Company continues to execute on strategic plans

Click here to view condensed consolidated statements of operations (unaudited)

• Net loss of $12 million, up $34 million Y-o-Y
• EBITDA of $213 million, down $25 million Y-o-Y
• Free cash flow before capex of $186 million, up $80 million Y-o-Y
• Liquidity of $857 million
• Invested $350 million in Asia to purchase minority stake in Korean operations

Atlanta: Novelis Inc, the world’s leading producer of aluminum rolled products, reported a net loss attributable to its common shareholder of $12 million for the third quarter of fiscal 2012.  Adjusted EBITDA for the quarter was $213 million as compared to $238 million for the same period of the previous year.

(in $M)	Q3FY12		Q3FY11	Variance
	12/31/2011		12/31/2010
Net Income (loss)	($12)		($46)	$34
Adjusted EBITDA	$213		$238	($25)

"These are good results, particularly when you consider the market pressures we saw in most of our regions and the fact that this is our seasonally low quarter. Our business model serves as a competitive advantage by reducing our overall exposure in volatile market conditions," said Phil Martens, President and Chief Executive Officer, Novelis.  “Our premium product portfolio, long-term customer base and business model are what differentiates us in our industry. As a result of this, our EBITDA per ton was flat versus last year on a 9 per cent decline in shipments. Going forward, we are seeing a recovery, particularly in our European segment, which was the most negatively impacted in the third quarter. For the full year, we are on par with last year’s record EBITDA results, despite the softer volumes we’ve experienced this year.”

Shipments of aluminum rolled products totaled 648 kilotonnes for the third quarter of fiscal 2012 compared to shipments of 715 kilotonnes in the third quarter of the previous year. This decrease in shipments was primarily a result of customer destocking in Europe due to economic uncertainty and continued weakness in the company’s electronics business in Asia. 

Net sales for the third quarter of fiscal 2012 were $2.5 billion, a decrease of 4 per cent compared to the $2.6 billion reported in the same period a year ago, mainly the result of lower shipments and a decrease in average aluminum prices compared to the same period last year. 

(in $M)		Q3FY12	Q3FY11
		12/31/2011	12/31/2010
Income/(Loss) before income taxes		($21)	($2)
Significant items affecting comparisons:
Restructuring, net		(1)	(20)
Unrealised gains/(losses) on derivatives		(63)	9
Loss on extinguishment of debt		-	(74)
Gain/(Loss) on sale of assets		1	(2)
Adjusted pre-tax income		$42	$85

The company reported a pre-tax loss of $21 million for the third quarter of fiscal 2012, compared to a pre-tax loss of $2 million for the same period of fiscal 2011.  Excluding restructuring charges, unrealised losses on derivatives and gain on sale of assets, adjusted pre-tax income was $42 million for the third quarter of fiscal 2012.

“Our results this quarter were impacted by softer demand in Europe and Asia, reducing our ability to absorb fixed costs and higher net interest expense as a result of our debt refinancing last year,” said Steve Fisher, Chief Financial Officer for Novelis.

(in $M)	Q3FY12	Q2FY12
	12/31/2011	9/30/2011
Cash and cash equivalents	$436	$286
Overdrafts	(1)	(8)
Gross availability under the ABL facility	422	715
Total liquidity	$857	$993

For the third quarter of fiscal 2012, Novelis reported solid liquidity of $857 million and free cash flow of $63 million.  The decrease in liquidity compared to the previous quarter primarily relates to short-term borrowings used to purchase the 31.2 per cent minority interest in the company’s Korean operations.  “As expected, we continued to generate strong cash flow, in part because of our ability to react quickly in this environment and manage our global inventory position down nearly 60 kilotonnes,” said Fisher.  “Free cash flow for the quarter was also robust given we doubled our capital expenditures year-over-year. Going forward, we expect continued strong cash flow generation, which will enable us to fund our strategic expansion projects across the globe.”  

(in $M)	Q3FY12	Q3FY11
	12/31/2011	12/31/2010
Free cash flow	$63	$45
Capex	123	61
Free cash flow before capex	$186	$106

Business outlook
As a result of market pressures and higher than expected destocking levels in several regions in the third quarter, the company revised its adjusted EBITDA guidance down slightly to between $1.05-1.08 billion for fiscal 2012. In addition, it reaffirms its fiscal 2012 free cash flow before capital expenditures target of $600-700 million and capital expenditures of approximately $550-600 million primarily focused on its global expansion projects in Brazil, Korea and North America.

Strategic investments
“Despite the softness we saw in the third quarter, we still believe in the strong long-term growth of the aluminum flat rolled products (FRP) market, which is expected to grow 34 per cent over the next 5 years,” said Martens.

“To this end, you will see us continue to take action to ensure we are best positioned to capture this growth going forward. We are committed to our strategy and continue to execute on our global rolling and recycling expansions.  In addition, as part of our approach to strengthen our operations and gain control over our assets in Asia, we completed the acquisition of the minority stake in our Korean operations in December, bringing our total ownership to over 99 per cent,” he added.

Quarterly report on Form 10-Q
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 December 31, 2011.  The Novelis Form 10-Q and other SEC filings are available for review on the company’s website at www.novelis.com.

Third quarter fiscal 2012 earnings conference call