruments 121  145 
Assets held for sale 1  3 
Total current assets 6,162  6,460 
Property, plant and equipment, net 5,228  4,900 
Goodwill 1,073  1,076 
Intangible assets, net 568  589 
Investment in and advances to non-consolidated affiliates 873  877 
Deferred income tax assets 152  166 
Other long-term assets
— third parties 275  293 
— related parties 2  3 
Total assets $ 14,333  $ 14,364 
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt $ 51  $ 88 
Short-term borrowings 692  671 
Accounts payable
— third parties 2,951  3,100 
— related parties 283  277 
Fair value of derivative instruments 213  130 
Accrued expenses and other current liabilities 593  633 
Total current liabilities 4,783  4,899 
Long-term debt, net of current portion 4,859  4,881 
Deferred income tax liabilities 271  288 
Accrued postretirement benefits 526  554 
Other long-term liabilities 271  288 
Total liabilities 10,710  10,910 
Commitments and contingencies
Shareholder's equity:
Common stock, no par value; Unlimited number of shares authorized; 1,000 shares issued and outstanding as of September 30, 2023, and March 31, 2023
 —  — 
Additional paid-in capital 1,208  1,208 
Retained earnings
 2,785  2,472 
Accumulated other comprehensive loss
 (382) (238)
Total equity of our common shareholder 3,611  3,442 
Noncontrolling interests 12  12 
Total equity 3,623  3,454 
Total liabilities and equity $ 14,333  $ 14,364 
____________________
See accompanying notes to the condensed consolidated financial statements. Refer to Note 3 – Consolidation for information on our consolidated VIE.
6
Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
Six Months Ended
September 30,
in millions 2023 2022
OPERATING ACTIVITIES
Net income
 $ 313  $ 489 
Net loss from discontinued operations
 —  (2)
Net income from continuing operations
 $ 313  $ 491 
Adjustments to determine net cash provided by operating activities:
Depreciation and amortization 267  272 
Loss on unrealized derivatives and other realized derivatives in investing activities, net
 10  18 
Loss on sale of assets, net
 —  1 
Impairment charges 3  — 
Loss on extinguishment of debt, net
 5  — 
Deferred income taxes, net 23  19 
Equity in net income of non-consolidated affiliates (7) (8)
Gain on foreign exchange remeasurement of debt
 (6) (22)
Amortization of debt issuance costs and carrying value adjustments 7  8 
Other, net 3  — 
Changes in assets and liabilities including assets and liabilities held for sale (net of effects from divestitures):
Accounts receivable (90) 138 
Inventories (72) (485)
Accounts payable (110) (309)
Other assets 21  18 
Other liabilities (77) 55 
Net cash provided by operating activities – continuing operations
 290  196 
Net cash used in operating activities – discontinued operations
 —  (6)
Net cash provided by operating activities
 $ 290  $ 190 
INVESTING ACTIVITIES
Capital expenditures $ (618) $ (284)
Acquisition of business and other investments, net of cash acquired —  (4)
Proceeds (outflows) from investment in and advances to non-consolidated affiliates, net
 12  (15)
Proceeds from the settlement of derivative instruments, net
 8  2 
Other 8  11 
Net cash used in investing activities
 $ (590) $ (290)
FINANCING ACTIVITIES
Proceeds from issuance of long-term and short-term borrowings $ 532  $ — 
Principal payments of long-term and short-term borrowings (531) (114)
Revolving credit facilities and other, net (24) 450 
Debt issuance costs (3) (6)
Return of capital to our common shareholder —  (100)
Net cash (used in) provided by financing activities
 $ (26) $ 230 
Net (decrease) increase in cash, cash equivalents and restricted cash
 (326) 130 
Effect of exchange rate changes on cash (14) (57)
Cash, cash equivalents and restricted cash – beginning of period 1,511  1,084 
Cash, cash equivalents and restricted cash – end of period $ 1,171  $ 1,157 
Cash and cash equivalents $ 1,158  $ 1,145 
Restricted cash (included in other long-term assets)
 13  12 
Cash, cash equivalents and restricted cash – end of period $ 1,171  $ 1,157 
Supplemental Disclosures:
Accrued capital expenditures as of September 30
 $ 176  $ 72 
Leased assets obtained in exchange for new operating lease liabilities 6  27 
____________________
See accompanying notes to the condensed consolidated financial statements.
7
Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (unaudited)
Equity of our Common Shareholder
Common Stock Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
 Noncontrolling Interests Total Equity
in millions, except number of shares Shares Amount
Balance as of March 31, 2022
 1,000  $ —  $ 1,308  $ 1,814  $ (620) $ 7  $ 2,509 
Net income attributable to our common shareholder
 —  —  —  490  —  —  490 
Net loss attributable to noncontrolling interests
 —  —  —  —  —  (1) (1)
Currency translation adjustment included in other comprehensive (loss) income
 —  —  —  —  (361) —  (361)
Change in fair value of effective portion of cash flow hedges, net of tax provision of $202 included in other comprehensive (loss) income
 —  —  —  —  601  —  601 
Change in pension and other benefits, net of tax provision of $3 included in other comprehensive (loss) income
 —  —  —  —  12  —  12 
Return of capital to our common shareholder —  —  (100) —  —  —  (100)
Balance as of September 30, 2022
 1,000  $ —  $ 1,208  $ 2,304  $ (368) $ 6  $ 3,150 
Equity of our Common Shareholder
Common Stock Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
 Noncontrolling Interests Total Equity
Shares Amount
Balance as of March 31, 2023
 1,000  $ —  $ 1,208  $ 2,472  $ (238) $ 12  $ 3,454 
Net income attributable to our common shareholder
 —  —  —  313  —  —  313 
Currency translation adjustment included in other comprehensive (loss) income
 —  —  —  —  (79) —  (79)
Change in fair value of effective portion of cash flow hedges, net of tax benefit of $24 included in other comprehensive (loss) income
 —  —  —  —  (60) —  (60)
Change in pension and other benefits, net of tax benefit of $2 included in other comprehensive (loss) income
 —  —  —  —  (5) —  (5)
Balance as of September 30, 2023
 1,000  $ —  $ 1,208  $ 2,785  $ (382) $ 12  $ 3,623 
Equity of our Common Shareholder
Common Stock Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
 Noncontrolling Interests Total Equity
Shares Amount
Balance as of June 30, 2022
 1,000  $ —  $ 1,308  $ 2,121  $ (105) $ 6  $ 3,330 
Net income attributable to our common shareholder
 —  —  —  183  —  —  183 
Currency translation adjustment included in other comprehensive (loss) income
 —  —  —  —  (188) —  (188)
Change in fair value of effective portion of cash flow hedges, net of tax benefit of $30 included in other comprehensive (loss) income
 —  —  —  —  (80) —  (80)
Change in pension and other benefits, net of tax provision of $1 included in other comprehensive (loss) income
 —  —  —  —  5  —  5 
Return of capital to our common shareholder —  —  (100) —  —  —  (100)
Balance as of September 30, 2022
 1,000  $ —  $ 1,208  $ 2,304  $ (368) $ 6  $ 3,150 
Equity of our Common Shareholder
Common Stock Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
 Noncontrolling Interests Total Equity
Shares Amount
Balance as of June 30, 2023
 1,000  $ —  $ 1,208  $ 2,628  $ (133) $ 12  $ 3,715 
Net income attributable to our common shareholder
 —  —  —  157  —  —  157 
Currency translation adjustment included in other comprehensive (loss) income
 —  —  —  —  (63) —  (63)
Change in fair value of effective portion of cash flow hedges, net of tax benefit of $67 included in other comprehensive (loss) income
 —  —  —  —  (184) —  (184)
Change in pension and other benefits, net of tax benefit of $1 included in other comprehensive (loss) income
 —  —  —  —  (2) —  (2)
Balance as of September 30, 2023
 1,000  $ —  $ 1,208  $ 2,785  $ (382) $ 12  $ 3,623 
____________________
See accompanying notes to the condensed consolidated financial statements.
8
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
References herein to "Novelis," the "Company," "we," "our," or "us" refer to Novelis Inc. and its subsidiaries unless the context specifically indicates otherwise. References herein to "Hindalco" refer to Hindalco Industries Limited. Hindalco acquired Novelis in May 2007. Effective September 1, 2022, Novelis Inc. and AV Metals, Inc. (which, prior to such date, was our sole shareholder and a wholly owned subsidiary of AV Minerals (Netherlands) N.V.) completed a plan of arrangement, pursuant to which AV Metals, Inc. merged with and into Novelis Inc., with Novelis Inc. surviving the merger. As of the effectiveness of the plan of arrangement, we are a direct, wholly owned subsidiary of AV Minerals (Netherlands) N.V. and indirectly by Hindalco. Prior to the effectiveness of the plan of arrangement, AV Metals, Inc. was a holding company, with its assets being comprised solely of its investment in Novelis, and without any operations. The plan of arrangement was a combination of entities under common control and resulted in a change in the reporting entity. The opening balance of additional paid-in capital has been increased and that of retained earnings reduced by $4 million in the earliest period presented.
All tonnages are stated in metric tonnes. One metric tonne is equivalent to 2,204.6 pounds. One kt is 1,000 metric tonnes.
Organization and Description of Business
We produce aluminum sheet and light gauge products for use in the packaging market, which includes beverage and food can and foil products, as well as for use in the automotive, transportation, aerospace, electronics, architectural, and industrial product markets. As of September 30, 2023, we had manufacturing operations in nine countries on four continents: North America, South America, Asia, and Europe, through 33 operating facilities, which may include any combination of hot or cold rolling, finishing, casting, or recycling capabilities. We have recycling operations in 15 of our operating facilities to recycle post-consumer aluminum, such as UBCs, and post-industrial aluminum, such as class scrap.
Basis of Presentation
The condensed consolidated balance sheet data as of March 31, 2023, was derived from the March 31, 2023, audited financial statements but does not include all disclosures required by U.S. GAAP. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes in our 2023 Form 10-K. Management believes that all adjustments necessary for the fair statement of results, consisting of normally recurring items, have been included in the unaudited condensed consolidated financial statements for the interim periods presented.
Consolidation Policy
Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and include the assets, liabilities, revenues, and expenses of all wholly owned subsidiaries, majority-owned subsidiaries over which we exercise control, and entities in which we have a controlling financial interest or are deemed to be the primary beneficiary. We eliminate intercompany accounts and transactions from our condensed consolidated financial statements.
We use the equity method to account for our investments in entities that we do not control but have the ability to exercise significant influence over operating and financial policies. Consolidated net income attributable to our common shareholder includes our share of the net income (loss) of these entities. The difference between consolidation and the equity method impacts certain of our financial ratios because of the presentation of the detailed line items reported in the condensed consolidated financial statements for consolidated entities, compared to a two-line presentation of investment in and advances to non-consolidated affiliates and equity in net income of non-consolidated affiliates.
Supplier Finance Programs
The Company participates in supply chain finance programs under which participating suppliers may elect to sell some or all of their Novelis receivables to a third-party financial institution. Supplier participation in the programs is solely up to the supplier, and participating suppliers negotiate their arrangements directly with the financial institutions. The payment terms that we have with our suppliers under these programs range up to 180 days and are considered commercially reasonable. The Company has provided a guarantee in support of the obligations of certain of its subsidiaries under one of the supply chain finance programs currently in effect pursuant to which invoices receivable from Novelis originating in North America and South America are purchased and sold. In the ordinary course of business, the Company provides operating guarantees relating to the payment obligations of certain of its subsidiaries. The Company’s obligation under the guarantee referenced above is qualitatively the same as its guarantees supporting payment obligations of its subsidiaries.
On September 30, 2023 and March 31, 2023, confirmed supplier invoices that are outstanding and subject to the third-party programs included in accounts payable on the condensed consolidated balance sheets were $651 million and $801 million, respectively.
9
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Use of Estimates and Assumptions
The preparation of our condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The principal areas of judgment relate to (1) impairment of goodwill; (2) actuarial assumptions related to pension and other postretirement benefit plans; (3) tax uncertainties and valuation allowances; and (4) assessment of loss contingencies, including environmental and litigation liabilities. Future events and their effects cannot be predicted with certainty, and accordingly, our accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of our condensed consolidated financial statements may change as new events occur, more experience is acquired, additional information is obtained, and our operating environment changes. We evaluate and update our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations. Actual results could differ from the estimates we have used.
Recently Adopted Accounting Standards
On April 1, 2023, we adopted ASU 2022-04, which requires a buyer in a supplier finance program to disclose qualitative and quantitative information about its supplier finance programs, including the key terms of the program, the amount of obligations outstanding at the end of the reporting period, and a description of where those obligations are presented in the balance sheet. If presented in more than one balance sheet line item, the amount in each line item should be disclosed. Further, effective April 1, 2024, a roll-forward of such amounts during the annual period should be presented. The adoption of this guidance resulted in enhanced disclosures regarding these programs (see Supplier Finance Programs above) and did not have a material impact on our consolidated financial condition, results of operations, or cash flows.
We did not adopt any other new accounting pronouncements during the six months ended September 30, 2023, that had a material impact on our consolidated financial condition, results of operations, or cash flows.
Recently Issued Accounting Standards (Not Yet Adopted)
There are no recent accounting pronouncements pending adoption that we expect will have a material impact on our consolidated financial condition, results of operations, or cash flows.

10
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2. INVENTORIES
Inventories consists of the following.
in millions September 30,
2023		 March 31,
2023
Finished goods $ 745  $ 643 
Work in process 1,174  1,303 
Raw materials 554  505 
Supplies 288  278 
Inventories $ 2,761  $ 2,729 

11
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3. CONSOLIDATION
Variable Interest Entity
The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and consolidates the VIE. An entity is deemed to have a controlling financial interest and is the primary beneficiary of a VIE if it has both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
Logan is a consolidated joint venture in which we hold 40% ownership. Our joint venture partner is Tri-Arrows. Logan processes metal received from Novelis and Tri-Arrows and charges the respective partner a fee to cover expenses. Logan is a thinly capitalized VIE that relies on the regular reimbursement of costs and expenses from Novelis and Tri-Arrows to fund its operations. Novelis is considered the primary beneficiary and consolidates Logan since it has the power to direct activities that most significantly impact Logan's economic performance, an obligation to absorb expected losses, and the right to receive benefits that could potentially be significant to the VIE.
Other than the contractually required reimbursements, we do not provide additional material support to Logan. Logan's creditors do not have recourse to our general credit. There are significant other assets used in the operations of Logan that are not part of the joint venture, as they are directly owned and consolidated by Novelis or Tri-Arrows.
The following table summarizes the carrying value and classification of assets and liabilities owned by the Logan joint venture and consolidated in our condensed consolidated balance sheets.
in millions September 30,
2023		 March 31,
2023
ASSETS
Current assets:
Cash and cash equivalents $ 5  $ 6 
Accounts receivable, net 8  6 
Inventories 156  149 
Prepaid expenses and other current assets 11  7 
Total current assets 180  168 
Property, plant and equipment, net 78  63 
Goodwill 12  12 
Deferred income tax assets 37  37 
Other long-term assets 4  6 
Total assets $ 311  $ 286 
LIABILITIES
Current liabilities:
Accounts payable $ 130  $ 90 
Accrued expenses and other current liabilities 26  28 
Total current liabilities 156  118 
Accrued postretirement benefits 121  130 
Other long-term liabilities 4  6 
Total liabilities $ 281  $ 254 
 
12
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
4. INVESTMENT IN AND ADVANCES TO NON-CONSOLIDATED AFFILIATES AND RELATED PARTY TRANSACTIONS
Included in the accompanying condensed consolidated financial statements are transactions and balances arising from business we conducted with our equity method non-consolidated affiliates.
Alunorf
Alunorf is a joint venture investment between Novelis Deutschland GmbH, a subsidiary of Novelis, and Speira GmbH. Each of the parties to the joint venture holds a 50% interest in the equity, profits and losses, shareholder voting, management control, and rights to use the production capacity of the facility. Alunorf tolls aluminum and charges the respective partner a fee to cover the associated expenses.
UAL
UAL is a joint venture investment between Novelis Korea Ltd., a subsidiary of Novelis, and Kobe. UAL is a thinly capitalized VIE that relies on the regular reimbursement of costs and expenses from Novelis and Kobe. UAL is controlled by an equally represented board of directors in which neither entity has sole decision-making ability regarding production operations or other significant decisions. Furthermore, neither entity has the ability to take the majority share of production or associated costs over the life of the joint venture. Our risk of loss is limited to the carrying value of our investment in and inventory-related receivables from UAL. UAL's creditors do not have recourse to our general credit. Therefore, UAL is accounted for as an equity method investment, and Novelis is not considered the primary beneficiary. UAL currently produces flat-rolled aluminum products exclusively for Novelis and Kobe. As of September 30, 2023, Novelis and Kobe both hold a 50% interest in UAL.
AluInfra
AluInfra is a joint venture investment between Novelis Switzerland SA, a subsidiary of Novelis, and Constellium SE. Each of the parties to the joint venture holds a 50% interest in the equity, profits and losses, shareholder voting, management control, and rights to use the facility.
The following table summarizes the results of operations of our equity method non-consolidated affiliates in the aggregate and the nature and amounts of significant transactions we have with our non-consolidated affiliates. The amounts in the table below are disclosed at 100% of the operating results of these affiliates.
 
Three Months Ended
September 30,
Six Months Ended
September 30,
in millions 2023 2022 2023 2022
Net sales $ 394  $ 447  $ 790  $ 956 
Costs and expenses related to net sales 381  430  762  919 
Income tax provision
 4  5  8  11 
Net income
 $ 9  $ 12  $ 20  $ 26 
Purchases of tolling services from Alunorf $ 81  $ 87  $ 158  $ 168 
The following table describes related party balances in the accompanying condensed consolidated balance sheets. We had no other material related party balances with non-consolidated affiliates.
in millions September 30,
2023		 March 31,
2023
Accounts receivable, net — related parties
 $ 135  $ 156 
Other long-term assets — related parties
 2  3 
Accounts payable — related parties
 283  277 
13
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Transactions with Hindalco
We occasionally have related party transactions with Hindalco. During the six months ended September 30, 2023, and 2022, we recorded net sales of $1 million and less than $1 million, respectively, between Novelis and Hindalco related primarily to sales of equipment and other services. As of September 30, 2023, and March 31, 2023, there was $1 million and $2 million, respectively, of outstanding accounts receivable, net — related parties net of accounts payable — related parties related to transactions with Hindalco.
Return of Capital
On August 1, 2023, the Board of Directors approved a return of capital to our common shareholder in the amount of $100 million, which will be paid during fiscal 2024. We paid a return of capital to our common shareholder in the amount of $100 million during the second quarter of fiscal 2023.
14
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
5. DEBT
Debt consists of the following.
September 30, 2023 March 31, 2023
in millions
Interest Rates(1)
Principal
Unamortized Carrying 
Value Adjustments(2)
Carrying Value Principal
Unamortized Carrying
Value Adjustments(2)
Carrying Value
Short-term borrowings 6.38  % $ 692  $ —  $ 692  $ 671  $ —  $ 671 
Floating rate Term Loans, due January 2025 —  —  —  752  (7) 745 
Floating rate Term Loans, due September 2026 7.04  % 750  (4) 746  —  —  — 
Floating rate Term Loans, due March 2028 7.54  % 488  (6) 482  490  (6) 484 
3.25% Senior Notes, due November 2026
 3.25  % 750  (7) 743  750  (8) 742 
3.375% Senior Notes, due April 2029
 3.375  % 529  (7) 522  543  (8) 535 
4.75% Senior Notes, due January 2030
 4.75  % 1,600  (20) 1,580  1,600  (22) 1,578 
3.875% Senior Notes, due August 2031
 3.875  % 750  (9) 741  750  (9) 741 
China Bank Loans, due August 2027 3.90  % 58  —  58  64  —  64 
1.8% Brazil Loan, due June 2023
 1.80  % —  —  —  30  —  30 
1.8% Brazil Loan, due December 2023
 1.80  % 20  —  20  20  —  20 
Finance lease obligations and other debt, due through June 2028 2.71  % 18  —  18  30  —  30 
Total debt $ 5,655  $ (53) $ 5,602  $ 5,700  $ (60) $ 5,640 
Less: Short-term borrowings
 (692) —  (692) (671) —  (671)
Less: Current portion of long-term debt
 (51) —  (51) (88) —  (88)
Long-term debt, net of current portion $ 4,912  $ (53) $ 4,859  $ 4,941  $ (60) $ 4,881 
____________________
(1)Interest rates are the stated rates of interest on the debt instrument (not the effective interest rate) as of September 30, 2023, and therefore exclude the effects of related interest rate swaps and accretion and amortization of debt issuance costs related to refinancing transactions and additional borrowings. We present stated rates of interest because they reflect the rate at which cash will be paid for future debt service.
(2)Amounts include unamortized debt issuance costs, fair value adjustments, and debt discounts.
Principal repayment requirements for our total debt over the next five years and thereafter using exchange rates as of September 30, 2023, for our debt denominated in foreign currencies are as follows (in millions).
As of September 30, 2023
 Amount
Short-term borrowings and current portion of long-term debt due within one year $ 743 
2 years 28 
3 years 759 
4 years 776 
5 years 469 
Thereafter 2,880 
Total $ 5,655 
Short-Term Borrowings
As of September 30, 2023, our short-term borrowings totaled $692 million, which consisted of $495 million of borrowings on our ABL Revolver, $150 million in short-term Brazil loans, and $47 million in short-term China loans (CNY 336 million). The weighted average interest rate on the short-term borrowings was 6.38% and 6.67% as of September 30, 2023, and March 31, 2023, respectively.
15
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Term Loan Facility
As of September 30, 2023, we were in compliance with the covenants of our Term Loan Facility.
On March 31, 2023, Novelis amended the Term Loan Facility, primarily to modify the reference rate used to determine interest from LIBOR to SOFR. Term loans under the Term Loan Facility will, beginning with the interest period commencing June 30, 2023, accrue interest at SOFR plus a 0.15% credit spread adjustment plus a spread of 1.75% in the case of the 2020 Term Loans, or a spread of 2.00% in the case of the 2021 Term Loans. During fiscal 2021, the Company adopted the practical expedient for Reference Rate Reform related to its debt arrangements and as such, this amendment is treated as a continuation of the existing debt agreement and no gain or loss on the modification was recorded. The Company did not record any gains or losses on the conversion of the reference rate for the borrowings under the Term Loan Facility from LIBOR to SOFR.
In September 2023, Novelis amended the Term Loan Facility and borrowed $750 million of term loans (the "2023 Term Loans"). The proceeds of the 2023 Term Loan were used to repay the previously-issued term loans due January 2025 (the "2020 Term Loans"). The 2023 Term Loans mature on September 25, 2026, are subject to 0.25% quarterly amortization payments and accrue interest at SOFR plus 1.65%.
In accordance with ASC 470, Debt, the amendment was accounted for as a partial extinguishment of the 2020 Term Loans, whereby $482 million of the $750 million outstanding at the time of the transaction was deemed an extinguishment and $268 million was deemed a modification of debt. As a result of this transaction, we recorded a loss on extinguishment of debt of $5 million in the second quarter of fiscal 2024.
ABL Revolver
In April 2022, Novelis amended the ABL Revolver facility to increase the limit on committed letters of credit under the facility to $275 million. There were no material costs incurred or accounting impacts as a result of this amendment.
In August 2022, Novelis amended the ABL Revolver facility to, among other things, increase the commitment under the ABL Revolver by $500 million to $2.0 billion and extend the maturity of the ABL Revolver until August 18, 2027. The amendment provides that new borrowings under the ABL Revolver facility made subsequent to the date of the amendment will incur interest at Term SOFR, EURIBOR, SONIA or SARON, as applicable based on the currency of the loan, plus a spread of 1.10% to 1.60% based on excess availability. The ABL Revolver facility also permits us to elect to borrow USD loans that accrue interest at a base rate (determined based on the greatest of one month Term SOFR plus 1.00%, a prime rate or an adjusted federal funds rate) plus a prime spread of 0.10% to 0.60% based on excess availability.
As of September 30, 2023, we had $495 million in borrowings under the ABL Revolver and were in compliance with debt covenants. We utilized $41 million of the ABL Revolver for letters of credit. We had availability of $990 million on the ABL Revolver, including $234 million of remaining availability that can be utilized for letters of credit.
Senior Notes
The Senior Notes are guaranteed, jointly and severally, on a senior unsecured basis, by Novelis Inc. and certain of its subsidiaries. The Senior Notes contain customary covenants and events of default that will limit our ability and, in certain instances, the ability of certain of our subsidiaries to incur additional debt and provide additional guarantees; pay dividends or return capital beyond certain amounts and make other restricted payments; 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 certain of Novelis' subsidiaries to pay dividends or make other distributions to Novelis or certain of Novelis' subsidiaries, as applicable; engage in certain transactions with affiliates; enter into sale and leaseback transactions; designate subsidiaries as unrestricted subsidiaries; and consolidate, merge, or transfer all or substantially all of our assets and the assets of certain of our subsidiaries. During any future period in which either Standard & Poor's Ratings Group, Inc. or Moody's Investors Service, Inc. have assigned an investment grade credit rating to the Senior Notes and no default or event of default under the indenture has occurred and is continuing, certain of the covenants will be suspended. The Senior Notes include customary events of default, including a cross-acceleration event of default. The Senior Notes also contain customary call protection provisions for our bondholders that extend through November 2023 for the 3.25% Senior Notes due November 2026, through April 2024 for the 3.375% Senior Notes due April 2029, through January 2025 for the 4.75% Senior Notes due January 2030, and through August 2026 for the 3.875% Senior Notes due August 2031.
As of September 30, 2023, we were in compliance with the covenants of our Senior Notes.
16
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
6. SHARE-BASED COMPENSATION
During the six months ended September 30, 2023, we granted 1,941,778 Hindalco phantom RSUs and 2,598,668 Hindalco SARs. Total share-based compensation expense was $8 million and $14 million for the three and six months ended September 30, 2023, respectively. Total share-based compensation expense was $6 million and $4 million for the three and six months ended September 30, 2022, respectively. As of September 30, 2023, the outstanding liability related to share-based compensation was $22 million.
The cash payments made to settle all Hindalco SAR liabilities were $4 million and $7 million in the six months ended September 30, 2023, and 2022, respectively. Total cash payments made to settle RSUs were $13 million and $15 million in the six months ended September 30, 2023, and 2022, respectively. As of September 30, 2023, unrecognized compensation expense related to the non-vested Hindalco SARs (assuming all future performance criteria are met) and the RSUs was $9 million and $22 million, respectively. The unrecognized expense related to the non-vested Hindalco SARs and the RSUs is expected to be recognized over weighted average periods of 1.5 years and 1.6 years, respectively.
17
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
7. POSTRETIREMENT BENEFIT PLANS
The Company recognizes actuarial gains and losses and prior service costs in the condensed consolidated balance sheet and recognizes changes in these amounts during the year in which changes occur through other comprehensive income (loss). The Company uses various assumptions when computing amounts relating to its defined benefit pension plan obligations and their associated expenses (including the discount rate and the expected rate of return on plan assets).
Components of net periodic benefit cost for all of our postretirement benefit plans are shown in the table below.
  Pension Benefit Plans Other Benefit Plans
 
Three Months Ended
September 30,
Three Months Ended
September 30,
in millions 2023 2022 2023 2022
Service cost $ 6  $ 7  $ 1  $ 1 
Interest cost 19  15  2  1 
Expected return on assets (20) (18) —  — 
Amortization — losses, net —  2  (1) — 
Amortization — prior service credit, net (1) —  (1) (1)
Net periodic benefit cost(1)
$ 4  $ 6  $ 1  $ 1 
Pension Benefit Plans Other Benefit Plans
Six Months Ended
September 30,
Six Months Ended
September 30,
2023 2022 2023 2022
Service cost $ 11  $ 13  $ 1  $ 2 
Interest cost 38  31  3  2 
Expected return on assets (39) (36) —  — 
Amortization — losses, net (1) 4  (1) — 
Amortization — prior service credit, net (1) —  (2) (2)
Net periodic benefit cost(1)
$ 8  $ 12  $ 1  $ 2 
____________________
(1)Service cost is included within cost of goods sold (exclusive of depreciation and amortization) and selling, general and administrative expenses, while all other cost components are recorded within other (income) expenses, net.
The average expected long-term rate of return on all plan assets is 6.1% in fiscal 2024.
Employer Contributions to Plans
For pension plans, our policy is to fund an amount required to provide for contractual benefits attributed to service to date and amortize unfunded actuarial liabilities typically over periods of 15 years or less. We also participate in savings plans in Canada and the U.S., as well as defined contribution pension plans in the U.S., the U.K., Canada, Germany, Italy, Switzerland, and Brazil. We contributed the following amounts to all plans.
 
Three Months Ended
September 30,
Six Months Ended
September 30,
in millions 2023 2022 2023 2022
Funded pension plans $ 19  $ 6  $ 21  $ 8 
Unfunded pension plans 3  4  7  8 
Savings and defined contribution pension plans 14  13  30  27 
Total contributions $ 36  $ 23  $ 58  $ 43 
During the remainder of fiscal 2024, we expect to contribute an additional $8 million to our funded pension plans, $9 million to our unfunded pension plans, and $26 million to our savings and defined contribution pension plans.

18
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
8. CURRENCY LOSSES (GAINS)
The following currency losses are included in other (income) expenses, net in the accompanying condensed consolidated statements of operations.
 
Three Months Ended
September 30,
Six Months Ended
September 30,
in millions 2023 2022 2023 2022
Gains on remeasurement of monetary assets and liabilities, net
 $ (16) $ (35) $ (4) $ (67)
Losses recognized on balance sheet remeasurement currency exchange contracts, net
 17  41  9  78 
Currency losses, net
 $ 1  $ 6  $ 5  $ 11 
19
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
9. FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS
The following tables summarize the gross fair values of our financial instruments and commodity contracts as of the periods presented.
  September 30, 2023
  Assets Liabilities Net Fair Value
in millions Current
Noncurrent(1)
Current
Noncurrent(1)
Assets / (Liabilities)
Derivatives designated as hedging instruments:
Cash flow hedges
Metal contracts $ 28  $ —  $ (68) $ —  $ (40)
Currency exchange contracts 17  1  (24) (2) (8)
Energy contracts 2  —  (1) —  1 
Interest rate swap contracts —  1  —  —  1 
Total derivatives designated as hedging instruments $ 47  $ 2  $ (93) $ (2) $ (46)
Derivatives not designated as hedging instruments:
Metal contracts $ 59  $ 1  $ (94) $ (1) $ (35)
Currency exchange contracts 14  1  (25) (2) (12)
Energy contracts 1  —  (1) —  — 
Total derivatives not designated as hedging instruments $ 74  $ 2  $ (120) $ (3) $ (47)
Total derivative fair value $ 121  $ 4  $ (213) $ (5) $ (93)
 
  March 31, 2023
  Assets Liabilities Net Fair Value
  Current
Noncurrent(1)
Current
Noncurrent(1)
Assets / (Liabilities)
Derivatives designated as hedging instruments:
Cash flow hedges
Metal contracts $ 37  $ —  $ (31) $ —  $ 6 
Currency exchange contracts 26  4  (19) (1) 10 
Energy contracts 3  —  (4) —  (1)
Total derivatives designated as hedging instruments $ 66  $ 4  $ (54) $ (1) $ 15 
Derivatives not designated as hedging instruments:
Metal contracts $ 66  $ —  $ (52) $ (2) $ 12 
Currency exchange contracts 13  3  (22) (3) (9)
Energy contracts —  —  (2) —  (2)
Total derivatives not designated as hedging instruments $ 79  $ 3  $ (76) $ (5) $ 1 
Total derivative fair value $ 145  $ 7  $ (130) $ (6) $ 16 
____________________
(1)The noncurrent portions of derivative assets and liabilities are included in other long-term assets and other long-term liabilities, respectively, in the accompanying condensed consolidated balance sheets.
20
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Metal
We use derivative instruments to preserve our conversion margins and manage the timing differences associated with metal price lag. We use over-the-counter derivatives indexed to the LME (referred to as our "aluminum derivative forward contracts") to reduce our exposure to fluctuating metal prices associated with the period of time between the pricing of our purchases of inventory and the pricing of the sale of that inventory to our customers, which is known as "metal price lag." We also purchase forward LME aluminum contracts simultaneously with our sales contracts with customers that contain fixed metal prices. These LME aluminum forward contracts directly hedge the economic risk of future metal price fluctuations to better match the selling price of the metal with the purchase price of the metal. The volatility in LMPs also results in metal price lag.
Price risk arises due to fluctuating aluminum prices between the time the sales order is committed and the time the order is shipped. We identify and designate certain LME aluminum forward purchase contracts as cash flow hedges of the metal price risk associated with our future metal purchases that vary based on changes in the price of aluminum. Generally, such designated exposures do not extend beyond one year in length. The average duration of those contracts is one year.
Price risk exposure arises due to the timing lag between the LME based pricing of raw material aluminum purchases and the LME based pricing of finished product sales. We identify and designate certain LME aluminum forward sales contracts as cash flow hedges of the metal price risk associated with our future metal sales that vary based on changes in the price of aluminum. Generally, such designated exposures do not extend beyond two years in length. The average duration of those contracts is less than one year.
In addition to aluminum, we entered into LME copper and zinc forward contracts, as well as LMP forward contracts. As of September 30, 2023, and March 31, 2023, the fair value of these contracts represented a liability of less than $1 million and an asset of less than $1 million, respectively. These contracts are undesignated, with an average duration of one year.
The following table summarizes our notional amount.
in kt September 30,
2023		 March 31,
2023
Hedge type
Purchase (sale)
Cash flow purchases —  1 
Cash flow sales (730) (699)
Not designated (115) (144)
Total, net (845) (842)
Foreign Currency
We use foreign exchange forward contracts and cross-currency swaps to manage our exposure to changes in exchange rates. These exposures arise from recorded assets and liabilities, firm commitments, and forecasted cash flows denominated in currencies other than the functional currency of certain operations.
We use foreign currency contracts to hedge expected future foreign currency transactions, which include capital expenditures. These contracts cover the same periods as known or expected exposures. We had total notional amounts of $1.0 billion and $1.2 billion in outstanding foreign currency forwards designated as cash flow hedges as of September 30, 2023, and March 31, 2023, respectively.
As of September 30, 2023, and March 31, 2023, we had outstanding foreign currency exchange contracts with a total notional amount of $1.4 billion and $1.7 billion, respectively, to primarily hedge balance sheet remeasurement risk, which were not designated as hedges. Contracts representing the majority of this notional amount will mature by the third and fourth quarters of fiscal 2024 and offset the remeasurement impact.
21
Novelis Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Interest rate
We use interest rate swaps to partially manage our exposure to changes in the SOFR interest rate, which impacts our variable-rate debt. During the three months ended September 30, 2023, we entered into several interest rate swaps to convert $400 million of our variable rate exposure to a weighted average fixed rate of 4.4%. These interest rate swaps, designated as cash flow hedges, are effective from September 2023 through March 31, 2027.
Energy
We use natural gas forward purchase contracts to manage our exposure to fluctuating energy prices in North America. We had a notional of 3 million MMBtu designated as cash flow hedges as of September 30, 2023, and the fair value was an asset of less than $1 million. There was a notional of 7 million MMBtu of natural gas forward purchase contracts designated as cash flow hedges as of March 31, 2023, and the fair value was a liability of less than $1 million. As of September 30, 2023, we had a notional of less than $1 million MMBtu forward contracts that were not designated as hedges, and the fair value was a liability of less than $ 1 million. As of March 31, 2023, we had a notional of less than 1 million MMBtu and the fair value was a liability of less than $1 million. The average duration for all natural gas contracts is less than three years in length.
We use diesel fuel forward purchase contracts to manage our exposure to fluctuating fuel prices in North America and Europe. We had a notional of 1 million gallons designated as cash flow hedges as of September 30, 2023, and the fair value was an asset of less than $1 million. There was a notional of 1 million gallons designated as cash flow hedges as of March 31, 2023, and the fair value was a liability of less than $1 million. As of September 30, 2023, we had a notional of less than 1 million metric tonnes not designated as hedges, and the fair value was an asset of less than $1 million. As of March 31, 2023, we had a notional of less than 1 million metric tonnes of forward contracts that were not designated as hedges, and the fair value was a liability of less than $1 million. The average duration for all diesel fuel contracts is one year in length.
(Gain) Loss Recognition
The following table summarizes the (gains) losses associated with the change in fair value of derivative instruments not designated as hedges and the excluded portion of designated derivatives recognized in other (income) expenses, net. (Gains) losses recognized in other line items in the condensed consolidated statement of operations are separately disclosed within this footnote.
Three Months Ended
September 30
Six Months Ended
September 30
in millions 2023 2022 2023 2022
Derivative instruments not designated as hedges