Novelis reports first quarter of fiscal 2019 results

First Quarter Fiscal Year 2019 Highlights

• Net income attributable to common shareholder of $137 million; excluding special items, net income increased 10% YoY
• Adjusted EBITDA increased 15% YoY to $332 million
• Net Sales increased 16% YoY to $3.1 billion
• Shipments increased 2% YoY to 797 kilotonnes
• Free cash flow improved $73 million YoY

Novelis Inc., the world leader in aluminum rolling and recycling, today reported net income attributable to its common shareholder of $137 million for the first quarter of fiscal year 2019, compared to $101 million in the first quarter of fiscal 2018. Excluding tax-affected special items, the company reported net income of $113 million in the first quarter of fiscal 2019, up from $103 million in the prior period.

The increase in net income, excluding special items, is mainly due to a 15 percent increase in Adjusted EBITDA over the prior year to $332 million in the first quarter of fiscal 2019. This increase is attributed to the continued optimization of the investments the company has made to increase global rolling, automotive finishing, and recycling capacity to drive higher shipments, strengthen its product portfolio, and manage costs. Adjusted EBITDA per ton reached $417 in the quarter, as compared to $368 in the prior year period.

Net sales increased 16 percent over the prior year to $3.1 billion for the first quarter of fiscal 2019, driven by higher average aluminum prices, higher shipments, and more favorable product mix, partially offset by lower conversion premiums on some products. Shipments of flat rolled products increased two percent to 797 kilotonnes.

“Outstanding operational performance with increased asset optimization and favorable market conditions contributed to another strong quarter,” said Steve Fisher, President and CEO of Novelis. “Our recent investment announcements in North America and Asia, along with the pending acquisition of Aleris, will diversify our product portfolio and increase our participation in high-demand, high-value markets to meet growing customer demand.”

The company reported negative $4 million of free cash flow for the first quarter of fiscal 2019, a $73 million improvement over the prior year.  This increase is primarily a result of higher Adjusted EBITDA, lower cash interest due to the timing of payments in the prior year, and favorable metal price lag. These favorable items were partially offset by higher taxes and an increase in capital expenditures to $54 million in fiscal 2019, as compared to $39 million in the prior year period.

“The progress Novelis has made to improve and transform the business is clearly reflected in our improved financial results, enabling us to make both organic and inorganic strategic growth investments,” said Devinder Ahuja, Senior Vice President and Chief Financial Officer for Novelis.

As of June 30, 2018, the company reported a strong liquidity position of $1.9 billion.

In July, Standard & Poors rating agency upgraded the Novelis Corporate Family rating from B+ to BB-, and its senior unsecured rating from B to B+.

First Quarter of Fiscal Year 2019 Earnings Conference Call
Novelis will discuss its first quarter of fiscal year 2019 results via a live webcast and conference call for investors at 8:00 a.m. ET on Tuesday, August 7, 2018. To view slides and listen only, visit the web at  https://cc.callinfo.com/r/1jxs03cgb0jla&eom. To join by telephone, dial toll-free in North America at 800 909 4147, India toll-free at 18002662124 or the international toll line at +1 212 231 2933. 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 ten countries, has approximately 11,000 employees and reported $11.4 billion in revenue for its 2018 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. Novelis is a subsidiary of Hindalco Industries Limited, an industry leader in aluminum and copper, and metals flagship company 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 news 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, Free Cash Flow, Reconciliation to Liquidity, Reconciliation to Net 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. Examples of forward looking statements in this news release are statements about our ability to make organic or inorganic strategic growth investments. 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; 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, 2018 are specifically incorporated by reference into this news release.