Novelis Reports Record Financial Results for the First Quarter of Fiscal 2011


    


    ATLANTA, Aug. 10 /CNW/ --

    --  Net Income of $50 million
    --  Record Adjusted EBITDA of $263 million, up 112%
    --  Record Liquidity of over $1 billion, up 136%
    --  Three-notch rating upgrade from Moody's

    
</pre>
<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">$50 million</span> for the first quarter of fiscal year 2011.  Adjusted EBITDA and Liquidity reached record levels in the quarter.</p>
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<pre>
    
    (in $M)                                Quarter-Ended
                                 6/30/2010   6/30/2009       3/31/2010
    Net Income (loss)                  $50        $143             ($1)
    Adjusted EBITDA                   $263        $124            $231
    ---------------                   ----        ----            ----


    
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<p>"This was a great quarter for the company for a number of reasons.  In addition to record results, we received a three-notch rating upgrade on our senior unsecured bonds to B1 from Moody's," said <span class="xn-person">Phil Martens</span>, Novelis President and COO. "Over the last year, we have built a solid foundation and become a stronger, leaner and more nimble company."</p>
<p/>
<p>Shipments of aluminum rolled products totaled 746 kilotonnes for the first quarter of fiscal 2011, an increase of 15 percent compared to shipments of 650 kilotonnes in the first quarter of the previous year, driven by stronger end-market conditions across all four regions.  This represents the second consecutive quarter since the economic downturn that shipments grew in all regions year-over-year.</p>
<p/>
<p>Net sales for the first quarter of fiscal 2011 were <span class="xn-money">$2.5 billion</span>, an increase of 29 percent compared to the <span class="xn-money">$2.0 billion</span> reported in the same period a year ago, a result of higher aluminum prices, conversion premiums and strength in the Company's end-markets.</p>
<p/>
<p>Adjusted EBITDA for the quarter was a record <span class="xn-money">$263 million</span>, representing a 112 percent increase from adjusted EBITDA of <span class="xn-money">$124 million</span> posted for the same period a year ago.  This represents the highest quarterly adjusted EBITDA in the Company's history.  These record operating results were primarily due to strong global market demand as well as effective cost management and efficiency gains.</p>
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<pre>
    
    (in $M)
                                       6/30/2010   6/30/2009    3/31/2010
      Cash and cash equivalents               $419        $237         $437
      Overdrafts                               (17)        (10)         (14)
      Gross availability under the ABL
       facility                                649         299          603
      Borrowing availability
       limitation due to
           fixed charge coverage ratio           -         (80)           -
    Total Liquidity                         $1,051        $446       $1,026
    ---------------                       ------        ----       ------


    
</pre>
<p>Liquidity improved to approximately <span class="xn-money">$1.1 billion</span> at the end of the first quarter of 2011, an increase of 136 percent from <span class="xn-money">$446 million</span> in liquidity reported for the same period in the previous year and a slight increase compared to the fourth quarter of fiscal 2010.</p>
<p/>
<p>"As of <span class="xn-chron">June 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 shift our focus to making more strategic decisions about capital allocation."</p>
<p/>
<p>For the first quarter of fiscal 2011, free cash flow was <span class="xn-money">$34 million</span>, representing an increase from the <span class="xn-money">$20 million</span> reported in the first quarter of the previous year and a decrease compared to the <span class="xn-money">$213 million</span> reported in the fourth quarter of fiscal 2010.  "The primary drivers of the sequential decrease were an increase in working capital due to higher aluminum prices and volume and a deliberate decision to change how we finance working capital in Asia and <span class="xn-location">South America</span>, which we determined to be the best use of cash during the quarter.  Excluding the change in how we financed working capital in Asia and <span class="xn-location">South America</span>, free cash flow would have been approximately <span class="xn-money">$110 million</span> for the first quarter of fiscal 2011," added Fisher.</p>
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    Business Outlook
    
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<p>Going forward, the Company expects continued strength across all of its regions. "The results in the first quarter reflect a rapid increase in demand throughout the quarter.  As a result, we are running at capacity in all of our regions," said Martens.  "In addition to our strategic initiatives and expansion plans in <span class="xn-location">South America</span>, we will focus on debottlenecking our facilities globally."</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">June 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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    First Quarter Fiscal 2011 Earnings Conference Call
    
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<p>Novelis will discuss its first quarter fiscal 2011 results via a live webcast and conference call for investors at <span class="xn-chron">9:00 a.m. EDT</span> on <span class="xn-chron">Tuesday, August 10, 2010</span>.  Participants may access the webcast at <a href="https://cc.callinfo.com/r/1i0i6at9o5wl3">https://cc.callinfo.com/r/1i0i6at9o5wl3</a>.  To join by telephone, dial toll-free in <span class="xn-location">North America</span> at 800 772 0358, <span class="xn-location">India</span> toll-free at 0008001007106 or the international toll line at +1 212 231 2904.  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>
<p/>
<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.  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> </p>
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                            Novelis Inc.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
                           (in millions)
    
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<p> </p>
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                                         Quarter
                                          Ended
                                         June 30,
                                         --------
                                        2010     2009
                                        ----     ----
    
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<p> </p>
<pre>
    
    Net sales                         $2,533   $1,960
                                      ------   ------
    Cost of goods sold (exclusive
     of depreciation and
     amortization shown below)         2,208    1,533
    Selling, general and
     administrative expenses              81       78
    Depreciation and amortization        103      100
    Research and development
     expenses                              9        8
    Interest expense and
     amortization of debt issuance
     costs                                39       43
    Interest income                       (3)      (3)
    (Gain) loss on change in fair
     value of derivative
     instruments, net                      6      (72)
    Restructuring charges, net             6        3
    Equity in net loss of non-
     consolidated affiliates               3       10
    Other (income) expense, net            7      (13)
                                         ---      ---
                                       2,459    1,687
                                       -----    -----
    Income before income taxes            74      273
    Income tax provision                  15      112
                                         ---      ---
    Net income                            59      161
    Net income attributable to
     noncontrolling interests              9       18
                                         ---      ---
    Net income attributable to our
     common shareholder                  $50     $143
                                         ===     ====



    
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<p> </p>
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                             Novelis Inc.
          CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
                (in millions, except number of shares)
    
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<p> </p>
<pre>
    
                                                     June     March
                                                      30,      31,
                                                      2010      2010
                                                      ----      ----
                                  ASSETS
    Current assets
     Cash and cash equivalents                        $419      $437
     Accounts receivable (net of allowances of $4 as of
      June 30, 2010 and
    March 31, 2010)
      - third parties                                1,242     1,143
      - related parties                                 18        24
     Inventories                                     1,075     1,083
     Prepaid expenses and other current assets          45        39
     Fair value of derivative instruments              158       197
     Deferred income tax assets                         28        12
                                                       ---       ---
    Total current assets                             2,985     2,935
     Property, plant and equipment, net              2,499     2,632
     Goodwill                                          611       611
     Intangible assets, net                            718       749
     Investment in and advances to non-
      consolidated affiliates                          650       709
     Fair value of derivative instruments, net of
      current portion                                    5         7
     Long-term deferred income tax assets                6         5
     Other long-term assets
      - third parties                                   93        93
      - related parties                                 18        21
                                                       ---       ---
    Total assets                                    $7,585    $7,762
                                                    ======    ======
    
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<p> </p>
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            LIABILITIES AND SHAREHOLDER'S EQUITY
    Current liabilities
     Current portion of long-term debt                $107      $106
     Short-term borrowings                              29        75
     Accounts payable
      - third parties                                1,084     1,076
      - related parties                                 44        53
     Fair value of derivative instruments              107       110
     Accrued expenses and other current
      liabilities                                      422       436
     Deferred income tax liabilities                    32        34
                                                       ---       ---
    Total current liabilities                        1,825     1,890
    
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<p> </p>
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     Long-term debt, net of current portion          2,485     2,490
     Long-term deferred income tax liabilities         495       497
     Accrued postretirement benefits                   486       499
     Other long-term liabilities                       343       376
                                                       ---       ---
    Total liabilities                                5,634     5,752
                                                     -----     -----
    
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<p> </p>
<p>Commitments and contingencies</p>
<p> </p>
<pre>
    
    Shareholder's equity
     Common stock, no par value; unlimited number
      of shares authorized;                              -         -
    77,459,658 shares issued and outstanding as of June
     30, 2010 and
    March 31, 2010
     Additional paid-in capital                      3,497     3,497
     Accumulated deficit                           (1,475)    (1,525)
     Accumulated other comprehensive loss             (213)     (103)
                                                      ----      ----
    Total Novelis shareholder's equity               1,809     1,869
    Noncontrolling interests                           142       141
                                                       ---       ---
    Total equity                                     1,951     2,010
                                                     -----     -----
    Total liabilities and shareholder's equity      $7,585    $7,762
                                                    ======    ======



    
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<p> </p>
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                                Novelis Inc.
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
                               (in millions)
    
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<p> </p>
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                                                                   Quarter
                                                                    Ended
                                                                  June 30,
                                                                  --------
    
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<p> </p>
<p> </p>
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                                                               2010    2009
                                                               ----    ----
    
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<p> </p>
<pre>
    
    OPERATING ACTIVITIES
    Net income                                                  $59    $161
    Adjustments to determine net cash provided by (used in)
     operating activities:
      Depreciation and amortization                             103     100
      (Gain) loss on change in fair value of derivative
       instruments, net                                           6     (72)
      Deferred income taxes                                     (11)     98
      Write-off and amortization of fair value adjustments,
       net                                                        5     (51)
      Equity in net loss of non-consolidated affiliates           3      10
      Foreign exchange remeasurement of debt                      7      (7)
      Gain on sale of assets                                    (13)     (1)
      Other, net                                                  3       3
      Changes in assets and liabilities:
       Accounts receivable                                    (146)     (80)
       Inventories                                              (38)     11
       Accounts payable                                          51      29
       Other current assets                                      (8)      3
       Other current liabilities                                 16      29
       Other noncurrent assets                                   (3)     (9)
       Other noncurrent liabilities                             (12)     32
                                                                ---     ---
    Net cash provided by operating activities                    22     256
                                                                ---     ---
    INVESTING ACTIVITIES
    Capital expenditures                                        (23)    (24)
    Proceeds from sales of assets                                15       3
    Changes to investment in and advances to non-
     consolidated affiliates                                      -       3
    Proceeds from related party loans receivable, net             3       6
    Net proceeds (outflow) from settlement of derivative
     instruments                                                 32    (221)
                                                                ---    ----
    Net cash provided by (used in) investing activities          27    (233)
                                                                ---    ----
    FINANCING ACTIVITIES
    Proceeds from issuance of debt, related parties               -       3
    Principal payments                                           (4)    (12)
    Short-term borrowings, net                                  (41)    (33)
    Dividends, noncontrolling interest                          (17)     (1)
                                                                ---     ---
    Net cash used in financing activities                       (62)    (43)
                                                                ---     ---
    Net decrease in cash and cash equivalents                   (13)    (20)
    Effect of exchange rate changes on cash balances held in
     foreign currencies                                          (5)      9
    Cash and cash equivalents - beginning of period             437     248
                                                                ---     ---
    Cash and cash equivalents - end of period                  $419    $237
                                                               ====    ====



    
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<p>Reconciliation from Net Income (Loss) Attributable to our Common Shareholder to Adjusted EBITDA</p>
<p/>
<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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<pre>
    
    (in millions)                               Quarter Ended
                                                  June 30,
                                                  --------
                                                2010     2009
                                                 ---      ---
    Net income attributable to our
     common shareholder                          $50     $143
    Noncontrolling interests                      (9)     (18)
    Income tax provision                         (15)    (112)
    Interest, net                                (36)     (40)
    Depreciation and amortization               (103)    (100)
                                                ----     ----
    EBITDA                                       213      413
    
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<p> </p>
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     Unrealized gain (loss) on
      derivatives                                (47)     299
     Proportional consolidation                  (10)     (16)
     Restructuring charges, net                   (6)      (3)
     Gain on sale of assets                       13        1
     Other income, net                             -        8
                                                 ---      ---
    Adjusted EBITDA                             $263     $124
                                                ====     ====




    
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<p>The following table shows the Free cash flow for the quarters ended <span class="xn-chron">June 30, 2010</span> and 2009, the change between periods as well as the ending balances of cash and cash equivalents (in millions).</p>
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<p> </p>
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<p> </p>
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                                         Quarter Ended
                                         -------------
                                     June 30,   June 30,
                                          2010      2009  Change
                                          ----      ----  ------
    Net cash provided by operating
     activities                            $22      $256    $(234)
    Net cash provided by (used in)
     investing activities                   27      (233)     260
    Less: Proceeds from sales of
     assets                                (15)       (3)     (12)
                                           ---       ---      ---
    Free cash flow                         $34       $20      $14
                                           ===       ===      ===
    Ending cash and cash
     equivalents                          $419      $237     $182
                                          ====      ====     ====


    
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<p>The following table shows the Free cash flow for each of the three months ended <span class="xn-chron">June 30, 2010</span> and <span class="xn-chron">March 31, 2010</span> as well as the ending balances of cash and cash equivalents (in millions).</p>
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<p> </p>
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                                       Quarter Ended
                                       -------------
                                      June    March
                                       30,      31,
                                       2010     2010  Change
                                       ----     ----  ------
    Net cash provided by operating
     activities                         $22     $214   $(192)
    Net cash provided by (used in)
     investing activities                27        -      27
    Less: Proceeds from sales of
     assets                             (15)      (1)    (14)
                                        ---      ---     ---
    Free cash flow                      $34     $213   $(179)
                                        ===     ====   =====
    Ending cash and cash
     equivalents                       $419     $437    $(18)
                                       ====     ====    ====


    (Logo: http://photos.prnewswire.com/prnh/20100527/CL11716LOGO )
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For further information: For further information: Media, Charles Belbin, +1-404-814-4260, charles.belbin@novelis.com; Investors, Isabel Janci, +1-404-814-4730, isabel.janci@novelis.com Web Site: http://www.novelis.com

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