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Novelis Reports Second Quarter of Fiscal Year 2013 Results

Company Continues to Execute on Strategic Plans

ATLANTA, Nov. 6, 2012 /PRNewswire/ -- Novelis, the global leader in aluminum recycling and rolling, today reported net income attributable to its common shareholder of $49 million for the second quarter of fiscal 2013.  Excluding tax-effected special items in both periods, net income for the second quarter of 2013 was $62 million, compared to $129 million for the same period in 2012 mainly driven by lower Adjusted EBITDA and a tax benefit in the prior year that did not reoccur. 

Adjusted EBITDA was $277 million for the second quarter of 2013, compared to the Company's second highest EBITDA of $301 million reported for the same quarter in 2012, primarily a result of higher employment and project start-up costs associated with its expansions.

"As expected, we had a strong second quarter with Adjusted EBITDA up seven percent sequentially, and are operating at or near capacity in all of our regions," said Phil Martens, Novelis President and Chief Executive Officer.  "The actions we've taken over the last few years have strengthened our operations and will help better position us as we continue to transition the business for future growth.  Although we see near-term pressure due to a slowdown in the global economy, we continue to believe in the strong long-term growth outlook for can, automotive, and specialties and expect our expansions to deliver strong EBITDA contributions once they are fully commissioned."

Shipments of aluminum rolled products totaled 719 kilotonnes for the second quarter of fiscal 2013, flat compared to shipments of 720 kilotonnes for the same period last year.   

Net sales for the second quarter of fiscal 2013 were $2.4 billion, a 15 percent decrease compared to the $2.9 billion reported in the same period a year ago.  This decrease was mainly the result of a 20 percent decline in average aluminum prices when compared to the previous year.

(in $M)




Q2FY13

Q1FY13





9/30/2012

6/30/2012



Cash and cash equivalents


$

227


$

263



Overdrafts



(3)



(2)



Gross availability under the ABL facility

695



607



Total Liquidity


$

919


$

868



 

(in $M)




Q2FY13

Q2FY12





9/30/2012

9/30/2011



Free Cash Flow


$

(25)


$

130



Capex



178



107



Free Cash Flow before Capex

$

153


$

237



For the second quarter of fiscal 2013, Novelis reported liquidity of $919 million.  "Our liquidity was very strong.  In the third quarter, our liquidity will be pressured by a few factors, mainly the semi-annual bond interest payment and our aggressive capital expenditures program," said Steve Fisher, SVP and Chief Financial Officer of Novelis.  Free cash flow was a negative $25 million for the second quarter of 2013, primarily due to capital investments of $178 million

Strategic Expansions
The Company continues to execute its strategy.  Last month, it opened Asia's largest fully integrated recycling and casting facility in South Korea.  Once fully commissioned, the facility will have an annual capacity of approximately 265 kilotonnes.  Together with the Company's other recycling operations worldwide, this new state-of-the-art facility makes Novelis the world's leading recycler of aluminum, reduces operating costs and furthers its sustainability commitment and goals.

Business Outlook
The Company is monitoring some market related variables due to further slowing of the global economy and increased competitive pressures in some of its regions.  While too early to be certain, these factors could impact the second half of the fiscal year.

Quarterly Report on Form 10-Q
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 September 30, 2012.  The Novelis Form 10-Q and other SEC filings are available for review on the Company's website at www.novelis.com.

Second Quarter of Fiscal 2013 Earnings Conference Call
Novelis will discuss its second quarter of fiscal 2013 results via a live webcast and conference call for investors at 9:00 a.m. ET on Tuesday, November 6, 2012.  Participants may access the webcast at https://cc.callinfo.com/r/12odf83eikpbe.  To join by telephone, dial toll-free in North America at 800 754 1391, India toll-free at 0008001007929 or the international toll line at +1 212 231 2921.  Access information may also be found at www.novelis.com/investors.

About Novelis
Novelis Inc. is the global leader in aluminum rolled products and the world's largest recycler of used aluminum cans. For fiscal year 2012, the company operated in 11 countries, had more than 11,000 employees and reported revenue of $11.1 billion. Novelis supplies premium aluminum sheet and foil products to automotive, transportation, packaging, construction, industrial, electronics and printing markets throughout North America, Europe, Asia and South America. 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 Mumbai, India. For more information, visit www.novelis.com and follow us on 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 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.

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 Net Income excluding Special Items, Reconciliation to Adjusted EBITDA and Free Cash Flow.

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.  An example of forward looking statements in this new release is our expectation for the annual capacity of our Yeongju facility upon full commissioning.  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; 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, derivative instruments, 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; 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 March 31, 2012 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, are specifically incorporated by reference into this news release.

 

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










Three Months Ended


Six Months Ended


September 30,


September 30,


2012


2011


2012


2011


(unaudited)

 


(unaudited)

 

Net sales

$

2,441



$

2,880



$

4,991



$

5,993


Cost of goods sold (exclusive of depreciation and amortization)

2,077



2,549



4,279



5,257


Selling, general and administrative expenses

102



91



204



186


Depreciation and amortization

69



81



142



170


Research and development expenses

13



12



25



24


Interest expense and amortization of debt issuance costs

73



77



147



154


Loss (gain) on assets held for sale

2





(3)




Restructuring charges, net

16



11



21



30


Equity in net loss of non-consolidated affiliates

3



3



5



5


Other income, net

(1)



(67)



(28)



(92)



2,354



2,757



4,792



5,734


Income before income taxes

87



123



199



259


Income tax provision (benefit)

37



(7)



58



52


Net income

50



130



141



207


Net income attributable to noncontrolling interests

1



10



1



25


Net income attributable to our common shareholder

$

49



$

120



$

140



$

182


 

Novelis Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (In millions)










September 30,
2012


March 31,
2012

ASSETS




Current assets




Cash and cash equivalents

$

227



$

317


Accounts receivable, net




— third parties (net of allowances of $4 and $5 as of September 30, 2012 and March 31, 2012,
          respectively)

1,304



1,331


— related parties

28



36


Inventories

1,163



1,024


Prepaid expenses and other current assets

90



61


Fair value of derivative instruments

58



99


Deferred income tax assets

139



151


Assets held for sale

4



81


Total current assets

3,013



3,100


Property, plant and equipment, net

2,848



2,689


Goodwill

611



611


Intangible assets, net

671



678


Investment in and advances to non–consolidated affiliates

656



683


Fair value of derivative instruments, net of current portion

3



2


Deferred income tax assets

88



74


Other long–term assets




— third parties

164



168


— related parties

14



16


Total assets

$

8,068



$

8,021


LIABILITIES AND EQUITY




Current liabilities




Current portion of long–term debt

$

25



$

23


Short–term borrowings

111



18


Accounts payable




— third parties

1,201



1,245


— related parties

48



51


Fair value of derivative instruments

119



95


Accrued expenses and other current liabilities

522



476


Deferred income tax liabilities

28



34


Liabilities held for sale



57


Total current liabilities

2,054



1,999


Long–term debt, net of current portion

4,326



4,321


Deferred income tax liabilities

534



581


Accrued postretirement benefits

665



687


Other long–term liabilities

277



310


Total liabilities

7,856



7,898


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, 2012 and March 31, 2012




Additional paid–in capital

1,659



1,659


Accumulated deficit

(1,239)



(1,379)


Accumulated other comprehensive loss

(242)



(191)


Total equity of our common shareholder

178



89


Noncontrolling interests

34



34


Total equity

212



123


Total liabilities and equity

$

8,068



$

8,021


 

Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (In millions)






Six Months Ended September 30,


2012


2011

OPERATING ACTIVITIES




Net income

$

141



$

207


Adjustments to determine net cash provided by operating activities:




Depreciation and amortization

142



170


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

(11)



(106)


Gain on assets held for sale

(3)




Deferred income taxes

13



32


Write–off and amortization of fair value adjustments, net

13



13


Equity in net loss of non–consolidated affiliates

5



5


Gain on foreign exchange remeasurement of debt

(7)



(1)


(Gain) loss on sale of assets

(1)



2


Non-cash impairment charges

1



14


Amortization of debt issuance costs

8



8


Other, net

1



(2)


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




Accounts receivable

30



40


Inventories

(148)



45


Accounts payable

(5)



(261)


Other current assets

(31)



(11)


Other current liabilities

(8)



(90)


Other noncurrent assets

(6)



18


Other noncurrent liabilities

(17)



(27)


Net cash provided by operating activities

117



56


INVESTING ACTIVITIES




Capital expenditures

(345)



(174)


Proceeds from sales of assets, third party

5



1


Proceeds from sale of assets, related party

2




Proceeds from investment in and advances to non–consolidated affiliates, net

1



1


Proceeds (outflow) from related party loans receivable, net

2



(4)


Proceeds from settlement of other undesignated derivative instruments, net

31



57


Net cash used in investing activities

(304)



(119)


FINANCING ACTIVITIES




Proceeds from issuance of debt

46



6


Principal payments

(11)



(11)


Short–term borrowings, net

54



48


Dividends, noncontrolling interest

(2)



(1)


Net cash provided by financing activities

87



42


Net decrease in cash and cash equivalents

(100)



(21)


Effect of exchange rate changes on cash

10



(4)


Cash and cash equivalents — beginning of period

317



311


Cash and cash equivalents — end of period

$

227



$

286


 

Reconciliation from Net Income Attributable to our Common Shareholder to Adjusted EBITDA





Novelis is providing disclosure of the reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.










Three Months Ended


Six Months Ended

(in millions)

September 30,


September 30,


2012


2011


2012


2011

Net income attributable to our common shareholder

$

49



$

120



$

140



$

182


Noncontrolling interests

(1)



(10)



(1)



(25)


Income tax (provision) benefit

(37)



7



(58)



(52)


Interest, net

(72)



(73)



(145)



(146)


Depreciation and amortization

(69)



(81)



(142)



(170)


EBITDA

228



277



486



575










Unrealized gain (loss) on derivatives

(24)



(1)



(11)



25


Realized gain on derivative instruments not  included in segment income





2



2


Proportional consolidation

(9)



(12)



(20)



(25)


Loss (gain) on assets held for sale

2





(3)




Restructuring charges, net

(16)



(11)



(21)



(30)


Other income, net

2





(3)



(4)


Adjusted EBITDA  

$

277



$

301



$

536



$

607


 

The following table shows the negative "Free cash flow" for the six months ended September 30, 2012 and 2011 and the ending balances of cash and cash equivalents (in millions).




Six Months Ended September 30,


2012


2011

Net cash provided by operating activities

$

117



$

56


Net cash used in investing activities

(304)



(119)


Less: Proceeds from sales of assets

(7)



(1)


Free cash flow

$

(194)



$

(64)


Ending cash and cash equivalents

$

227



$

286


 

The following table shows Net Income attributable to our common shareholder excluding Special Items for the three months ended September 30, 2012 and 2011 (in millions).




Three Months Ended September 30,


2012


2011





Net Income

$

49



$

120


Special Items:




Loss on assets held for sale

2




Restructuring charges

16



11


Tax effect on Special Items

5



2


Net Income, excluding Special Items

$

62



$

129


 

SOURCE Novelis Inc.

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