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Novelis Reports Fiscal Year 2014 Results

May 16, 2014

Solid Operating Performance in Q4 Ends Year on a Strong Note

ATLANTA, May 16, 2014 /PRNewswire/ — Novelis, the world leader in aluminum rolling and recycling, today reported net income attributable to its common shareholder of $54 million for the fourth quarter of fiscal year 2014. Excluding certain tax-effected items, net income was $75 million.

“Fiscal 2014 was a transitional year for Novelis and we closed it on a strong note,” said Phil Martens, President and Chief Executive Officer for Novelis. “We completed the majority of our business transformation initiatives to secure our leadership position in flat rolled products for the global automotive and beverage can markets, and enhance our unmatched, low-cost recycling capabilities worldwide. Together these actions are driving both our top and bottom lines.”

The company reported shipments of aluminum rolled products of 753 kilotonnes in the fourth quarter of fiscal 2014, up eight percent compared to the prior year. Every global operating region reported an increase in shipments year-over-year. Higher global shipments were the primary driver behind the four percent increase in adjusted EBITDA versus the prior year to $250 million in the fourth quarter of fiscal 2014.

“While 2014 provided market challenges, particularly lower can sheet pricing and volatile market premiums for primary aluminum, we have positioned the company well for the future. Auto will accelerate this year as our key supplier role to Ford’s new aluminum intensive F-150 program will demonstrate,” said Martens.

The Company noted a number of accomplishments over the past year:

    --  Generated significant cash flow to fund capital investments;
    --  Made significant progress on all strategic expansions including the ramp
        up of rolling production at Brazil and Korea mill expansions and the
        start of commercial production at US automotive finishing lines;
    --  Announced incremental investment of $205 million to further expand
        global auto finishing capacity to approximately 900 kilotonnes annually;
    --  Expanded recycling facilities and capabilities in all of its operating
        regions and increased the recycled content in its products by three
        percentage points to 46 percent for fiscal 2014, continuing toward the
        Company's goal of 80 percent recycled content in its products by 2020;
    --  Launched commercial use of evercan(TM), the world's first certified
        high-recycled content beverage can sheet;
    --  Demonstrated our leading research & technology capabilities through a
        60% year over year increase in patent applications and grants;
    --  Further optimized the Company's footprint and product portfolio,
        including the proposed sale of its household foil operations in North
        America and non-core hydroelectric power generation operations in
        Brazil.

Adjusted EBITDA for fiscal 2014 was $885 million compared to $961 million reported for the prior year. The decline was primarily due to pricing pressures experienced in the Asian and North American beverage can markets, a higher fixed cost base due to expansions ahead of revenue generation and higher incentive costs, partially offset by higher shipments and benefits from increasing recycled content.

Shipments of aluminum rolled products totaled 2,895 kilotonnes in fiscal 2014, an increase of four percent compared to 2,786 kilotonnes reported in fiscal 2013. Net sales in fiscal 2014 were $9.8 billion, which is flat compared to the prior year resulting from higher shipments partially offset by a ten percent decrease in average aluminum prices and lower conversion premiums.


    (in $M)                                 Fiscal           Fiscal
                                              2014            2013

                                          3/31/2014        3/31/2013

    Free Cash Flow                  $(16)           $(565)

    Capital Expenditures        717             775

    Free Cash Flow before CapEx     $701             $210
    ---------------------------     ----             ----

The company reported negative free cash flow of $16 million for the year. “Our excellent cash generation essentially funded the $717 million in capital investments we made last year,” said Steve Fisher, Chief Financial Officer for Novelis. “In addition, we drove liquidity levels in excess of $1 billion by fiscal year end, allowing us to return $250 million of capital to our parent company in the first quarter of fiscal 2015.”

Fourth Quarter and Fiscal Year 2014 Earnings Conference Call

Novelis will discuss its fourth quarter and fiscal year 2014 results via a live webcast and conference call for investors at 9:30 a.m. ET on Friday, May 16, 2014. To view slides and listen only, visit the web at https://cc.callinfo.com/r/1rzes6fm8phdz&eom. To join by telephone, dial toll-free in North America at 800 743 4304, India toll-free at 0008001006992 or the international toll line at +1 212 231 2902. 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 9 countries, has approximately 11,400 employees and reported revenue of approximately $10 billion for its 2014 fiscal year. Novelis supplies premium aluminum sheet and foil products to transportation, packaging, construction, industrial and consumer electronics markets throughout North America, Europe, Asia and South America. The company is part of the Aditya Birla Group, a multinational conglomerate based in Mumbai, India. For more information, visit novelis.com and follow us on Facebook at facebook.com/NovelisInc and Twitter at twitter.com/Novelis.

Non-GAAP Financial Measures

This press release and the presentation slides for the earnings call contain non-GAAP financial measures as defined by SEC rules. We 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 Consolidated Statements of Operations, Consolidated Balance Sheets, Consolidated Statements of Cash Flows, Reconciliation to Adjusted EBITDA and Free Cash Flow, Reconciliation to Liquidity and Net Income excluding Certain Items, and Segment Information.

Forward-Looking Statements

Statements made in this news release which describe Novelis’ intentions, expectations, beliefs or predictions may be forward-looking statements within the meaning of securities laws. Forward-looking statements include statements preceded by, followed by, or including the words “believes,” “expects,” “anticipates,” “plans,” “estimates,” “projects,” “forecasts,” or similar expressions. An example of forward looking statements in this new release is our expectation for acceleration in the automotive market. 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, 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; 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, 2013 (and in our upcoming Annual Report on Form 10-K for the fiscal year ended March 31, 2014) are specifically incorporated by reference into this news release.


                                                                                 Novelis Inc.
                                                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                (In millions)

                                                                                                              (unaudited)

                                                                                                                Quarter
                                                                                                                 Ended                 Year Ended

                                                                                                               March 31,               March 31,
                                                                                                               ---------               ---------

                                                                                                           2014            2013          2014          2013
                                                                                                           ----            ----          ----          ----

    Net sales                                                                                                    $2,549         $2,500         $9,767       $9,812
                                                                                                                   ----           ----           ----         ----

    Cost of goods sold (exclusive of depreciation and amortization)                                       2,203           2,162         8,468         8,477

    Selling, general and administrative expenses                                                            117              93           461           398

    Depreciation and amortization                                                                            87              74           334           292

    Research and development expenses                                                                        11              10            45            46

    Interest expense and amortization of debt issuance costs                                                 77              75           304           298

    Gain on assets held for sale                                                                              -              -            (6)           (3)

    Loss on extinguishment of debt                                                                            -               7            -             7

    Restructuring and impairment, net                                                                        29              18            75            47

    Equity in net loss of non-consolidated affiliates                                                         -               1            12            16

    Other income, net                                                                                       (14)           (13)          (41)          (52)
                                                                                                            ---             ---           ---           ---

                                                                                                          2,510           2,427         9,652         9,526
                                                                                                          -----           -----         -----         -----

    Income before income taxes                                                                               39              73           115           286

    Income tax (benefit) provision                                                                          (15)             14            11            83
                                                                                                            ---             ---           ---           ---

    Net income                                                                                               54              59           104           203

    Net income attributable to noncontrolling interests                                                       -              -            -             1
                                                                                                            ---            ---          ---           ---

    Net income attributable to our common shareholder                                                               $54            $59           $104         $202
                                                                                                                    ===            ===           ====         ====


                                                                                                       Novelis Inc.
                                                                            CONSOLIDATED BALANCE SHEETS (In millions, except number of shares)

                                                                                                                                                March          March
                                                                                                                                                 31,             31,
                                                                                                                                               ------          ------

                                                                                          ASSETS                                                  2014           2013
                                                                                                                                                  ----           ----

    Current assets

    Cash and cash equivalents                                                                                                                             $509            $301

    Accounts receivable, net

    - third parties (net of allowances of $4 and $3 as of March 31, 2014 and March 31,                                                           1,382          1,447

    2013, respectively)

    - related parties                                                                                                                               54             38

    Inventories                                                                                                                                  1,173          1,168

    Prepaid expenses and other current assets                                                                                                      101             93

    Fair value of derivative instruments                                                                                                            51            109

    Deferred income tax assets                                                                                                                     101            112

    Assets held for sale                                                                                                                           102              9
                                                                                                                                                   ---            ---

    Total current assets                                                                                                                         3,473          3,277

    Property, plant and equipment, net                                                                                                           3,513          3,104

    Goodwill                                                                                                                                       611            611

    Intangible assets, net                                                                                                                         640            649

    Investment in and advances to non-consolidated affiliates                                                                                      612            627

    Deferred income tax assets                                                                                                                      80             75

    Other long-term assets

    - third parties                                                                                                                                173            166

    - related parties                                                                                                                               12             13
                                                                                                                                                   ---            ---

    Total assets                                                                                                                                        $9,114          $8,522
                                                                                                                                                        ======          ======

                                                                           LIABILITIES AND SHAREHOLDER'S EQUITY

    Current liabilities

    Current portion of long-term debt                                                                                                                      $92             $30

    Short-term borrowings                                                                                                                          723            468

    Accounts payable

    - third parties                                                                                                                              1,418          1,207

    - related parties                                                                                                                               53             47

    Fair value of derivative instruments                                                                                                            60             74

    Accrued expenses and other current liabilities

    - third parties                                                                                                                                547            497

    - related party                                                                                                                                250             -

    Deferred income tax liabilities                                                                                                                 16             28

    Liabilities held for sale                                                                                                                       11              1
                                                                                                                                                   ---            ---

    Total current liabilities                                                                                                                    3,170          2,352

    Long-term debt, net of current portion                                                                                                       4,359          4,434

    Deferred income tax liabilities                                                                                                                425            504

    Accrued postretirement benefits                                                                                                                621            731

    Other long-term liabilities                                                                                                                    271            262
                                                                                                                                                   ---            ---

    Total liabilities                                                                                                                            8,846          8,283
                                                                                                                                                 -----          -----

    Commitments and contingencies

    Shareholder's equity

    Common stock, no par value; unlimited number of shares authorized; 1,000 shares issued                                                           -             -

    and outstanding as of March 31, 2014 and March 31, 2013

    Additional paid-in capital                                                                                                                   1,404          1,654

    Accumulated deficit                                                                                                                         (1,073)          (1,177)

    Accumulated other comprehensive loss                                                                                                           (91)         (268)
                                                                                                                                                   ---           ----

    Total equity of our common shareholder                                                                                                         240            209

    Noncontrolling interests                                                                                                                        28             30
                                                                                                                                                   ---            ---

    Total equity                                                                                                                                   268            239
                                                                                                                                                   ---            ---

    Total liabilities and equity                                                                                                                        $9,114          $8,522
                                                                                                                                                        ======          ======


                                                                                CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)

                                                                                                                                          Year
                                                                                                                                          Ended
                                                                                                                                          March
                                                                                                                                               31,
                                                                                                                                             -----

                                                                                                                                    2014           2013
                                                                                                                                    ----           ----

    OPERATING ACTIVITIES

    Net income                                                                                                                             $104          $203

    Adjustments to determine net cash provided by operating activities:

    Depreciation and amortization                                                                                                    334            292

    Gain on unrealized derivatives and other realized derivatives in investing activities, net                                        (3)          (28)

    Gain on assets held for sale                                                                                                      (6)            (3)

    Loss on extinguishment of debt                                                                                                     -              7

    Deferred income taxes                                                                                                           (129)          (31)

    Amortization of fair value adjustments, net                                                                                       12             12

    Equity in net loss of non-consolidated affiliates                                                                                 12             16

    (Gain) loss on foreign exchange remeasurement of debt                                                                             (2)             8

    Loss on sale of assets                                                                                                             9              6

    Impairment charges                                                                                                                24              4

    Amortization of debt issuance costs and carrying value adjustment                                                                 26             27

    Other, net                                                                                                                        (4)             1

    Changes in assets and liabilities including assets and liabilities held for sale (net of

    effects from divestitures):

    Accounts receivable                                                                                                              106           (121)

    Inventories                                                                                                                       17           (160)

    Accounts payable                                                                                                                 159              6

    Other current assets                                                                                                               -           (36)

    Other current liabilities                                                                                                         32             28

    Other noncurrent assets                                                                                                           (9)          (10)

    Other noncurrent liabilities                                                                                                      20           (18)
                                                                                                                                     ---            ---

    Net cash provided by operating activities                                                                                        702            203
                                                                                                                                     ---            ---

    INVESTING ACTIVITIES

    Capital expenditures                                                                                                            (717)          (775)

    Proceeds from sales of assets, third party, net of transaction fees                                                                8             19

    Proceeds from the sale of assets, related party, net of transaction fees                                                           8              2

    (Outflows) proceeds from investment in and advances to non-consolidated affiliates, net                                          (16)             3

    Proceeds from settlement of other undesignated derivative instruments, net                                                        15              4
                                                                                                                                     ---            ---

    Net cash used in investing activities                                                                                           (702)          (747)
                                                                                                                                    ----           ----

    FINANCING ACTIVITIES

    Proceeds from issuance of debt                                                                                                   169            319

    Principal payments                                                                                                              (164)          (97)

    Short-term borrowings, net                                                                                                       208            332

    Dividends, noncontrolling interest                                                                                                 -             (2)

    Acquisition of noncontrolling interest in Novelis Korea Ltd.                                                                       -             (9)

    Debt issuance costs                                                                                                               (8)            (8)
                                                                                                                                     ---            ---

    Net cash provided by (used in) financing activities                                                                              205            535
                                                                                                                                     ---            ---

    Net increase (decrease) in cash and cash equivalents                                                                             205             (9)

    Effect of exchange rate changes on cash                                                                                            3             (7)

    Cash and cash equivalents - beginning of period                                                                                  301            317
                                                                                                                                     ---            ---

    Cash and cash equivalents - end of period                                                                                              $509          $301
                                                                                                                                           ====          ====

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.


                                                                                 Quarter               Year
                                                                                  Ended                Ended

    (in millions)                                                              March 31,            March 31,
                                                                               ---------            ---------

                                                                           2014          2013         2014        2013
                                                                           ----          ----         ----        ----

    Net income attributable to our common shareholder                              $54          $59          $104       $202

    Noncontrolling interests                                                  -            -           -          (1)

    Income tax (provision) benefit                                           15          (14)         (11)        (83)

    Interest, net                                                          (74)          (73)         (297)       (293)

    Depreciation and amortization                                          (87)          (74)         (334)       (292)
                                                                            ---           ---         ----        ----

    EBITDA                                                                  200           220          746         871

    Unrealized gain (loss) on derivatives                                    (5)           21         (10)          14

    Realized (loss) gain on derivative instruments not included in segment   (1)            3            5           5

    income

    Proportional consolidation                                             (10)          (10)         (40)        (41)

    Gain on assets held for sale                                              -            -            6           3

    Loss on early extinguishment of debt                                      -            (7)          -          (7)

    Restructuring and impairment, net                                      (29)          (18)         (75)        (47)

    Other income, net                                                        (5)           (9)        (25)        (17)
                                                                                          ---          ---         ---

    Adjusted EBITDA                                                               $250         $240          $885       $961
                                                                                  ====         ====          ====       ====

The following table shows the “Free cash flow” for the year ended March 31, 2014 and 2013 and the ending balances of cash and cash equivalents (in millions).


                                                  Year Ended
                                                   March 31,

                                              2014            2013
                                              ----            ----

    Net cash provided by operating activities        $702            $203

    Net cash used in investing activities     (702)          (747)

    Less: Proceeds from sales of assets        (16)            (21)
                                               ---             ---

    Free cash flow                                   $(16)          $(565)

    Ending cash and cash equivalents                 $509      301
                                                     ====      ===

The following table shows available liquidity as of March 31, 2014 and 2013 (in millions).


                                                        March 31,
                                                        ---------

                                                   2014           2013
                                                   ----           ----

    Cash and cash equivalents                              $509        $301

    Availability under committed credit facilities  511            459
                                                    ---            ---

    Total liquidity                                      $1,020        $760
                                                           ====        ====

The following table shows Net Income attributable to our common shareholder excluding Certain Items (in millions). We adjust for items which may recur in varying magnitude which affect the comparability of the operational results of our underlying business.


                                                                             Quarter            Year
                                                                              Ended             Ended

                                                                            March 31,        March 31,
                                                                            ---------        ---------

                                                                         2014         2013           2014      2013
                                                                         ----         ----           ----      ----

    Net income attributable to our common shareholder                          $54          $59           $104      $202

    Certain Items:

    Gain on assets held for sale                                            -           -             (6)       (3)

    Loss on extinguishment of debt                                          -            7             -         7

    Restructuring and impairment, net                                      29           18             75        47

    Tax effect on Certain Items                                            (8)          (5)          (18)      (11)
                                                                          ---          ---            ---       ---

    Net income attributable to our common shareholder, excluding Certain       $75          $79           $155      $242

      Items

Segment Information

The following table shows selected segment financial information (in millions, except shipments which are in kilotonnes).


                                          Quarter               Year
                                           Ended                Ended

                                        March 31,            March 31,
                                        ---------            ---------

                                    2014          2013         2014          2013
                                    ----          ----         ----          ----

    Adjusted EBITDA

    North America                     68            61          229           324

    Europe                            73            71          265           261

    Asia                              33            47          160           174

    South America                     75            61          231           202

    Eliminations                       1            -           -            -
                                     ---          ---         ---          ---

    Total Adjusted EBITDA                  $250         $240          $885          $961
                                           ====         ====          ====          ====

    Total Rolled Products Shipments

    North America                    247           239          958           990

    Europe                           242           218          911           861

    Asia                             157           143          640           562

    South America                    124           107          447           395

    Eliminations                    (17)            (9)        (61)          (22)

    Total Rolled Product Shipments   753           698        2,895         2,786
                                     ===           ===         =====          =====

SOURCE Novelis Inc.


Source: PR Newswire



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