UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 9, 2011
NOVELIS INC.
(Exact name of Registrant as specified in its charter)
Canada | 001-32312 | 98-0442987 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
3560 Lenox Road, Suite 2000, Atlanta, GA |
30326 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code (404) 814-4200
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
The following information is furnished pursuant to Item 2.02, Results of Operations and Financial Condition. Consequently, it is not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section. It may only be incorporated by reference in another filing under the Securities Exchange Act of 1934 or Securities Act of 1933 if such subsequent filing specifically references this Form 8-K. On November 9, 2011, Novelis Inc. issued a press release reporting the companys financial results for its quarter ended September 30, 2011. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein in its entirety. A copy of investor presentation materials relating to such financial results is attached hereto as Exhibit 99.2 and is incorporated by reference herein in its entirety. The presentation materials use the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted Pre-Tax Income (Loss) Excluding Certain Items, Free Cash Flow and Total Liquidity.
EBITDA and Adjusted EBITDA. EBITDA consists of earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA for unrealized (gains) losses on change in fair value of derivative instruments, impairment of goodwill, gains (losses) on extinguishment of debt, adjustment to include proportional consolidation, restructuring charges and certain other costs. EBITDA and Adjusted EBITDA are measures commonly used in the companys industry, and the company presents EBITDA and Adjusted EBITDA to enhance investors understanding of the companys operating performance. Novelis believes that EBITDA and Adjusted EBITDA are operating performance measures, and not liquidity measures, that provide investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies.
However, EBITDA and Adjusted EBITDA are not measurements of financial performance under GAAP, and the companys EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA have important limitations as an analytical tool, and investors should not consider them in isolation, or as a substitute for analysis of the companys results as reported under GAAP. For example, EBITDA and Adjusted EBITDA:
| do not reflect the companys cash expenditures or requirements for capital expenditures or capital commitments; |
| do not reflect changes in, or cash requirements for, the companys working capital needs; and |
| do not reflect any costs related to the current or future replacement of assets being depreciated and amortized. |
Management believes that investors understanding of the companys performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing the companys ongoing results of operations. Many investors are interested in understanding the performance of the companys business by comparing its results from ongoing operations from one period to the next and would ordinarily add back items that are not part of normal day-to-day operations of the companys business. By providing these non-GAAP financial measures, together with reconciliations, the company believes it is enhancing investors understanding of its business and its results of operations, as well as assisting investors in evaluating how well it is executing strategic initiatives.
Additionally, a form of adjusted EBITDA, defined in the companys senior secured credit facilities, 8.375% senior notes and 8.75% senior notes, is used for debt covenant compliance purposes, which has additional adjustments to Adjusted EBITDA which may decrease or increase adjusted EBITDA for purposes of these financial covenants.
The company also uses EBITDA and Adjusted EBITDA:
| as measures of operating performance to assist the company in comparing its operating performance on a consistent basis because it removes the impact of items not directly resulting from the companys core operations; |
| for planning purposes, including the preparation of the companys internal annual operating budgets and financial projections; |
| to evaluate the performance and effectiveness of the company operational strategies; and |
| to calculate incentive compensation payments for the companys key employees. |
Free Cash Flow. Free Cash Flow consists of: (a) net cash provided by (used in) operating activities; (b) plus net cash provided by (used in) investing activities and (c) less proceeds from sales of assets. Management believes that Free Cash Flow is relevant to investors as it provides a measure of the cash generated internally that is available for debt service and other value creation opportunities. However, Free Cash Flow is not a measurement of financial
performance or liquidity under GAAP and does not necessarily represent cash available for discretionary activities, as certain debt service obligations must be funded out of Free Cash Flow. In addition, the companys method of calculating Free Cash Flow may not be consistent with that of other companies.
Adjusted Pre-Tax Income (Loss) Excluding Certain Items. Adjusted Pre-Tax Income (Loss) Excluding Certain Items adjusts income before income taxes for restructuring charges, unrealized gains (losses) on change in fair value of derivative instruments, extinguishment of debt fees and gains (losses) on sale of assets. Novelis believes that Pre-Tax Income (Loss) Excluding Certain Items enhances the overall understanding of the companys current financial performance. Specifically, management believes this non-GAAP financial measure provides useful information to investors by excluding or adjusting certain items, which impact the comparability of the companys core operating results. With respect to unrealized gains (losses) on change in fair value of derivative instruments, management adjusts pre-tax income to eliminate the volatility created between periods due to changes in the fair value of derivative instruments before the derivative instruments are settled. With respect to restructuring charges, extinguishment of debt fees and gains (losses) on sale of assets, management believes these excluded items are not reflective of fixed costs that the company believes it will incur over the long term. This financial measure should be considered in addition to, and not as a substitute for or superior to, results prepared in accordance with GAAP.
Total Liquidity. Total Liquidity consists of: (a) cash and cash equivalents; (b) less overdrafts; (c) plus gross availability under the ABL facility and (d) less borrowing availability limitation under the ABL facility due to fixed charge coverage ratio. In addition to presenting available cash and cash equivalents, management believes that presenting Total Estimated Liquidity enhances investors understanding of the liquidity that is actually available to the company. This financial measure should be considered in addition to, and not as a substitute for or superior to, results prepared in accordance with GAAP.
All information in the news release and the presentation materials speak as of the date thereof, and Novelis does not assume any obligation to update said information in the future.
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. |
99.1 | Press release, dated November 9, 2011 (furnished to the Commission as a part of this Form 8-K). | |
99.2 | Presentation materials, dated November 9, 2011 (furnished to the Commission as a part of this Form 8-K). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NOVELIS INC. | ||||
Date: November 9, 2011 | By: | /s/ Leslie J. Parrette, Jr. | ||
Leslie J. Parrette, Jr. | ||||
General Counsel, Corporate Secretary and Compliance Officer |
EXHIBIT INDEX
Exhibit Number |
Description | |
99.1 | Press release, dated November 9, 2011 (furnished to the Commission as a part of this Form 8-K). | |
99.2 | Presentation materials, dated November 9, 2011 (furnished to the Commission as a part of this Form 8-K). |
Exhibit 99.1
News Release
For Immediate Release
Novelis Reports Strong Second Quarter Fiscal Year 2012 Results
| Net income of $120 million, up 94% YOY |
| Strong EBITDA of $301 million, up 3% YOY |
| Free Cash Flow before CapEx of $237 million |
| Liquidity of $993 million |
| Strategic Expansion Projects on Track and on Budget |
ATLANTA, November 9, 2011 Novelis Inc., the worlds leading producer of aluminum rolled products, today reported net income attributable to its common shareholder of $120 million for the second quarter of fiscal 2012 compared to net income of $62 million for the same period in fiscal 2011. Adjusted EBITDA was the second highest quarterly EBITDA in the Companys history.
(in $M) | Q2FY12 9/30/2011 |
Q2FY11 9/30/2010 |
Variance | |||||||||
Net Income |
$ | 120 | $ | 62 | 94 | % | ||||||
Adjusted EBITDA |
$ | 301 | $ | 291 | 3 | % |
Shipments of aluminum rolled products totaled 720 kilotonnes for the second quarter of fiscal 2012, a decrease of 2 percent compared to shipments of 737 kilotonnes in the second quarter of the previous year. This slight decrease in shipments was driven by economic uncertainty in the United States and Europe and unseasonably cool and wet weather across a number of the Companys operating regions which resulted in customer destocking in the quarter.
Net sales for the second quarter of fiscal 2012 were $2.9 billion, an increase of 14 percent compared to the $2.5 billion reported in the same period a year ago, mainly the result of strong conversion premiums and higher average aluminum prices.
Adjusted EBITDA for the quarter was $301 million, representing a 3 percent increase from adjusted EBITDA of $291 million posted for the same period a year ago. These operating results were primarily due to strong conversion premiums and effective cost management.
We are particularly proud of the results we realized for the second quarter. Together with our record first quarter performance, this positions us well to achieve another record year, said Phil Martens, Novelis President and Chief Executive Officer. As a result of our premium product portfolio, which is largely comprised of recession resistant products and other products which have strong, favorable substitution trends, weve produced consistent and predictable results.
1
(in $M) |
|
Q2FY12 9/30/2011 |
|
|
Q2FY11 9/30/2010 |
| ||
Income Before Income Taxes |
$ | 123 | $ | 129 | ||||
Significant Items Affecting Comparisons: |
||||||||
Restructuring, net |
(11 | ) | (9 | ) | ||||
Unrealized gains/(losses) on derivatives |
(1 | ) | 1 | |||||
Gain/(Loss) on Sale of Assets |
(1 | ) | | |||||
Gain on Litigation |
8 | | ||||||
Adjusted Pre-tax Income |
$ | 128 | $ | 137 |
The Company reported pre-tax income of $123 million for the second quarter of fiscal 2012, a decrease when compared to the $129 million pre-tax income reported in the same period of fiscal 2011. Excluding restructuring charges, unrealized gains/losses on derivatives, loss on sale of assets and gain on litigation, adjusted pre-tax income decreased 7%. These are very strong operating results, considering shipments were down 2% year-over-year and net interest was up $36 million due to higher interest expense resulting from our debt issuance and refinancing in the third quarter of 2011, said Steve Fisher, Chief Financial Officer for Novelis.
(in $M) |
|
Q2FY12 9/30/2011 |
|
|
Q1FY12 6/30/2011 |
| ||
Cash and cash equivalents |
$ | 286 | $ | 307 | ||||
Overdrafts |
(8 | ) | (18 | ) | ||||
Gross availability under the ABL facility |
715 | 576 | ||||||
Total Liquidity |
$ | 993 | $ | 865 |
For the second quarter of fiscal 2012, free cash flow was $130 million, compared to free cash flow of $97 million reported in the second quarter of the previous year. Free cash flow for the quarter was particularly strong given the 123% increase in capital expenditures year-over-year, said Fisher. Going forward, we expect continued strong cash flow generation which will enable us to fund our global expansion projects.
(in $M) |
|
Q2FY12 9/30/2011 |
|
|
Q2FY11 9/30/2010 |
| ||
Free Cash Flow |
$ | 130 | $ | 97 | ||||
Capex |
107 | 48 | ||||||
Free Cash Flow before Capex |
$ | 237 | $ | 145 |
Business Outlook
For fiscal 2012, the Company expects to generate between $600-700 million of free cash flow before capital expenditures and invest approximately $550-600 million primarily in its global expansion projects.
As a result of economic uncertainty in the Eurozone, unseasonably cool weather and flooding in some of its operating regions and lower than expected growth in its electronics business, Novelis lowered its guidance to between $1.10-1.15 billion in adjusted EBITDA for fiscal year 2012. We are still planning on a record fiscal 2012 despite several factors outside of our control impacting our results. This is a real testament to the structural changes weve made in the business over the last few years that have made us a stronger, more nimble company, said Mr. Martens.
2
Quarterly Report on Form 10-Q
The results described in this press release have been reported in detail on the Companys Form 10-Q on file with the SEC, and investors are directed to that document for a complete explanation of the Companys financial position and results through September 30, 2011. The Novelis Form 10-Q and other SEC filings are available for review on the Companys website at www.novelis.com.
Second Quarter Fiscal 2012 Earnings Conference Call
Novelis will discuss its second quarter fiscal 2012 results via a live webcast and conference call for investors at 9:00 a.m. ET on Wednesday, November 9, 2011. Participants may access the webcast at https://cc.callinfo.com/r/15q2p7ar9ygsn. To join by telephone, dial toll-free in North America at 800 736 4610, India toll-free at 0008001007108 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 aluminum can recycling. The Company operates in 11 countries, has nearly 11,000 employees and reported revenue of $10.6 billion in fiscal year 2011. 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 Asias 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, please visit www.novelis.com.
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 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. Examples of such statements in this news release include our plans to increase production capacity, our growth plans, our expectations with respect to the flat rolled products market and our view of 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
3
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 and our ability to purchase 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; the impact of timing differences between the pricing periods for the purchase and sale of aluminum; our ability to increase production capacity 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 March 31, 2011 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, are specifically incorporated by reference into this news release.
Media Contact: Charles Belbin +1 404 760 4120 charles.belbin@novelis.com |
Investor Contact: Isabel Janci +1 404 760 4164 isabel.janci@novelis.com |
4
Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In millions)
Three Months Ended September 30, |
Six Months Ended September 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net sales |
$ | 2,880 | $ | 2,524 | $ | 5,993 | $ | 5,057 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Cost of goods sold (exclusive of depreciation and amortization) |
2,549 | 2,188 | 5,257 | 4,396 | ||||||||||||
Selling, general and administrative expenses |
91 | 97 | 186 | 178 | ||||||||||||
Depreciation and amortization |
81 | 104 | 170 | 207 | ||||||||||||
Research and development expenses |
12 | 9 | 24 | 18 | ||||||||||||
Interest expense and amortization of debt issuance costs |
77 | 40 | 154 | 79 | ||||||||||||
Interest income |
(4 | ) | (3 | ) | (8 | ) | (6 | ) | ||||||||
Restructuring charges, net |
11 | 9 | 30 | 15 | ||||||||||||
Equity in net loss of non-consolidated affiliates |
3 | 3 | 5 | 6 | ||||||||||||
Other (income) expense, net |
(63 | ) | (52 | ) | (84 | ) | (39 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
2,757 | 2,395 | 5,734 | 4,854 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
123 | 129 | 259 | 203 | ||||||||||||
Income tax (benefit) provision |
(7 | ) | 56 | 52 | 71 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
130 | 73 | 207 | 132 | ||||||||||||
Net income attributable to noncontrolling interests |
10 | 11 | 25 | 20 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income attributable to our common shareholder |
$ | 120 | $ | 62 | $ | 182 | $ | 112 | ||||||||
|
|
|
|
|
|
|
|
5
Novelis Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(In millions, except number of shares)
September 30, 2011 |
March 31, 2011 |
|||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 286 | $ | 311 | ||||
Accounts receivable, net |
||||||||
third parties (net of allowances of $6 and $7 as of September 30, 2011 and March 31, 2011, respectively) |
1,415 | 1,480 | ||||||
related parties |
36 | 28 | ||||||
Inventories, net |
1,258 | 1,338 | ||||||
Prepaid expenses and other current assets |
73 | 50 | ||||||
Fair value of derivative instruments |
175 | 165 | ||||||
Deferred income tax assets |
9 | 39 | ||||||
|
|
|
|
|||||
Total current assets |
3,252 | 3,411 | ||||||
Property, plant and equipment, net |
2,528 | 2,543 | ||||||
Goodwill |
611 | 611 | ||||||
Intangible assets, net |
671 | 707 | ||||||
Investment in and advances to nonconsolidated affiliates |
704 | 743 | ||||||
Fair value of derivative instruments, net of current portion |
7 | 17 | ||||||
Deferred income tax assets |
52 | 52 | ||||||
Other longterm assets |
||||||||
third parties |
165 | 193 | ||||||
related parties |
17 | 19 | ||||||
|
|
|
|
|||||
Total assets |
$ | 8,007 | $ | 8,296 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities |
||||||||
Current portion of longterm debt |
$ | 20 | $ | 21 | ||||
Shortterm borrowings |
63 | 17 | ||||||
Accounts payable |
||||||||
third parties |
1,111 | 1,378 | ||||||
related parties |
45 | 50 | ||||||
Fair value of derivative instruments |
168 | 82 | ||||||
Accrued expenses and other current liabilities |
503 | 568 | ||||||
Deferred income tax liabilities |
42 | 43 | ||||||
|
|
|
|
|||||
Total current liabilities |
1,952 | 2,159 | ||||||
Longterm debt, net of current portion |
4,063 | 4,065 | ||||||
Deferred income tax liabilities |
472 | 552 | ||||||
Accrued postretirement benefits |
519 | 526 | ||||||
Other longterm liabilities |
339 | 359 | ||||||
|
|
|
|
|||||
Total liabilities |
7,345 | 7,661 | ||||||
|
|
|
|
|||||
Commitments and contingencies |
||||||||
Shareholders equity |
||||||||
Common stock, no par value; unlimited number of shares authorized; 1,000 shares issued and outstanding as of September 30, 2011 and March 31, 2011 |
| | ||||||
Additional paidin capital |
1,830 | 1,830 | ||||||
Accumulated deficit |
(1,260 | ) | (1,442 | ) | ||||
Accumulated other comprehensive (loss) income |
(109 | ) | 57 | |||||
|
|
|
|
|||||
Total equity of our common shareholder |
461 | 445 | ||||||
Noncontrolling interests |
201 | 190 | ||||||
|
|
|
|
|||||
Total equity |
662 | 635 | ||||||
|
|
|
|
|||||
Total liabilities and equity |
$ | 8,007 | $ | 8,296 | ||||
|
|
|
|
6
Novelis Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In millions)
Six Months Ended September 30, |
||||||||
2011 | 2010 | |||||||
OPERATING ACTIVITIES |
||||||||
Net income |
$ | 207 | $ | 132 | ||||
Adjustments to determine net cash provided by operating activities: |
||||||||
Depreciation and amortization |
170 | 207 | ||||||
Gain on unrealized derivatives and other realized derivatives in investing activities, net |
(106 | ) | (28 | ) | ||||
Deferred income taxes |
32 | 18 | ||||||
Writeoff and amortization of fair value adjustments, net |
13 | 8 | ||||||
Equity in net loss of nonconsolidated affiliates |
5 | 6 | ||||||
(Gain) loss on foreign exchange remeasurement of debt |
(1 | ) | 1 | |||||
(Gain) loss on sale of assets |
2 | (13 | ) | |||||
Other, net |
20 | 5 | ||||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
40 | (91 | ) | |||||
Inventories |
45 | (84 | ) | |||||
Accounts payable |
(261 | ) | (45 | ) | ||||
Other current assets |
(11 | ) | (4 | ) | ||||
Other current liabilities |
(90 | ) | 16 | |||||
Other noncurrent assets |
18 | (8 | ) | |||||
Other noncurrent liabilities |
(27 | ) | 4 | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
56 | 124 | ||||||
|
|
|
|
|||||
INVESTING ACTIVITIES |
||||||||
Capital expenditures |
(174 | ) | (71 | ) | ||||
Proceeds from sales of assets |
1 | 18 | ||||||
Proceeds from investment in and advances to nonconsolidated affiliates, net |
1 | | ||||||
(Outflow) proceeds from related party loans receivable, net |
(4 | ) | 11 | |||||
Proceeds from settlement of other undesignated derivative instruments, net |
57 | 67 | ||||||
|
|
|
|
|||||
Net cash (used in) provided by investing activities |
(119 | ) | 25 | |||||
|
|
|
|
|||||
FINANCING ACTIVITIES |
||||||||
Proceeds from issuance of debt |
6 | | ||||||
Principal payments |
(11 | ) | (8 | ) | ||||
Shortterm borrowings (payments), net |
48 | (50 | ) | |||||
Dividends, noncontrolling interest |
(1 | ) | (18 | ) | ||||
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
42 | (76 | ) | |||||
|
|
|
|
|||||
Net (decrease) increase in cash and cash equivalents |
(21 | ) | 73 | |||||
Effect of exchange rate changes on cash balances held in foreign currencies |
(4 | ) | 2 | |||||
Cash and cash equivalents beginning of period |
311 | 437 | ||||||
|
|
|
|
|||||
Cash and cash equivalents end of period |
$ | 286 | $ | 512 | ||||
|
|
|
|
7
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, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net income (loss) attributable to our common shareholder |
$ | 120 | $ | 62 | 182 | 112 | ||||||||||
Noncontrolling interests |
(10 | ) | (11 | ) | (25 | ) | (20 | ) | ||||||||
Income tax provision |
7 | (56 | ) | (52 | ) | (71 | ) | |||||||||
Interest, net |
(73 | ) | (37 | ) | (146 | ) | (73 | ) | ||||||||
Depreciation and amortization |
(81 | ) | (104 | ) | (170 | ) | (207 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
EBITDA |
277 | 270 | 575 | 483 | ||||||||||||
Unrealized gain (loss) on derivatives |
(1 | ) | 1 | 25 | (46 | ) | ||||||||||
Realized gain on derivative instruments not included in segment income |
| | 2 | | ||||||||||||
Proportional consolidation |
(12 | ) | (12 | ) | (25 | ) | (22 | ) | ||||||||
Restructuring charges, net |
(11 | ) | (9 | ) | (30 | ) | (15 | ) | ||||||||
Gain (loss) on sale of assets |
(1 | ) | | (2 | ) | 13 | ||||||||||
Other income, net |
1 | (1 | ) | (2 | ) | (1 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 301 | $ | 291 | $ | 607 | $ | 554 | ||||||||
|
|
|
|
|
|
|
|
The following table shows the Free cash flow for the six months ended September 30, 2011 and 2010, the change between periods, as well as the ending balances of cash and cash equivalents (in millions).
Six Months
Ended September 30, |
||||||||||||
2011 | 2010 | Change | ||||||||||
Net cash provided by operating activities |
$ | 56 | $ | 124 | $ | (68 | ) | |||||
Net cash provided by (used in) investing activities |
(119 | ) | 25 | (144 | ) | |||||||
Less: Proceeds from sales of assets |
(1 | ) | (18 | ) | 17 | |||||||
|
|
|
|
|
|
|||||||
Free cash flow |
$ | (64 | ) | $ | 131 | $ | (195 | ) | ||||
|
|
|
|
|
|
|||||||
Ending cash and cash equivalents |
$ | 286 | $ | 512 | $ | (226 | ) | |||||
|
|
|
|
|
|
8
Novelis Second Quarter 2012
Earnings Conference Call
Philip Martens
President and Chief Executive Officer
Steve Fisher
Senior Vice President and Chief Financial Officer
Brighter Ideas with Aluminum
November 9, 2011
Exhibit 99.2 |
2
Safe Harbor Statement
Forward-Looking Statements
Statements made in this presentation 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 presentation are our
stated view regarding our ability to generate free cash flow this fiscal year, our target Adjusted
EBITDA for fiscal 2012 our projections for aluminum demand, our projected liquidity levels,
expected cost savings from plant closures and anticipated increases to our production capacity from our
debottlenecking initiatives. 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, 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 March 31, 2011 and our Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2011 are specifically incorporated by reference into this
presentation.
Non-GAAP Financial Measures
This presentation contains 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. We have included reconciliations of
each of these measures to the most directly comparable GAAP measure. In addition, a more
detailed description of these non-GAAP financial measures used in this presentation,
together with a discussion of the usefulness and purpose of such measures, is included as Exhibit 99.2 to our
Current Report on Form 8-K furnished to the SEC with our earnings press release. |
DETAILED FINANCIAL PERFORMANCE
NOVELIS STRATEGY
QUESTIONS AND ANSWERS
FINANCIAL HIGHLIGHTS & OUTLOOK
3
Agenda |
4
4 |
5
(Q2FY12 vs. Q2FY11)
Continued Strong Performance
Shipments Down 2% to 720 Kilotonnes
Net Sales Up 14% to $2.9 Billion
Strong Adjusted EBITDA Up 3% to $301 Million
Free Cash Flow Before CapEx of $237 Million
Liquidity of $993 Million
Net Income of $120 Million
Second Quarter Financial Highlights |
6
FY12 Targets
Adjusted EBITDA $1.10 -
$1.15B
Free Cash Flow before CapEx of
$600 -
$700M
CapEx of $550 -
$600M Primarily
for Strategic Investments
On Track to
Achieve
Record FY12
Results |
7
Strong & Predictable Results
Competitive Advantages in this Market
Recession Resistant
Growth in Emerging Markets
Increasing Substitution
Low Exposure to True Commodity Type Product
and |
8 |
9
Shipments & Sales
Shipments by Region
Total Company
Sales (Billions)
Shipments (Kt)
Solid Global Demand
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
Shipments
Sales
Q2FY12
Q2FY11
2.5
2.9
200
350
500
650
800
Q2FY11
Q2FY12
0
50
100
150
200
250
300
South
America
Asia
Europe
North
America
(2%)
0%
(4%)
(3%) |
10
Adjusted EBITDA/Shipments
Adjusted Pre-Tax Income*
EBITDA, Shipments and Pre-Tax Income
Strong EBITDA
Up 3% on Shipment Decrease of 2%
EBITDA
&
Pre-Tax
Income
(Millions)
Shipments
(Kt)
Shipments
Adjusted EBITDA
* Adjusted Pre-Tax Income excludes restructuring charges,
unrealized gains/losses on derivatives, gain/loss on sale of assets, gain on litigation.
$0
$40
$80
$120
$160
Q2FY11
Q2FY12
$200
$225
$250
$275
$300
$325
$350
Q2FY11
Q2FY12
291
301
137
128
0
150
300
450
600
750
900 |
11
(Millions)
Adjusted EBITDA Trend
Driving Consistent & Predictable Results |
12
Less Controllable
Business Variables
Adjusted EBITDA
Q2FY11 vs. Q2FY12 (Millions) |
13
(Millions)
Free Cash Flow Before CapEx
Expect to Generate ~$600-700 Million for FY12 |
(Millions)
Capital Expenditures
Focused on Strategic Investments
CapEx Plan:
CapEx plan
Back-end Weighted
Strategic
Investments of
~$410-$460M
Maintenance
Investments of
~$140M
FY11
FY12
~550-600
$0
$100
$200
$300
$400
$500
$600
$700
234
107
48
67
23
Q1
Q2
FY
14 |
15 |
16
Source: Novelis Estimates and March 2011 CRU
Long-Term Global Trends in Aluminum Demand
Electronics & High-End
Specialties
Beverage Can
Automotive
~25%
~25%
~6%
~6%
~4-5%
~4-5%
Strong Long-Term Outlook
Long-term
(CY11-16)
16 |
17
Committed to Capitalizing on Strong Market Growth and
Solidifying Market Leadership Through Expansion
Novelis Long-Term Strategy
Long-Term Strategic Investments
Long-Term Strategic Investments
Brazil Mill Expansion
Asia Mill Expansion
North America Mill Expansion
17 |
18
Brazil
Mill
Expansion
Status
Update
Expansion Project
Additional
Capacity
Product
Segment
Annual Beverage
Can Growth of
7% for S.A. over
the next 5 years
~$300M
Halfway
Through
Expansion
On Track & On
Budget
On Track
for
Incremental
Capacity of
~220kt by
End of CY
2012
Investment &
Status |
19
Brazil Mill Expansion
Cold Mill 3 Foundation
Pre-assembling
Cold Mill stands
Line-D Casting Center
Foundation
19 |
20
Brazil
Additional Investment
New Recycling Line
Adds Recycling
Capacity of
~190 kts of UBC
and scrap, brings
total recycling
capacity to
~390 kts
~$30M
Late
CY2013
Additional Capacity
Investment
& Status
Benefits
Drives Towards 80%
Recycled Content
Goal
Ensures Metal
Supply
Reduces Costs
20 |
21
Korea
Mill
Expansion
Status
Update
Expansion Project
Investment
& Status
Additional
Capacity
Product
Segment
Annual FRP
Growth of 8% for
Asia over the next
5 years
~$400M
Broke Ground
in Q2
On Track
for
Incremental
Capacity of
~350kt by
End of
CY 2013
21 |
22
North
America
Mill
Expansion
Status
Update
22
Expansion Project
Investment &
Status
Additional
Capacity
Product
Segment
Strong Double
Digit Annual Auto
Sheet Growth in
N.A. over the next
5 years
On Track for
Incremental
Capacity of
~200kt by
Mid CY 2013
~$200M
Broke Ground
in Q2 |
23
Source: Ducker Worldwide and The Aluminum Association, Oct. 2011
Government Regulation Driving Aluminum Demand
0
100
200
300
400
500
600
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
Driven by Castings
23
Driven by Sheet
Aluminum Content in Pounds per Light Vehicle -
History and Forecast -
Aluminum Content Growth to be Driven by Sheet Starting 2015
|
24
Summary
Performance Remains Solid Across Four Operating
Regions
Planning to Achieve Record FY12 Adjusted EBITDA of
$1.10 -
$1.15B
Making Headway on Global Investments:
Three Large Mill Expansions on Track & Budget
Global Recycling Initiatives on Track & Budget
24 |
25 |
26 |
27
Income Statement Reconciliation to Adjusted EBITDA
(in $ m)
Q1
FY10
Q2
FY10
Q3
FY10
Q4
FY10
FY 10
Q1
FY11
Q2
FY11
Q3
FY11
Q4
FY11
FY11
Q1
FY12
Q2
FY12
Net Income (loss) Attributable to Our Common
Shareholder
143
195
68
(1)
405
50
62
(46)
50
116
62
120
-
Interest, net
(40)
(41)
(42)
(41)
(164)
(36)
(37)
(42)
(79)
(194)
(73)
(73)
-
Income tax (provision) benefit
(112)
(87)
(48)
(15)
(262)
(15)
(56)
(33)
21
(83)
(59)
7
-
Depreciation and amortization
(100)
(92)
(93)
(99)
(384)
(103)
(104)
(100)
(97)
(404)
(89)
(81)
-
Noncontrolling interests
(18)
(19)
(13)
(10)
(60)
(9)
(11)
(11)
(13)
(44)
(15)
(10)
EBITDA
413
434
264
164
1,275
213
270
140
218
841
298
277
-
Unrealized gain (loss) on derivatives
299
254
62
(37)
578
(47)
1
9
(27)
(64)
26
(1)
-
Realized gain on derivative
instruments not included in
segment income
-
-
-
-
-
-
-
4
1
5
2
-
-
Loss on early extinguishment of debt
-
-
-
-
-
-
-
(74)
(10)
(84)
-
-
-
Proportional consolidation
(16)
(17)
2
(21)
(52)
(10)
(11)
(10)
(14)
(45)
(13)
(12)
-
Restructuring charges, net
(3)
(3)
(1)
(7)
(14)
(6)
(9)
(20)
1
(34)
(19)
(11)
-
Others costs, net
9
1
1
(3)
8
13
(2)
(7)
(13)
(9)
(4)
-
Adjusted EBITDA
124
199
200
232
755
263
291
238
280
1,072
306
301
Other Income (expense) Included in Adjusted
EBITDA
-
Metal price lag
(30)
(10)
3
2
(35)
9
19
-
(3)
25
5
15
-
Foreign currency remeasurement
5
13
(6)
4
16
(22)
20
1
9
8
(8)
-
-
Purchase accounting
52
49
42
(2)
141
(3)
(4)
(3)
(3)
(13)
(3)
(3)
-
Can price ceiling, net
(54)
(54)
(20)
-
(128)
-
-
-
-
-
-
- |
28
Free Cash Flow
(in $m)
FY10
FY11
FY12
Q1
Q2
Q3
Q4
Full
Year
Q1
Q2
Q3
Q4
Full
Year
Q1
Q2
Cash Provided by (used
in) Operating Activities
256
195
179
214
844
22
102
94
236
454
(115)
171
Cash Provided by (used
in) Investing Activities)
(233)
(196)
(55)
0
(484)
27
(2)
(39)
(99)
(113)
(79)
(40)
Less: Proceeds from
Sales of Fixed Assets
(3)
(1)
0
(1)
(5)
(15)
(3)
(10)
(3)
(31)
0
1
Free Cash Flow
20
(2)
124
213
355
34
97
45
134
310
(194)
130 |
29
Explanation of Other Income (Expenses)
Included in our Adjusted EBITDA
1) Metal Price Lag Net of Related Hedges:
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. We have a risk management program in place to minimize impact of
this lag. 2) Foreign Currency Remeasurement Net of Related
Hedges: All non-functional currency denominated Working Capital and Debt
gets remeasured every period by the period end exchange
rates.
This
impacts
our
profitability.
Like
Metal
Price
Lag,
we
have
a
risk
management
program
in
place
to
minimize impact of such Remeasurement.
3) Purchase Accounting:
Following our acquisition, the consideration and transaction costs paid by Hindalco
in connection with the transaction were pushed down
to us and were allocated to the assets acquired and the liabilities assumed. These
allocations are amortized over
periods,
impacting
our
profitability.
A
significant
portion
of
such
amortizations
pertain
to
ceiling
contracts.
4) Can Price Ceilings:
Some sales contracts contained a ceiling over which metal prices could not be
contractually passed through to certain customers. This negatively impacted
our margins and cash flows when the price we paid for metal was above the ceiling
price contained in these contracts. These contracts expired December 31,
2009. |
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