Novelis Reports Record Financial Results for the Second Quarter of Fiscal
2011
ATLANTA, Nov. 10, 2010 /CNW/ --
-- Net Income of $62 million
-- Record Adjusted EBITDA of $290 million, up 45%
-- Strong Free Cash Flow of $97 million, up $99 million
-- Solid Liquidity of $1.2 billion, up 113%
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<p>Novelis Inc., the world's leading producer of aluminum rolled products, today reported net income attributable to its common shareholder of <span class="xn-money">$62 million</span> for the second quarter of fiscal year 2011. The Company also reported that Adjusted EBITDA and Liquidity reached record levels in the quarter.</p>
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(in $M) Q2FY11 Q2FY10 Q1FY11
9/30/2010 9/30/2009 6/30/2010
Net Income $62 $195 $50
Adjusted EBITDA $290 $200 $263
--------------- ---- ---- ----
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<p>"Our momentum over the last year has continued into the second quarter," said <span class="xn-person">Phil Martens</span>, Novelis President and COO. "These record results can be directly attributed to our relentless focus on product portfolio optimization, footprint optimization and cost management on a global basis. Today, we are a much stronger company operationally and financially."</p>
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<p>Shipments of aluminum rolled products totaled 737 kilotonnes for the second quarter of fiscal 2011, an increase of six percent compared to shipments of 693 kilotonnes in the second quarter of the previous year. This increase in shipments was driven by strong end-market conditions across all of our product segments globally, particularly can, automotive and electronics.</p>
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<p>Net sales for the second quarter of fiscal 2011 were <span class="xn-money">$2.5 billion</span>, an increase of 16 percent compared to the <span class="xn-money">$2.2 billion</span> reported in the same period a year ago, the result of higher aluminum prices, higher conversion premiums and strength in the Company's end-markets.</p>
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<p>Adjusted EBITDA for the quarter was a record <span class="xn-money">$290 million</span>, representing a 45 percent increase from adjusted EBITDA of <span class="xn-money">$200 million</span> posted for the same period a year ago. Excluding the Company's seasonably low third quarter, this represents five consecutive quarters of improvement. These record operating results were primarily due to strong global market demand, price increases as well as effective cost management and efficiency gains.</p>
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(in $M) Q2FY11 Q2FY10 Q1FY11
9/30/2010 9/30/2009 6/30/2010
Income Before Income Taxes $129 $301 $74
Significant Items Affecting
Comparisons:
Restructuring (9) (3) (6)
Unrealized Gains (losses) on
Derivatives 1 254 (47)
Adjusted Pre-tax Income $137 $50 $127
----------------------- ---- --- ----
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<p>Income before income taxes was <span class="xn-money">$129 million</span> for the second quarter of fiscal 2011, a decrease when compared to the <span class="xn-money">$301 million</span> reported in the same period of fiscal 2010. Excluding restructuring charges and unrealized gains on derivatives, adjusted pre-tax income increased 174 percent year-over-year.</p>
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(in $M) Q2FY11 Q2FY10 Q1FY11
9/30/2010 9/30/2009 6/30/2010
Cash and cash equivalents $512 $246 $419
Overdrafts (23) (11) (17)
Gross availability under
the ABL facility 694 400 649
Borrowing availability
limitation due to
fixed charge coverage ratio - (80) -
Total Liquidity $1,183 $555 $1,051
--------------- ------ ---- ------
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<p>Liquidity improved to <span class="xn-money">$1.2 billion</span> at the end of the second quarter of 2011, an increase of 113 percent from <span class="xn-money">$555 million</span> in liquidity reported for the same period in the previous year and a 13 percent increase compared to the first quarter of fiscal 2011.</p>
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<p>"As of <span class="xn-chron">September 30</span>, our liquidity remained strong," said <span class="xn-person">Steve Fisher</span>, Chief Financial Officer for Novelis. "This record liquidity enables us to focus on making more strategic decisions about capital allocation."</p>
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<p>For the second quarter of fiscal 2011, free cash flow was <span class="xn-money">$97 million</span>, representing a significant increase from the negative <span class="xn-money">$2 million</span> reported in the second quarter of the previous year. "As a result of institutionalizing good risk management practices globally, we generated strong free cash flow in the second quarter and are on track this year to surpass our fiscal year 2010 free cash flow," said Fisher.</p>
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Business Outlook
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<p>Excluding the typical seasonality in the third quarter, going forward, the Company expects continued strength across all of its regions. "While we are still running at capacity, we will release a meaningful amount of capacity in fiscal 2011 and plan to increase capacity, through debottlenecking, by 3 to 4 percent annually over the next few years with minimal capital investments," said Martens.</p>
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Quarterly Report on Form 10-Q
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<p>The results described in this press release have been reported in detail on the Company's Form 10-Q on file with the SEC, and investors are directed to that document for a complete explanation of the Company's financial position and results through <span class="xn-chron">September 30, 2010</span>. The Novelis Form 10-Q and other SEC filings are available for review on the Company's website at <a href="http://www.novelis.com">www.novelis.com</a>.</p>
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Second Quarter Fiscal 2011 Earnings Conference Call
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<p>Novelis will discuss its second quarter fiscal 2011 results via a live webcast and conference call for investors at <span class="xn-chron">9:00 a.m. ET</span> on <span class="xn-chron">Wednesday, November 10, 2010</span>. Participants may access the webcast at <a href="https://cc.callinfo.com/r/1xivey5dmqqun">https://cc.callinfo.com/r/1xivey5dmqqun</a>. To join by telephone, dial toll-free in <span class="xn-location">North America</span> at 800 891 8794, <span class="xn-location">India</span> toll-free at 0008001007106 or the international toll line at +1 212 231 2935. Access information may also be found at <a href="http://www.novelis.com/investors">www.novelis.com/investors</a>.</p>
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About Novelis
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<p>Novelis Inc. is the global leader in aluminum rolled products and aluminum can recycling. The Company operates in 11 countries, has approximately 11,600 employees and reported revenue of <span class="xn-money">$8.7 billion</span> in fiscal year 2010. Novelis supplies premium aluminum sheet and foil products to automotive, transportation, packaging, construction, industrial, electronics and printing markets throughout <span class="xn-location">North America</span>, <span class="xn-location">Europe</span>, Asia, and <span class="xn-location">South America</span>. Novelis is a subsidiary of Hindalco Industries Limited (BSE: HINDALCO), one of Asia's largest integrated producers of aluminum and a leading copper producer. Hindalco is a flagship company of the Aditya Birla Group, a multinational conglomerate based in <span class="xn-location">Mumbai</span>, <span class="xn-location">India</span>. For more information, please visit <a href="http://www.novelis.com">www.novelis.com</a>.</p>
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Non-GAAP Financial Measures
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<p>This press release and the presentation slides for the earnings call contain non-GAAP financial measures as defined by SEC rules. We think that 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 concurrent 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.</p>
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<p>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 Free Cash Flow.</p>
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Forward-Looking Statements
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<p>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 such statements in this news release include our plans to increase production capacity and our stated view regarding our ability to generate free cash flow this fiscal year. Novelis cautions that, by their nature, forward-looking statements involve risk and uncertainty and that 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 metal hedging activities, including our internal used beverage cans (UBCs) and smelter hedges; 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; continuing obligations and other relationships resulting from our spin-off from Alcan Inc.; 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; changes in the fair value of derivative instruments; 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, environmental, health or safety compliance; changes in interest rates that have the effect of increasing the amounts we pay under our principal credit agreement and other financing agreements; the effect of taxes and changes in tax rates; and our 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 <span class="xn-chron">March 31, 2010</span> are specifically incorporated by reference into this news release.</p>
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<p> Novelis Inc.</p>
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in millions)
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<p> </p>
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Three Six
Months Months
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Ended Ended
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September September
30, 30,
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2010 2009 2010 2009
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<p> </p>
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Net sales $2,524 $2,181 $5,057 $4,141
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Cost of goods sold
(exclusive of
depreciation and
amortization) 2,188 1,734 4,396 3,271
Selling, general and
administrative
expenses 97 77 178 151
Depreciation and
amortization 104 92 207 192
Research and
development expenses 9 9 18 17
Interest expense and
amortization of debt
issuance costs 40 44 79 87
Interest income (3) (3) (6) (6)
Gain on change in fair
value of derivative
instruments, net (34) (80) (28) (152)
Restructuring charges,
net 9 3 15 6
Equity in net loss of
non-consolidated
affiliates 3 10 6 20
Other (income) expense,
net (18) (6) (11) (19)
--- --- --- ---
2,395 1,880 4,854 3,567
----- ----- ----- -----
Income before income
taxes 129 301 203 574
Income tax provision 56 87 71 199
--- --- --- ---
Net income 73 214 132 375
Net income attributable
to noncontrolling
interests 11 19 20 37
--- --- --- ---
Net income attributable
to our common
shareholder $62 $195 $112 $338
=== ==== ==== ====
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<p> Novelis Inc.</p>
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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in millions, except number of shares)
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September
30, March 31,
2010 2010
ASSETS
Current assets
Cash and cash equivalents $512 $437
Accounts receivable (net of allowances of $5
and $4 as of
September 30, 2010 and March 31, 2010)
- third parties 1,244 1,143
- related parties 12 24
Inventories 1,177 1,083
Prepaid expenses and other current assets 44 39
Fair value of derivative instruments 182 197
Deferred income tax assets 21 12
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Total current assets 3,192 2,935
Property, plant and equipment, net 2,526 2,632
Goodwill 611 611
Intangible assets, net 724 749
Investment in and advances to non-
consolidated affiliates 707 709
Fair value of derivative instruments, net of
current portion 17 7
Long-term deferred income tax assets 14 5
Other long-term assets
- third parties 98 93
- related parties 20 21
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Total assets $7,909 $7,762
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LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities
Current portion of long-term debt $117 $116
Short-term borrowings 23 75
Accounts payable
- third parties 1,045 1,076
- related parties 47 53
Fair value of derivative instruments 145 110
Accrued expenses and other current
liabilities 441 436
Deferred income tax liabilities 33 34
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Total current liabilities 1,851 1,900
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Long-term debt, net of current portion 2,477 2,480
Long-term deferred income tax liabilities 537 497
Accrued postretirement benefits 507 499
Other long-term liabilities 354 376
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Total liabilities 5,726 5,752
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<p>Commitments and contingencies</p>
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Shareholder's equity
Common stock, no par value; unlimited number
of shares authorized; - -
1,000 shares issued and outstanding as of
September 30, 2010 and
March 31, 2010
Additional paid-in capital 3,530 3,530
Accumulated deficit (1,446) (1,558)
Accumulated other comprehensive loss (62) (103)
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Total Novelis shareholder's equity 2,022 1,869
Noncontrolling interests 161 141
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Total equity 2,183 2,010
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Total liabilities and shareholder's equity $7,909 $7,762
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<p> Novelis Inc.</p>
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in millions)
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Six Months Ended
September 30,
-------------
2010 2009
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OPERATING ACTIVITIES
Net income $132 $375
Adjustments to determine net cash provided
by operating activities:
Depreciation and amortization 207 192
Gain on change in fair value of derivative
instruments, net (28) (152)
Deferred income taxes 18 196
Write-off and amortization of fair value
adjustments, net 8 (98)
Equity in net loss of non-consolidated
affiliates 6 20
Foreign exchange remeasurement of debt 1 (15)
Gain on sale of assets (13) (1)
Other, net 5 6
Changes in assets and liabilities:
Accounts receivable (91) (98)
Inventories (84) (84)
Accounts payable (45) 97
Other current assets (4) 4
Other current liabilities 16 (4)
Other noncurrent assets (8) (14)
Other noncurrent liabilities 4 27
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Net cash provided by operating activities 124 451
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INVESTING ACTIVITIES
Capital expenditures (71) (46)
Proceeds from sales of assets 18 4
Changes to investment in and advances to
non-consolidated affiliates - 2
Proceeds from related party loans
receivable, net 11 14
Net proceeds (outflow) from settlement of
derivative instruments 67 (403)
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Net cash provided by (used in) investing
activities 25 (429)
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FINANCING ACTIVITIES
Proceeds from issuance of debt, third
parties - 177
Proceeds from issuance of debt, related
parties - 3
Principal payments, third parties (8) (16)
Principal payments, related parties - (94)
Short-term borrowings, net (50) (96)
Dividends, noncontrolling interest (18) (13)
--- ---
Net cash used in financing activities (76) (39)
--- ---
Net increase (decrease) in cash and cash
equivalents 73 (17)
Effect of exchange rate changes on cash
balances held in foreign currencies 2 15
Cash and cash equivalents - beginning of
period 437 248
--- ---
Cash and cash equivalents - end of period $512 $246
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<p>RECONCILIATION FROM NET INCOME (LOSS) ATTRIBUTABLE TO OUR COMMON SHAREHOLDER TO ADJUSTED EBITDA</p>
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<p>Novelis is providing disclosure of the reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.</p>
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Three Months Ended Six Months Ended
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(in millions) September 30, September 30,
------------- -------------
2010 2009 2010 2009
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Net income attributable to our
common shareholder $62 $195 $112 $338
Noncontrolling interests (11) (19) (20) (37)
Income tax provision (56) (87) (71) (199)
Interest, net (37) (41) (73) (81)
Depreciation and amortization (104) (92) (207) (192)
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EBITDA 270 434 483 847
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Unrealized gain (loss) on
derivatives 1 254 (46) 553
Proportional consolidation (11) (17) (21) (33)
Restructuring charges, net (9) (3) (15) (6)
Gain on sale of assets - - 13 1
Other income (expense), net (1) - (1) 8
--- --- --- ---
Adjusted EBITDA $290 $200 $553 $324
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<p>The following table shows Free cash flow as well as the ending balances of cash and cash equivalents (in millions).</p>
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Three Months Three Months Six Months
Ended Ended Ended
June 30, September 30, September 30,
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2010 2009 2010 2009 2010 2009
---- ---- ---- ---- ---- ----
Net cash provided by
operating
activities $22 $256 $102 $195 $124 $451
Net cash provided by
(used in) investing
activities 27 (233) (2) (196) 25 (429)
Less: Proceeds from
sales of assets (15) (3) (3) (1) (18) (4)
--- --- --- --- --- ---
Free cash flow $34 $20 $97 $(2) $131 $18
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Ending cash and cash
equivalents $419 $237 $512 $246 $512 $246
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For further information: Media Contact: Charles Belbin, +1-404-760-4120, [email protected], or Investor Contact: Isabel Janci, +1-404-760-4164, [email protected] Web Site: http://www.novelis.com
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