Novelis Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 EARNINGS RELEASE - February 7, 2017

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EX-99.2 - EXHIBIT 99.2 PRESENTATION SLIDES - Novelis Inc.a3qfy17earningscallprese.htm
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Exhibit 99.1
novelislogo1a01a01a01a01a09.jpg
News Release

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, February 7, 2017 – 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.


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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

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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.

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

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



 
 
 
 
 
 
 
Three Months Ended December 31,

Nine Months Ended December 31,
 
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
)

























4

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


5


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



6

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


7


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



8

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



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Novelis Inc. Reports