Novelis Reports Third Quarter Fiscal Year 2017 Results
Continued automotive ramp-up and efficiencies drive adjusted EBITDA to record third quarter
Third Quarter Fiscal Year 2017 Highlights
-- Net income of $63 million; excluding special items in both periods, net income more than doubled YoY to $67 million
-- Record third quarter adjusted EBITDA, excluding metal price lag, of $255 million, up 7% YoY
-- Total FRP shipments of 750 kilotonnes; record automotive sheet shipments up 13% YoY

ATLANTA, Feb. 7, 2017 /PRNewswire/ -- Novelis, the world leader in aluminum rolling and recycling, today reported net income attributable to our common shareholder of $63 million for the third quarter of fiscal year 2017, compared to a net income of $6 million in the prior year period. Excluding tax-effected special items in both periods, the company more than doubled third quarter fiscal 2017 net income to $67 million from $32 million in the prior year. Current year net income reflects record adjusted EBITDA and an 18% reduction in interest expense, a result of the refinancing of two senior note issuances during the second quarter of fiscal 2017. 

"Continued operational efficiencies combined with strong aluminum automotive sheet demand and strategic capacity investments delivered record, sustainable adjusted EBITDA results this quarter," said Steve Fisher, President and Chief Executive Officer for Novelis.

Adjusted EBITDA for the third quarter of fiscal 2017 increased to $251 million from $212 million in the prior year period. Excluding metal price lag in both periods, adjusted EBITDA increased seven percent to a third quarter record of $255 million, driven by higher automotive sheet shipments, productivity gains, lower metal cost, and favorable foreign exchange gains.

Overall, Novelis experienced a four percent decline in total shipments of rolled aluminum products to 750 kilotonnes, mainly due to prior strategic decisions to reduce volumes in China and soft demand in South America. Lower shipments, partially offset by slightly higher average aluminum prices and increased shipments of higher conversion premium products, led to a two percent decrease in net sales to $2.3 billion for the third quarter of fiscal 2017. 

The company generated $131 million of free cash flow for the third quarter of fiscal 2017 as compared to negative $12 million in the prior year driven by stronger adjusted EBITDA results, as well as lower interest and capital expenditures. Due to the recent bond refinancing, there were no bond interest payments in the third quarter this fiscal year. Capital expenditures declined to $48 million as compared to $78 million in the prior year period. The company now expects full year fiscal 2017 free cash flow to be on the high end of its previously guided range of $300 million to $350 million

"Following our successful bond refinancing during the second quarter, we refinanced our $1.8 billion term loan with Asian banks in January," said Devinder Ahuja, Senior Vice President and Chief Financial Officer. "Together, these bond and term loan transactions will result in an extended debt maturity profile and annual cash interest savings of approximately $80 million."

As of December 31, 2016, the company reported a strong liquidity position over $1 billion.

Third Quarter of Fiscal Year 2017 Earnings Conference Call
Novelis will discuss its third quarter fiscal year 2017 results via a live webcast and conference call for investors at 8:00 a.m. ET on Tuesday, February 7, 2017. To view slides and listen only, visit the web at https://cc.callinfo.com/r/1wd4xfmmz9lal&eom. To join by telephone, dial toll-free in North America at 800 764 4852, India toll-free at 18002662118 or the international toll line at +1 415 226 5356. Presentation materials and access information may also be found at novelis.com/investors.

About Novelis
Novelis Inc. is the global leader in aluminum rolled products and the world's largest recycler of aluminum. The company operates in 10 countries, has approximately 12,000 employees and reported $10 billion in revenue for its 2016 fiscal year. Novelis supplies premium aluminum sheet and foil products to transportation, packaging, construction, industrial and consumer electronics markets throughout North America, Europe, Asia and South America. Novelis is a subsidiary of Hindalco Industries Limited, an industry leader in aluminum and copper, and metals flagship company of the Aditya Birla Group, a multinational conglomerate based in Mumbai, India. For more information, visit novelis.com and follow us on Facebook at facebook.com/NovelisInc and Twitter at twitter.com/Novelis.

Non-GAAP Financial Measures
This press release and the presentation slides for the earnings call contain non-GAAP financial measures as defined by SEC rules. We believe these measures are helpful to investors in measuring our financial performance and liquidity and comparing our performance to our peers. However, our non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures used by other companies. These non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP financial measures. To the extent we discuss any non-GAAP financial measures on the earnings call, a reconciliation of each measure to the most directly comparable GAAP measure will be available in the presentation slides filed as Exhibit 99.2 to our Current Report on Form 8-K furnished to the SEC concurrently with the issuance of this press release. In addition, the Form 8-K includes a more detailed description of each of these non-GAAP financial measures, together with a discussion of the usefulness and purpose of such measures.

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

Forward-Looking Statements
Statements made in this news release which describe Novelis' intentions, expectations, beliefs or predictions may be forward-looking statements within the meaning of securities laws. Forward-looking statements include statements preceded by, followed by, or including the words "believes," "expects," "anticipates," "plans," "estimates," "projects," "forecasts," or similar expressions. Examples of forward looking statements in this news release are statements about the company's expectation to generate approximately $350 million in free cash flow for the full fiscal year. Novelis cautions that, by their nature, forward-looking statements involve risk and uncertainty and Novelis' actual results could differ materially from those expressed or implied in such statements. We do not intend, and we disclaim any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise. Factors that could cause actual results or outcomes to differ from the results expressed or implied by forward-looking statements include, among other things: changes in the prices and availability of aluminum (or premiums associated with such prices) or other materials and raw materials we use; the capacity and effectiveness of our hedging activities; relationships with, and financial and operating conditions of, our customers, suppliers and other stakeholders; fluctuations in the supply of, and prices for, energy in the areas in which we maintain production facilities; our ability to access financing for future capital requirements; changes in the relative values of various currencies and the effectiveness of our currency hedging activities; factors affecting our operations, such as litigation, environmental remediation and clean-up costs, labor relations and negotiations, breakdown of equipment and other events; the impact of restructuring efforts in the future; economic, regulatory and political factors within the countries in which we operate or sell our products, including changes in duties or tariffs; competition from other aluminum rolled products producers as well as from substitute materials such as steel, glass, plastic and composite materials; changes in general economic conditions including deterioration in the global economy, particularly sectors in which our customers operate; cyclical demand and pricing within the principal markets for our products as well as seasonality in certain of our customers' industries; changes in government regulations, particularly those affecting taxes, derivative instruments, environmental, health or safety compliance; changes in interest rates that have the effect of increasing the amounts we pay under our credit facilities and other financing agreements; the effect of taxes and changes in tax rates; our level of indebtedness and our ability to generate cash. The above list of factors is not exhaustive. Other important risk factors included under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2016 are specifically incorporated by reference into this news release.

 

 

 

Novelis Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in millions)









Three Months Ended
December 31,


Nine Months Ended
December 31,


2016


2015


2016


2015







Net sales

$

2,313



$

2,354



$

6,970



$

7,470


Cost of goods sold (exclusive of depreciation and amortization)

1,924



2,051



5,834



6,692


Selling, general and administrative expenses

103



104



303



304


Depreciation and amortization

88



88



267



264


Interest expense and amortization of debt issuance costs

67



82



231



244


Loss on extinguishment of debt





112



13


Research and development expenses

14



13



41



39


Gain on assets held for sale





(2)




Restructuring and impairment, net

1



10



4



29


Equity in net loss of non-consolidated affiliates

8





8



2


Other (income) expense, net

(3)



(16)



63



(78)



2,202



2,332



6,861



7,509


Income (loss) before income taxes

111



22



109



(39)


Income tax provision

47



16



110



28


Net income (loss)

64



6



(1)



(67)


Net income attributable to noncontrolling interests

1





1




Net income (loss) attributable to our common shareholder

$

63



$

6



$

(2)



$

(67)


 

 

 

Novelis Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in millions, except number of shares)



December 31,
2016


March 31,
2016

ASSETS


Current assets




Cash and cash equivalents

$

505



$

556


Accounts receivable, net




— third parties (net of uncollectible accounts of $5 as of December 31, 2016 and $3 as of March 31, 2016)

993



956


— related parties

63



59


Inventories

1,321



1,180


Prepaid expenses and other current assets

101



127


Fair value of derivative instruments

84



88


Assets held for sale

3



5


Total current assets

3,070



2,971


Property, plant and equipment, net

3,304



3,506


Goodwill

607



607


Intangible assets, net

470



523


Investment in and advances to non–consolidated affiliate

444



488


Deferred income tax assets

81



87


Other long–term assets




  — third parties

86



82


  — related parties

13



16


  Total assets

$

8,075



$

8,280


LIABILITIES AND SHAREHOLDER'S DEFICIT




Current liabilities




Current portion of long–term debt

$

90



$

47


Short–term borrowings

517



579


Accounts payable




 — third parties

1,496



1,506


 — related parties

52



48


Fair value of derivative instruments

80



85


Accrued expenses and other current liabilities

468



569


Total current liabilities

2,703



2,834


Long–term debt, net of current portion

4,460



4,421


Deferred income tax liabilities

113



89


Accrued postretirement benefits

795



820


Other long–term liabilities

190



175


Total liabilities

8,261



8,339


Commitments and contingencies




Shareholder's deficit




Common stock, no par value; unlimited number of shares authorized; 1,000 shares issued and outstanding as of December 31, 2016 and March 31, 2016




Additional paid–in capital

1,404



1,404


Accumulated deficit

(965)



(963)


Accumulated other comprehensive loss

(606)



(500)


Total deficit of our common shareholder

(167)



(59)


Noncontrolling interests

(19)




Total deficit

(186)



(59)


Total liabilities and deficit

$

8,075



$

8,280


 

 

Novelis Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in millions)



Nine Months Ended December 31,


2016


2015

OPERATING ACTIVITIES




Net loss

$

(1)



$

(67)


Adjustments to determine net cash used in operating activities:




Depreciation and amortization

267



264


Gain on unrealized derivatives and other realized derivatives in investing activities, net

(23)



(25)


Gain on assets held for sale

(2)




Loss on sale of business

27




Loss on sale of assets

4



2


Impairment charges



8


Loss on extinguishment of debt

112



13


Deferred income taxes

15



(60)


Amortization of fair value adjustments, net

7



9


Equity in net loss of non-consolidated affiliates

8



2


Loss (gain) on foreign exchange remeasurement of debt

41



(5)


Amortization of debt issuance costs and carrying value adjustments

10



15


Other, net

1




Changes in assets and liabilities including assets and liabilities held for sale (net of effects from divestitures):




Accounts receivable

(108)



166


Inventories

(200)



146


Accounts payable

59



(422)


Other current assets

18



6


Other current liabilities

(117)



(42)


Other noncurrent assets

(17)



21


Other noncurrent liabilities

50



(30)


Net cash provided by operating activities

151



1


INVESTING ACTIVITIES




Capital expenditures

(138)



(282)


Proceeds from sales of assets, third party, net of transaction fees and hedging

2



2


Outflows from the sale of a business, net of transaction fees

(2)




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

12



(5)


Outflows from related party loans receivable, net

(3)




Proceeds (outflows) from settlement of other undesignated derivative instruments, net

7



(11)


Net cash used in investing activities

(122)



(296)


FINANCING ACTIVITIES




Proceeds from issuance of long-term and short-term borrowings

2,770



151


Principal payments of long-term and short-term borrowings

(2,676)



(194)


Revolving credit facilities and other, net

(20)



178


Dividends, noncontrolling interest



(1)


Debt issuance costs

(139)



(15)


Net cash (used in) provided by financing activities

(65)



119


Net decrease in cash and cash equivalents

(36)



(176)


Effect of exchange rate changes on cash

(15)



5


Cash and cash equivalents — beginning of period

556



628


Cash and cash equivalents — end of period

$

505



$

457


 

 

Reconciliation from Net income (loss) attributable to our common shareholder to Adjusted EBITDA, and Adjusted EBITDA excluding Metal Price Lag (unaudited)

Novelis is providing disclosure of the reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis. To better analyze underlying operational results, the following table also shows Adjusted EBITDA to Adjusted EBITDA excluding the impact of Metal Price Lag. On certain sales contracts we experience timing differences on the pass through of changing aluminum prices from our suppliers to our customers. Additional timing differences occur in the flow of metal costs through moving average inventory cost values and cost of goods sold. This timing difference is referred to as metal price lag. Although we use derivatives contracts to minimize the price lag associated with LME base aluminum prices, we do not use derivative contracts for local market premiums, as these are not prevalent in the market.


(in millions)

Three Months Ended
December 31,


Nine Months Ended
December 31,


2016


2015


2016


2015

Net income (loss) attributable to our common shareholder

$

63



$

6



$

(2)



$

(67)


Noncontrolling interests

1





1




Income tax provision

(47)



(16)



(110)



(28)


Interest, net

(65)



(77)



(224)



(235)


Depreciation and amortization

(88)



(88)



(267)



(264)


EBITDA

264



187



600



460










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

21



(2)



18



18


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

1



1



2



(1)


Adjustment to eliminate proportional consolidation

(4)



(7)



(20)



(22)


Loss on sale of a business





(27)




Gain (loss) on sale of fixed assets

2



(1)



(4)



(2)


Gain on assets held for sale





2




Loss on extinguishment of debt





(112)



(13)


Restructuring and impairment, net

(1)



(10)



(4)



(29)


Other costs, net

(6)



(6)



(17)



(12)


Adjusted EBITDA

$

251



$

212



$

762



$

521










Metal price lag

(4)



(26)



(32)



(165)


Adjusted EBITDA excluding metal price lag

$

255



$

238



$

794



$

686



Free Cash Flow and Cash and Cash Equivalents (unaudited)

The following table shows the "Free cash flow" for the nine months ended December 31, 2016 and 2015 and the ending balances of cash and cash equivalents (in millions).



Nine Months Ended December 31,


2016


2015

Net cash provided by operating activities

$

151



$

1


Net cash used in investing activities

(122)



(296)


Less: Proceeds from sales of assets, net of transaction fees and hedging



(2)


Free cash flow

$

29



$

(297)


Ending cash and cash equivalents

$

505



$

457



Total Liquidity (unaudited)

The following table shows available liquidity as of December 31, 2016 and March 31, 2016 (in millions).



December 31,


March 31,


2016


2016

Cash and cash equivalents

$

505



$

556


Availability under committed credit facilities

534



640


Total liquidity

$

1,039



$

1,196


 

 

 

Reconciliation of Net income (loss) attributable to our common shareholder, to Net Income attributable to our common shareholder, excluding Special Items (unaudited)

The following table shows Net Income attributable to our common shareholder excluding special items (in millions).  We adjust for items which may recur in varying magnitude which affect the comparability of the operational results of our underlying business.



Three Months Ended
December 31,


Nine Months Ended
December 31,


2016


2015


2016


2015

Net income (loss) attributable to our common shareholder

$

63



$

6



$

(2)



$

(67)


Special Items:








Gain on assets held for sale





(2)




Loss on sale of a business





27




Loss on extinguishment of debt





112



13


Metal price lag

4



26



32



165


Restructuring and impairment, net

1



10



4



29


Tax effect on special items

(1)



(10)



(10)



(59)


Net income attributable to our common shareholder, excluding special items

$

67



$

32



$

161



$

81


 

 

 

Segment Information (unaudited)

The following table shows selected segment financial information (in millions, except shipments which are in kilotonnes).


Selected Operating Results Three Months Ended December 31, 2016


North

America


Europe


Asia


South

America


Eliminations and Other


Total

Adjusted EBITDA


$

92



$

39



$

37



$

83



$



$

251


Metal price lag


2



(5)



(3)



2





(4)


Adjusted EBITDA excluding metal price lag


$

90



$

44



$

40



$

81



$



$

255















Shipments













Rolled products - third party


247



222



161



120





750


Rolled products - intersegment




4



1



5



(10)




Total rolled products


247



226



162



125



(10)



750




Selected Operating Results Three Months Ended December 31, 2015


North

America


Europe


Asia


South

America


Eliminations and Other


Total

Adjusted EBITDA


$

68



$

37



$

30



$

77



$



$

212


Metal price lag


(16)



(8)



(3)



1





(26)


Adjusted EBITDA excluding metal price lag


$

84



$

45



$

33



$

76



$



$

238















Shipments













Rolled products - third party


253



220



183



123





779


Rolled products - intersegment




12



10



9



(31)




Total rolled products


253



232



193



132



(31)



779




Selected Operating Results Nine Months Ended December 31, 2016


North

America


Europe


Asia


South

America


Eliminations and Other


Total

Adjusted EBITDA


$

268



$

133



$

124



$

237



$



$

762


Metal price lag


(8)



(17)



(8)



1





(32)


Adjusted EBITDA excluding metal price lag


$

276



$

150



$

132



$

236



$



$

794















Shipments













Rolled products - third party


740



695



512



331





2,278


Rolled products - intersegment


1



13



4



18



(36)




Total rolled products


741



708



516



349



(36)



2,278




Selected Operating Results Nine Months Ended December 31, 2015


North

America


Europe


Asia


South

America


Eliminations and Other


Total

Adjusted EBITDA


$

163



$

69



$

100



$

190



$

(1)



$

521


Metal price lag


(79)



(78)



(10)



2





(165)


Adjusted EBITDA excluding metal price lag


$

242



$

147



$

110



$

188



$

(1)



$

686















Shipments













Rolled products - third party


782



686



538



329





2,335


Rolled products - intersegment


1



48



35



27



(111)




Total rolled products


783



734



573



356



(111)



2,335


 

 

 

SOURCE Novelis Inc.

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

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