Novelis Reports Third Quarter of Fiscal Year 2016 Results

Record Automotive Shipments and Solid Execution Deliver Strong Quarterly Results

Third Quarter Fiscal Year 2016 Highlights

- Net income of $6 million; excluding special items, net income $32 million

- Excluding metal price lag, Adjusted EBITDA increased 4% YoY to $238 million

- Record automotive shipments up 52% YoY

- Global FRP shipments of 779 kilotonnes, up 3% YoY

Feb 09, 2016, 05:50 ET from Novelis Inc.

ATLANTA, Feb. 9, 2016 /PRNewswire/ -- Novelis, the world leader in aluminum rolling and recycling, today reported net income of $6 million for the third quarter of fiscal year 2016.  Excluding tax-effected special items, the company reported net income of $32 million in the third quarter of fiscal 2016 compared to $54 million in the third quarter of fiscal 2015.

Excluding the impact of metal price lag in both quarters, Adjusted EBITDA was $238 million in the third quarter of fiscal 2016, up four percent compared to $228 million in the prior year.  The increase was driven by higher shipments of automotive and beverage can sheet, partially offset by less favorable recycling benefits due to depressed aluminum prices as compared to the prior year.  Current year results also reflect higher fixed costs associated with new automotive and recycling operations.

"Our good performance this quarter validates our strategy to grow aluminum rolled products capabilities around the world to serve high growth, high value industries including automotive and packaging," said Steve Fisher, President and Chief Executive Officer for Novelis. "The success of our expansion projects coupled with our steady improvement in operational performance positions Novelis for continued growth and profitability."

Shipments of rolled aluminum products grew three percent to 779 kilotonnes in the third quarter of fiscal 2016, as compared to 757 kilotonnes reported in the prior year period.  Despite higher shipments, revenues decreased 17 percent to $2.4 billion for the third quarter of fiscal 2016 driven by significantly lower average aluminum prices and local market premiums.

While average local market metal premiums stabilized during the third quarter of fiscal 2016, the company reported negative metal price lag of $26 million as it continued to turn higher average metal cost inventory from previous months.  Although the company uses derivatives contracts to minimize the price lag associated with LME base aluminum prices, adequate cost-effective hedges are not available for local market premiums.  Adjusted EBITDA for the third quarter of fiscal 2016 including metal price lag was $212 million.

The company reported negative $12 million of free cash flow in the third quarter of fiscal 2016 as compared to negative $12 million in the third quarter of fiscal 2015.  Capital expenditures totaled $78 million in the third quarter of fiscal 2016, down from $104 million reported in the prior year period.  The company continues to expect positive free cash flow for the full fiscal year, and capital expenditures slightly below $400 million in fiscal 2016.

As of December 31, 2015, the company reported solid liquidity of $946 million.

Third Quarter of Fiscal Year 2016 Earnings Conference Call

Novelis will discuss its third quarter of fiscal year 2016 results via a live webcast and conference call for investors at 8:00 a.m. ET on Tuesday, February 9, 2016. To view slides and listen only, visit the web at https://cc.callinfo.com/r/1jziyt410jabm&eom. To join by telephone, dial toll-free in North America at 800 918 9478, India toll-free at 0008008521493 or the international toll line at +1 303 223 0117. 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 11 countries, has approximately 11,500 employees and reported $11.1 billion in revenue for its 2015 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. The company is a subsidiary of Hindalco Industries Limited, part 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 (Loss) Income 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.  An example of forward looking statements in this news release is the company's expectation for positive 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, 2015 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,


2015


2014


2015


2014

Net sales

$

2,354



$

2,847



$

7,470



$

8,358


Cost of goods sold (exclusive of depreciation and amortization)

2,051



2,498



6,692



7,310


Selling, general and administrative expenses

104



108



304



319


Depreciation and amortization

88



87



264



266


Interest expense and amortization of debt issuance costs

82



85



244



248


Research and development expenses

13



14



39



38


Gain on assets held for sale



(12)





(23)


Loss on extinguishment of debt





13




Restructuring and impairment, net

10



25



29



38


Equity in net loss of non-consolidated affiliates



2



2



4


Other (income) expense, net

(16)



(9)



(78)



14



2,332



2,798



7,509



8,214


Income (loss) before income taxes

22



49



(39)



144


Income tax provision

16



3



28



25


Net income (loss)

6



46



(67)



119


Net income attributable to noncontrolling interests








Net income (loss) attributable to our common shareholder

$

6



$

46



$

(67)



$

119


 

 

Novelis Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in millions, except number of shares)



December 31, 2015


March 31, 2015

ASSETS


Current assets




Cash and cash equivalents

$

457



$

628


Accounts receivable, net




— third parties (net of uncollectible accounts of $3 as of December 31, 2015 and March 31, 2015)

1,110



1,289


— related parties

56



53


Inventories

1,277



1,431


Prepaid expenses and other current assets

107



112


Fair value of derivative instruments

64



77


Deferred income tax assets

95



79


Assets held for sale

5



6


Total current assets

3,171



3,675


Property, plant and equipment, net

3,465



3,542


Goodwill

607



607


Intangible assets, net

545



584


Investment in and advances to non–consolidated affiliate

452



447


Deferred income tax assets

109



95


Other long–term assets




— third parties

109



137


— related parties

17



15


Total assets

$

8,475



$

9,102


LIABILITIES AND SHAREHOLDER'S DEFICIT




Current liabilities




Current portion of long–term debt

$

47



$

108


Short–term borrowings

932



846


Accounts payable




— third parties

1,384



1,854


— related parties

49



44


Fair value of derivative instruments

111



149


Accrued expenses and other current liabilities

514



572


Deferred income tax liabilities

8



20


Total current liabilities

3,045



3,593


Long–term debt, net of current portion

4,442



4,349


Deferred income tax liabilities

243



261


Accrued postretirement benefits

749



748


Other long–term liabilities

168



221


Total liabilities

8,647



9,172


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, 2015 and March 31, 2015




Additional paid–in capital

1,404



1,404


Accumulated deficit

(992)



(925)


Accumulated other comprehensive loss

(594)



(561)


Total deficit of our common shareholder

(182)



(82)


Noncontrolling interests

10



12


Total deficit

(172)



(70)


Total liabilities and deficit

$

8,475



$

9,102


 

 

Novelis Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in millions)



Nine Months Ended December 31,


2015


2014

OPERATING ACTIVITIES




Net (loss) income

$

(67)



$

119


Adjustments to determine net cash provided by operating activities:




Depreciation and amortization

264



266


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

(25)



6


Gain on assets held for sale



(23)


Loss on sale of assets

2



4


Impairment charges

8



7


Loss on extinguishment of debt

13




Deferred income taxes

(60)



(46)


Amortization of fair value adjustments, net

9



9


Equity in net loss of non-consolidated affiliates

2



4


Gain on foreign exchange remeasurement of debt

(5)



(4)


Amortization of debt issuance costs and carrying value adjustments

15



19


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




Accounts receivable

166



(176)


Inventories

146



(437)


Accounts payable

(422)



427


Other current assets

6



(62)


Other current liabilities

(42)



(6)


Other noncurrent assets

21



3


Other noncurrent liabilities

(30)



(23)


Net cash provided by operating activities

1



87


INVESTING ACTIVITIES




Capital expenditures

(282)



(368)


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

2



100


Outflows from investments in and advances to non-consolidated affiliates, net

(5)



(17)


(Outflows) proceeds from settlement of other undesignated derivative instruments, net

(11)



1


Net cash used in investing activities

(296)



(284)


FINANCING ACTIVITIES




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

151



303


Principal payments of long-term and short-term borrowings

(194)



(209)


Revolving credit facilities and other, net

178



238


Return of capital to our common shareholder



(250)


Dividends, noncontrolling interest

(1)



(1)


Debt issuance costs

(15)



(3)


Net cash provided by financing activities

119



78


Net decrease in cash and cash equivalents

(176)



(119)


Effect of exchange rate changes on cash

5



(3)


Cash and cash equivalents — beginning of period

628



509


Cash and cash equivalents — end of period

$

457



$

387


 

 

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.

(in millions)

Three Months Ended December 31,


Nine Months Ended December 31,


2015


2014


2015


2014

Net income (loss) attributable to our common shareholder

$

6



$

46



$

(67)



$

119


Income tax provision

(16)



(3)



(28)



(25)


Interest, net

(77)



(84)



(235)



(244)


Depreciation and amortization

(88)



(87)



(264)



(266)


EBITDA

187



220



460



654










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

(2)



12



18



12


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

1



(3)



(1)



(4)


Adjustment to eliminate proportional consolidation

(7)



(10)



(22)



(27)


Loss on sale of fixed assets

(1)



(1)



(2)



(4)


Gain on assets held for sale



12





23


Loss on extinguishment of debt





(13)




Restructuring and impairment, net

(10)



(25)



(29)



(38)


Other expense, net

(6)



(1)



(12)



(9)


Adjusted EBITDA

$

212



$

236



$

521



$

701










Metal price lag

(26)



8



(165)



19


Adjusted EBITDA excluding metal price lag

$

238



$

228



$

686



$

682



 

Free Cash Flow and Cash and Cash Equivalents (unaudited)

The following table shows the "Free cash flow" for the nine months ended December 31, 2015 and 2014 and the ending balances of cash and cash equivalents (in millions).


Nine Months Ended
December 31,


2015


2014

Net cash provided by operating activities

$

1



$

87


Net cash used in investing activities

(296)



(284)


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

(2)



(100)


Free cash flow

$

(297)



$

(297)


Ending cash and cash equivalents

$

457



$

387



 

Total Liquidity (unaudited)

The following table shows available liquidity as of December 31, 2015 and March 31, 2015 (in millions).


December 31,


March 31,


2015


2015

Cash and cash equivalents

$

457



$

628


Availability under committed credit facilities

489



510


Total liquidity

$

946



$

1,138



 

Reconciliation of Net income (loss) to Net income, excluding Special Items (unaudited)

The following table shows Net income (loss) 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,


2015


2014


2015


2014

Net income (loss) attributable to our common shareholder

$

6



$

46



$

(67)



$

119


Special Items:








Gain on assets held for sale



12





23


Loss on extinguishment of debt





(13)




Metal price lag

(26)



8



(165)



19


Restructuring and impairment, net

(10)



(25)



(29)



(38)


Tax effect on Special Items

10



(3)



59



(3)


Net income attributable to our common shareholder, excluding special items

$

32



$

54



$

81



$

118



 

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, 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 Three Months Ended December 31, 2014


North

America


Europe


Asia


South

America


Eliminations and Other


Total

Adjusted EBITDA


$

71



$

57



$

33



$

75



$



$

236


Metal price lag


2



(5)



8



3





8


Adjusted EBITDA excluding metal price lag


$

69



$

62



$

25



$

72



$



$

228


Shipments













Rolled products - third party


255



205



177



120





757


Rolled products - intersegment




13



21



9



(43)




Total rolled products


255



218



198



129



(43)



757





















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





















Selected Operating Results Nine Months Ended December 31, 2014


North

America


Europe


Asia


South

America


Eliminations and Other


Total

Adjusted EBITDA


$

211



$

211



$

106



$

171



$

2



$

701


Metal price lag


7



2



9



1





19


Adjusted EBITDA excluding metal price lag


$

204



$

209



$

97



$

170



$

2



$

682


Shipments













Rolled products - third party


762



665



528



337





2,292


Rolled products - intersegment


2



33



44



22



(101)




Total rolled products


764



698



572



359



(101)



2,292


 

SOURCE Novelis Inc.



RELATED LINKS

http://www.novelis.com