Novelis Fourth Quarter & FY 2012 Earnings Conference Call Philip Martens President and Chief Executive Officer Steve Fisher Senior Vice President and Chief Financial Officer Brighter Ideas with Aluminum May 24, 2012 Exhibit 99.2 |
2 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 are statements about future global growth in flat rolled products, our anticipated capital expenditures in fiscal year 2013, and our expectations for demand recovery in fiscal year 2013. 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; 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, 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; and 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, 2012 are specifically incorporated by reference into this presentation. Non-GAAP Financial Measures This presentation contains 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. We have included reconciliations of each of these measures to the most directly comparable GAAP measure. In addition, a more detailed description of these non- GAAP financial measures used in this presentation, together with a discussion of the usefulness and purpose of such measures, is included as Exhibit 99.2 to our Current Report on Form 8-K furnished to the SEC with our earnings press release. |
NOVELIS’ STRATEGY SUMMARY & OUTLOOK FY 2012 HIGHLIGHTS Agenda DETAILED FINANCIAL PERFORMANCE 3 |
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5 Fiscal 2012 Highlights Record EBITDA/tonne of $371 despite 4% decrease in Shipments Generated Record Free Cash Flow before CapEx Strategic Expansions Progressing Well Continued Executing on our Strategy Strong Performance & Execution Throughout FY2012 5 |
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7 Novelis’ Strategy • Product Portfolio/Footprint Optimization • One Novelis • Major Rolling Expansions in South America, Asia & North America • Major Recycling Expansions Worldwide CONTINUE TO STRENGTHEN THE BUSINESS CAPTURE GROWTH IN OUR GLOBAL FRP MARKETS 80% RECYCLED CONTENT IN OUR PRODUCTS BY 2020 7 |
Executing on Novelis’ Strategy – FY12 Actions • Announced Divestiture of Three Foil Mills in Europe • Announced Closure of Saguenay Plant in Canada • Buyout of Minority Interests in Korean Operations • Announced Intent to Exit the Evermore Joint Venture CONTINUE TO STRENGTHEN THE BUSINESS 8 |
Executing on Novelis’ Strategy – FY12 Actions • Progressing well on All Major Rolling Expansions -- Brazil, South Korea & United States • Announced Entry Point into China through a new Plant geared at Automotive Sheet Finishing Capabilities in Changzhou City in the Jiangsu Province of China CONTINUE TO STRENGTHEN THE BUSINESS CAPTURE GROWTH IN OUR GLOBAL FRP MARKETS 9 |
Executing on Novelis’ Strategy – FY12 Actions CONTINUE TO STRENGTHEN THE BUSINESS CAPTURE GROWTH IN OUR GLOBAL FRP MARKETS • Commissioned Norf Recycling Facility • Planned Recycling Investments for Brazil, South Korea and Europe • Increased Recycled Content in Products from 33% in FY11 to 39% for FY12 80% RECYCLED CONTENT IN OUR PRODUCTS BY 2020 10 |
11 Executing on Novelis’ Strategy – FY12 Actions • Announced Divestiture of Three Foil Mills in Europe • Announced Closure of Saguenay Plant in Canada • Buyout of Minority Interests in Korean Operations • Announced Intent to Exit the Evermore Joint Venture • Progressing well on All Major Rolling Expansions • Announced Entry Point into China through a new Plant geared at Automotive Sheet Finishing Capabilities in Changzhou City in the Jiangsu Province of China • Commissioned Norf Recycling Facility • Planned Recycling Investments for Brazil, South Korea and Europe • Increased Recycled Content in Products from 33% in FY11 to 39% for FY12 CONTINUE TO STRENGTHEN THE BUSINESS CAPTURE GROWTH IN OUR GLOBAL FRP MARKETS 80% RECYCLED CONTENT IN OUR PRODUCTS BY 2020 |
12 (Kt) Strong FRP Growth Worldwide (2011-2016) Strong Long-Term Outlook Supports Investments Source: February 2012 CRU, Novelis Estimates ~35% Growth Over 5 Years |
Source: February 2012 CRU, Novelis Estimates (Kt) Strong Long-Term Outlook Supports Investments • Asia Represents 67% of Growth • China Expected to Drive Majority of this Growth • China will Grow at a 11% CAGR Over the Next 5 Years Strong FRP Growth Worldwide (2011-2016) 19,200 4,350 400 350 600 800 25,700 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000 2011 Asia M&NA South America Europe North America 2016 13 |
14 China’s First Plant for Aluminum Automotive Sheet ~$100 Million Plant Investment; ~120 kt Capacity Commissioning at the End of 2014 Platform for Future Growth NOVELIS TO BUILD ITS FIRST MANUFACTURING PLANT IN CHINA Novelis Enters China |
15 Strengthening Unmatched Global Rolling Footprint Brazil Rolling Expansion ~220kt End of CY12 China Auto Finishing Line ~120kt End of CY14 Korea Rolling Expansion ~350kt End of CY13 United States Auto Finishing Lines ~200kt Mid CY13 Global Rolling Strategic Investments Shipments (Kt) |
16 Global Recycling Investments Brazil Pinda North America Italy Pieve Korea Yeongju Germany Nachterstedt Germany Norf Unmatched Global Recycling Footprint |
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18 Fourth Quarter Financial Highlights (Q4FY12 vs. Q4FY11) Shipments Down 9% to 703 Kilotonnes Net Sales Down 12% to $2.6 Billion Adjusted EBITDA Down 17% to $233 Million Free Cash Flow Before CapEx of $318 Million Net Income, Excluding Special Items, of $25 Million Net Loss of $107 Million Demand Continuing to Improve Sequentially |
Shipments & Sales Total Company Sales (Billions) • Shipments (Kt) Short-term Softness in Most Regions Shipments Sales Q4FY12 Q4FY11 (18%) (5%) (9%) (2%) Shipments by Region 3.0 2.6 200 350 500 650 800 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 Q4FY11 Q4FY12 0 50 100 150 200 250 300 South America Asia Europe North America 19 |
20 (Millions) Adjusted EBITDA Trend Short-term Softness Impacting EBITDA TTM EBITDA Quarterly EBITDA 238 280 306 301 213 233 $800 $850 $900 $950 $1,000 $1,050 $1,100 $1,150 $0 $50 $100 $150 $200 $250 $300 $350 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 20 |
21 FY12 Financial Highlights Strong Performance & Execution throughout FY2012 Shipments Down 4% to 2,838 Kilotonnes Net Sales Up 5% to $11 Billion Adjusted EBITDA Down 2% to $1.053 Billion Free Cash Flow Before CapEx of $614 Million Liquidity of $1 Billion Net Income, Excluding Special Items, of $218 Million Net Income of $63 Million (FY12 vs. FY11) 21 |
22 Adjusted EBITDA/tonne & Shipments $176 $279 $361 $371 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800 3,000 $0 $100 $200 $300 $400 $500 FY09 FY10 FY11 FY12 EBITDA/tonne Shipments (Kts) Record EBITDA/tonne Despite 4% Decrease in Shipments |
23 (Millions) Free Cash Flow Before CapEx FY11 FY12 FY13E FY11 FY12 FY13E $0 $200 $400 $600 $800 Strong Cash Flow Generation Continues $544 $614 $600-700 |
(Millions) Capital Expenditures FY11 FY12 FY13E • Brazil Mill Expansion • South Korea Mill Expansion • • Global Recycling Initiatives FISCAL 2013 CAPEX: $234 $516 $0 $200 $400 $600 $800 $650-700 Continued Focus & Execution on Strategic Investments 24 in North America & China Automotive Capacity Increase |
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26 Summary & FY13 Outlook Executing on our Strategy • Taking Action to Strengthen the Business • Strategic Expansions Progressing Well • Making Progress Towards our Goal of 80% Recycled Content by 2020 Unmatched Global Rolling & Recycling Footprint Adjusted EBITDA above FY12 $1.05 Billion • Demand Recovery Continuing into FY13 Free Cash Flow before CapEx of approximately $600-700 Million Capital Expenditures of approximately $650-700 Million |
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Income Statement Reconciliation to Adjusted EBITDA (in $ m) Q1 FY11 Q2 FY11 Q3 FY11 Q4 FY11 FY11 Q1 FY12 Q2 FY12 Q3 FY12 Q4 FY12 FY12 Net Income (loss) Attributable to Our Common Shareholder 50 62 (46) 50 116 62 120 (12) (107) 63 - Interest, net (36) (37) (42) (79) (194) (73) (73) (71) (73) (290) - Income tax (provision) benefit (15) (56) (33) 21 (83) (59) 7 10 3 (39) - Depreciation and amortization (103) (104) (100) (97) (404) (89) (81) (79) (80) (329) - Noncontrolling interests (9) (11) (11) (13) (44) (15) (10) (1) (1) (27) EBITDA 213 270 140 218 841 298 277 129 44 748 - Unrealized gain (loss) on derivatives (47) 1 9 (27) (64) 26 (1) (63) (23) (62) - Realized gain on derivative instruments not included in segment income - - 4 1 5 2 - (3) 2 1 - Loss on early extinguishment of debt - - (74) (10) (84) - - - - - - Proportional consolidation (10) (11) (10) (14) (45) (13) (12) (9) (15) (49) - Restructuring charges, net (6) (9) (20) 1 (34) (19) (11) (1) (29) (60) - Loss on assets held for sale - - - - - - - - (111) (111) - Others costs, net 13 (2) (7) (13) (9) (4) - (8) (13) (24) Adjusted EBITDA 263 291 238 280 1,072 306 301 213 233 1,053 Other Income (expense) Included in Adjusted EBITDA - Metal price lag 9 19 - (3) 25 5 15 8 (19) 9 - Foreign currency remeasurement (22) 20 1 9 8 (8) - (2) (4) (14) - Purchase accounting (3) (4) (3) (3) (13) (3) (3) (3) (3) (13) 29 |
Free Cash Flow (in $m) FY11 FY12 Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Cash Provided by (used in) Operating Activities 22 102 94 236 454 (115) 171 145 355 556 Cash Provided by (used in) Investing Activities) 27 (2) (39) (99) (113) (79) (40) (72) (251) (442) Less: Proceeds from Sales of Fixed Assets (15) (3) (10) (3) (31) 0 1 (10) (7) (16) Free Cash Flow 34 97 45 134 310 (194) 130 63 99 98 30 |
31 Explanation of Other Income (Expenses) Included in Adjusted EBITDA 1) Metal Price Lag Net of Related Hedges: 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. We have a risk management program in place to minimize impact of this “lag”. 2) Foreign Currency Remeasurement Net of Related Hedges: All non-functional currency denominated Working Capital and Debt gets remeasured every period by the period end exchange rates. This impacts our profitability. Like Metal Price Lag, we have a risk management program in place to minimize impact of such Remeasurement. 3) Purchase Accounting: Following our acquisition, the consideration and transaction costs paid by Hindalco in connection with the transaction were “pushed down” to us and were allocated to the assets acquired and the liabilities assumed. These allocations are amortized over periods, impacting our profitability. |