Attached files
| file | filename |
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| EX-99.1 - EXHIBIT 99.1 EARNINGS RELEASE - Novelis Inc. | novelisq2fy18results.htm |
| 8-K - 8-K EARNINGS - Novelis Inc. | nvl-form8xkq2fy181.htm |
© 2017 Novelis
NOVELIS Q2 FISCAL 2018
EARNINGS CONFERENCE CALL
November 2, 2017
Steve Fisher
President and Chief Executive Officer
Devinder Ahuja
Senior Vice President and Chief Financial Officer
Exhibit 99.2
© 2017 Novelis
SAFE HARBOR STATEMENT
Forward-looking statements
Statements made in this presentation which describe Novelis' intentions, expectations, beliefs or predictions may be forward-
looking statements within the meaning of securities laws. Forward-looking statements include statements preceded by, followed
by, or including the words "believes," "expects," "anticipates," "plans," "estimates," "projects," "forecasts," or similar
expressions. Examples of forward-looking statements in this presentation including statements concerning our expectation that we
will achieve record free cash flow this fiscal year. Novelis cautions that, by their nature, forward-looking statements involve risk and
uncertainty and that Novelis' actual results could differ materially from those expressed or implied in such statements. We do not
intend, and we disclaim, any obligation to update any forward-looking statements, whether as a result of new information, future
events or otherwise. Factors that could cause actual results or outcomes to differ from the results expressed or implied by forward-
looking statements include, among other things: changes in the prices and availability of aluminum (or premiums associated 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, 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, 2017 are specifically incorporated by reference into this presentation.
2
© 2017 Novelis
SECOND QUARTER FY18 HIGHLIGHTS
Achieved record shipments and Adjusted
EBITDA in Q2, supported by:
Automotive shipments growth 12% YoY as
available capacity is able to meet rising
demand for lightweight aluminum materials
Beverage can shipments growth 5% YoY
with positive market conditions
Operational efficiencies and metal
management
Received $314 million of cash proceeds
for the joint venture transaction at Ulsan
Aluminum
Q2 Adjusted EBITDA/ton increased to
$377
3
Quarterly Adjusted EBITDA ($M)
236
270
302
150
175
200
225
250
275
300
325
Adjusted EBITDA/ton ($)
294 308
354 367
377
200
225
250
275
300
325
350
375
400
Strategy driving a notable step change in performance
© 2017 Novelis
REGIONAL BUSINESS HIGHLIGHTS
South America
Expanded volumes through
specialties exports
Outlook: Signals of economic
recovery leading to beverage
can supply chain restocking
4
Europe
Stable volumes and market
conditions
Positive impact from
strengthening Euro
Outlook: Continued penetration
of aluminum in automotive
North America
Improving can volumes
Favorable metal costs and
operating efficiencies
Outlook: Continued penetration
of aluminum in automotive
Asia
Offsetting lower can prices with
higher volume and cost
efficiency gains
Successfully completed joint
venture transaction
Outlook: Continued penetration
of aluminum in automotive
© 2017 Novelis
FINANCIAL HIGHLIGHTS
© 2017 Novelis
Q2 FISCAL 2018 FINANCIAL HIGHLIGHTS
Net income of $307 million up from
negative $89 million in prior year
Excluding tax-effected special items*,
net income up 30% from $60 million to
$78 million
Adjusted EBITDA up 12% from $270
million to record $302 million
Sales up 18% to $2.8 billion
Total FRP Shipments up 4% to record
802 kilotonnes
Strong liquidity position at $1.6 billion
Reduced net leverage ratio to 3.5x
6
Q2FY18 vs Q2FY17
*Tax-effected special items may include restructuring & impairment, metal price lag, gain/loss on assets held for sale, loss on extinguishment of debt, loss/gain on sale of business
TTM Adjusted EBITDA ($M)
1,137
750
800
850
900
950
1,000
1,050
1,100
1,150
1,200
Net Leverage ratio
TTM Adjusted EBITDA/net debt
3.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
© 2017 Novelis
Q2 ADJUSTED EBITDA BRIDGE
7
$ Millions
270
34
(4)
8
(6)
302
Q2FY17 Volume Price/Mix Operating Cost SG&A and Other Q2FY18
Bridge components adjusted to remove net impact of divested ALCOM business, reflected in SG&A & Other as ($1M).
Strong demand & production
led to increase in beverage
can and automotive volumes
Lower beverage can pricing mostly
offset by favorable product mix
mainly from higher automotive
Operational efficiencies and
favorable metal costs partly
offset by inflation
© 2017 Novelis
FREE CASH FLOW
8
YTD
FY18
YTD
FY17
Adjusted EBITDA 591 538
Capital expenditures (82) (90)
Interest paid (135) (208)
Taxes paid (68) (44)
Working capital & other (282) (298)
Free cash flow $24 ($102)
Q2FY18 free cash flow $101 million
Positive YTD free cash flow despite
sharply rising aluminum prices
$126 million YoY improvement in
YTD FCF driven by:
Higher adjusted EBITDA
Lower interest due to refinancing
actions in FY17 and timing of
payments
Working capital outflow related to
higher metal prices and timing of
customer payments
$ Millions
Free cash flow excludes the gain from Ulsan Aluminum JV transaction; see definition of Free Cash Flow in Appendix
Continue to expect record free cash flow in FY18 $400-450 million
© 2017 Novelis
JOINT VENTURE TRANSACTION SUMMARY
9
In September, Novelis completed the transaction to sell
approximately 50% of its ownership interest in its Ulsan, South
Korea facility to Kobe Steel for US $314 million, recognizing
after-tax P&L gain of $241 million
This joint venture, named Ulsan Aluminum Ltd., will allow
Novelis to:
More efficiently utilize our rolling assets in Korea
Deepen the plant’s focus on the growing automotive
aluminum sheet market and enhance our customer service
Provide cash proceeds to increase our strategic flexibility and
reduce debt
Q2 proceeds from sale of a business $314
Expected cash taxes & fees paid in FY18 (50)
Expected total cash proceeds, net of taxes & fees $264
Cash flow impacts
(US$ millions)
© 2017 Novelis
OUTLOOK AND SUMMARY
© 2017 Novelis
ALUMINUM AUTOMOTIVE OUTLOOK
11
Source: Ducker Worldwide
84 120
139
165
212
258
306
340
397
466
520
565
0
100
200
300
400
500
600
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2028
North American Light Vehicle Aluminum Content
Net pounds per vehicle
2028
CURB WEIGHT: 3,465 LBS
16%
aluminum
2015
CURB WEIGHT: 3,835 LBS
10%
aluminum
Lightweighting improves
performance, increases fuel
economy, reduces emissions
and extends battery range
Aluminum is a growing metal of
choice for lightweighting
vehicles and provides equal or
better quality, strength and
durability compared to other
materials
Ability to deliver consistent,
quality products on a global
scale makes Novelis a partner
of choice for automotive sheet
solutions
© 2017 Novelis
SUMMARY
Record shipments and operating performance
drove record Q2 Adjusted EBITDA
Raise FY18 full year guidance for Adjusted
EBITDA to $1,150-$1,200 million
Previous guidance $1,100-$1,150 million
Maintain FY18 free cash flow guidance $400-
$450 million
Monitoring higher aluminum price pressure on
working capital
Solid cash flow and net leverage trending to 3x
by fiscal year end
Maintain positive outlook for automotive
aluminum sheet demand in near and long term;
reviewing organic growth options to meet
customer needs
12
© 2017 Novelis
THANK YOU
QUESTIONS?
THANK YOU AND QUESTIONS
© 2017 Novelis
APPENDIX
© 2017 Novelis
INCOME STATEMENT RECONCILIATION TO ADJUSTED
EBITDA
15
(in $ m) Q1 Q2 Q3 Q4 FY17 Q1FY18
Q2
FY18
Net income (loss) attributable to our common shareholder 24 (89) 63 47 45 101 307
- Noncontrolling interests - - 1 - 1 - -
- Interest, net 80 79 65 59 283 62 66
- Income tax provision 36 27 47 41 151 43 116
- Depreciation and amortization 89 90 88 93 360 90 91
EBITDA 229 107 264 240 840 296 576
- Unrealized loss (gain) on derivatives 7 (4) (21) 13 (5) (16) 18
- Realized gain on derivative instruments not included in segment
income (1) - (1) (3) (5) (1) -
- Proportional consolidation 8 8 4 8 28 8 8
- Loss on extinguishment of debt - 112 - 22 134 - -
- Restructuring and impairment, net 2 1 1 6 10 1 7
- Loss (gain) on sale of business - 27 - - 27 - (318)
- Loss (gain) on sale of fixed assets 4 2 (2) 2 6 1 1
- Gain on assets held for sale, net (1) (1) - - (2) - -
- Metal price lag (A) 13 14 4 - 31 1 5
- Others costs (income), net 7 4 6 4 21 (1) 5
Adjusted EBITDA 268 270 255 292 1,085 289 302
(A) Effective in the first quarter of fiscal 2018, management removed the impact of metal price lag from Adjusted EBITDA (Segment Income) in order to
provide more transparency and visibility for our stakeholders on the underlying performance of the business. On certain sales contracts, we experience
timing differences on the pass through of changing aluminum prices from our suppliers to our customers. Additional timing differences occur in the flow of
metal costs through moving average inventory cost values and cost of goods sold. This timing difference is referred to as metal price lag. The company will
continue to report metal price lag as a separate line item in Reconciliation from Net Income (loss) attributable to our common shareholder to Adjusted
EBITDA. Segment information for all prior periods presented has been updated to reflect this change.
© 2017 Novelis
FREE CASH FLOW AND LIQUIDITY
16
(in $ m) Q1 Q2 Q3 Q4 FY17 Q1FY18
Q2
FY18
Cash (used in) provided by operating activities (107) 80 178 424 575 (45) 139
Cash used in investing activities (39) (48) (35) (90) (212) (31) 273
Less: outflows (proceeds) from sale of a
business, net of transaction fees, cash income
taxes and hedging (A)
- 12 (12) (2) (2) (1) (311)
Free cash flow (146) 44 131 332 361 (77) 101
Capital expenditures 44 46 48 86 224 39 43
(in $ m) Q1 Q2 Q3 Q4 FY17 Q1FY18
Q2
FY18
Cash and cash equivalents 457 473 505 594 594 565 949
Availability under committed credit facilities 633 573 534 701 701 671 700
Liquidity 1,090 1,046 1,039 1,295 1,295 1,236 1,649
(A) This line item includes the proceeds from the sale of shares in Ulsan Aluminum Ltd., to Kobe Steel Ltd. during the three months ended September 30,
2017 in the amount of $314 million. We expect additional cash taxes and transaction fees related to Ulsan Aluminum Ltd. of approximately $39 million and
$9 million, respectively, to be paid during the remainder of fiscal 2018.