Novelis reports fourth quarter and full fiscal year 2018 results

Fourth Quarter Fiscal Year 2018 Highlights

• Net income attributable to common shareholder of $106 million; net income excluding special items increased 38% YoY
• Adjusted EBITDA up 9% to $319 million
• Net Sales increased 17% to $3.1 billion
• Reduced net debt leverage ratio to 3.0x

Fiscal Year 2018 Highlights

• Net income attributable to common shareholder of $635 million; net income excluding special items increased 80% YoY
• Adjusted EBITDA up 12% to $1.2 billion
• Net Sales increased 20% to $11.5 billion
• Automotive shipments increased 11% YoY; represent 20% of total FRP shipments
• Free cash flow $406 million, up 12% YoY

Novelis Inc., the world leader in aluminum rolling and recycling, today reported record results for the fourth quarter and fiscal year 2018 with significant year-over-year increases in Adjusted EBITDA, net sales, net income, free cash flow and shipments.  This performance was driven by Novelis’ focused strategy to improve operational efficiencies, increase shipments of premium products, and make key investments to grow automotive capacity.  Fiscal 2018 net income attributable to its common shareholder was $106 million for the fourth quarter and $635 million for the full year.

Excluding tax-effected special items in both years, Novelis grew its fourth quarter fiscal 2018 net income 38 percent to $101 million, and increased full year net income by 80 percent to $420 million. This increase reflects a significant improvement in adjusted EBITDA, as well as lower interest expense, a result of the company’s long-term debt refinancing actions during fiscal 2017.

“Our strategy to focus on safety, customer service and operational excellence has delivered a record-setting year for Novelis both in our financial performance and overall execution,” said Steve Fisher, President and CEO, Novelis, Inc. “We’ve increased our leadership position in the key growth category of automotive aluminum sheet by making the right strategic investments in capacity globally to be the clear partner-of-choice for innovative solutions.  In addition, we will continue to evaluate opportunities in the market that further maximize our capabilities that deliver value to our customers and stakeholders.”

Key achievements in fiscal 2018 include:

• completed a joint venture to establish Ulsan Aluminum by selling approximately 50 percent of its ownership of the Ulsan, South Korea plant, to Kobe Steel for $314 million;
• announced plans to expand production in the US with an automotive finishing investment in Guthrie, Kentucky, adding approximately 200 kilotonnes of nameplate capacity;
• agreed to acquire operating facilities and manufacturing assets in Sierre, Switzerland, that have historically been leased;
• achieved record automotive sheet shipment levels to support new product launches including the Land Rover Velar, Jaguar I-PACE, Ford Expedition, Lincoln Navigator and Jeep Wrangler;
• continued electric vehicle platform collaboration with NIO and London Electric Vehicle Company to launch the new NIO ES8 and London Electric Taxi;
• launched Novelis Advanz™ 6HF -e/s200 alloy in North America, a heat-treatable alloy that provides automakers greater design flexibility due to its superior formability, strength performance and weight savings;
• increased recycled content from 55 percent to 57 percent for the full year.

By strengthening its automotive portfolio and making strategic investments to increase capacity, Novelis broadened its leadership position within the industry and is committed to developing next-generation high-strength, highly-formable 6xxx and 7xxx series alloys for future vehicle design.  As projections for aluminum adoption increase, Novelis will continue to partner with OEMs to develop more aluminum based vehicle architecture from hang-on parts to complete structural aluminum-intensive bodies.  As a result, the company will pursue significant growth opportunities from incremental aluminum adoption in niche premium cars as well as higher mass production mix-material vehicles.

Fourth Quarter Fiscal 2018 Results

Net sales increased 17 percent over the prior year to $3.1 billion for the fourth quarter of fiscal 2018, driven by higher average aluminum prices, higher total shipments, and a favorable impact from record automotive shipments.  Shipments of flat rolled products increased two percent to a record 805 kilotonnes.

Adjusted EBITDA for the fourth quarter of fiscal 2018 increased nine percent to $319 million as compared to $292 million in the prior year.  This increase reflects higher shipments as well as the company’s strategy to deliver a more profitable product mix with higher automotive shipments, and increased operational efficiencies including a more favorable metal input mix.

Full Year Fiscal 2018 Results

Net sales grew 20 percent to $11.5 billion in fiscal 2018.  The increase was driven by higher average aluminum prices, record shipments and increased shipments of higher conversion premium products.  Total shipments of flat rolled products grew four percent to 3,188 kilotonnes.  For fiscal 2018, the percentage of the company’s shipment portfolio stemming from automotive sheet grew to 20 percent, up from 18 percent in the prior year.

Adjusted EBITDA grew 12 percent to $1,215 million in fiscal 2018 compared to $1,085 million in fiscal 2017.  The increase was driven by higher shipments and strong operational efficiencies, as well as favorable product mix, metal costs and currency impacts, partially offset by lower can prices.

Full year free cash flow increased 12 percent to $406 million in fiscal 2018 driven by stronger adjusted EBITDA and lower interest, despite significant working capital pressure from higher aluminum prices. Capital expenditures increased slightly to $226 million as compared to $224 million in the prior year.

“With robust free cash flow generation and a significant improvement in net debt leverage to 3.0x, we are excited to begin a bold yet balanced growth phase for Novelis,” said Devinder Ahuja, Senior Vice President and Chief Financial Officer.  “Strong operating cash flow will be utilized to fund a disciplined increase in strategic investments in fiscal 2019, particularly in our automotive business to meet growing customer demand.”

As of March 31, 2018, the company reported a strong liquidity position of $1.9 billion.

Fourth Quarter of Fiscal Year 2018 Earnings Conference Call

Novelis will discuss its fourth quarter of fiscal year 2018 results via a live webcast and conference call for investors at 8:00 a.m. EDT on Tuesday, May 8, 2018.  To view slides and listen only, visit the web at https://cc.callinfo.com/r/1reus8g1xoeb3&eom. To join by telephone, dial toll-free in North America at 800 908 1236, India toll-free at 18002660839 or the international toll line at +1 212 231 2909. 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 10 countries, has approximately 11,000 employees and reported $11.5 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 the company’s ability to generate strong operating cash flow. 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; 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 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 are included under the caption “Risk Factors” in our upcoming Annual Report on Form 10-K for the fiscal year ended March 31, 2018.

SOURCE Novelis Inc.