Skip to main content

AI assistant

Sign in to chat with this filing

The assistant answers questions, extracts KPIs, and summarises risk factors directly from the filing text.

Sign up Log in

Hindalco Industries Ltd. Call Transcript 2019

Aug 6, 2019

59187_rns_2019-08-06_d8612a31-256c-43c0-bcaa-ef6031c1f037.pdf

Call Transcript

Open in viewer

Opens in your device viewer

BSE Limited
Phiroze Jeejeebhoy Towers
Dalal Street
Mumbai: 400 001		 National Stock Exchange of India
Limited
Exchange Plaza, 5th Floor
Plot No. C/1, G Block
Bandra Kurla Complex
Bandra (East)
Mumbai - 400 051
Mr. Daniel Schammo
Banque Internationale A Luxembourg
Societe Anonyme
69, Route d'Esch
L-2953 LUXEMBOURG
Fax No. 00 352 4590 2010
TEL. NO. 00 352 4590-1

NOVELIS Q1 FISCAL 2020 EARNINGS CONFERENCE CALL

August 6, 2019

Steve FisherPresident and Chief Executive OfficerDev Ahuja Senior Vice President and Chief Financial Officer

Forward-looking statements

Statements made in this presentation which describe Novelis' intentions, expectations, beliefs or predictions may be forwardlooking 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 our expectation that the proposed Aleris acquisition will close in the fourth quarter of this year. 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 including in connection with potential acquisitions and investments; risks relating to, and our ability to consummate, pending and future acquisitions, investments or divestitures, including the proposed acquisition of Aleris Corporation; 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; 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; 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 Annual Report on Form 10-K for the fiscal year ended March 31, 2019.

FIRST QUARTER HIGHLIGHTS

  • Strong operational & financial performance
  • Organic expansion projects progressing on time and on budget
  • Increasing focus on delivering nextgeneration automotive aluminum solutions
  • Sheet-intensive battery enclosures
  • High-strength, lightweight 6HS-s650 alloy for structural applications
  • Digital transformation underway to drive world class manufacturing operations

Novelis AdvanzTM 6HS-s650 potential applications

END MARKET HIGHLIGHTS

Beverage Can

  • Demand trends strong globally
  • Growth in emerging markets
  • Package mix shift from other substrates to aluminum
  • New beverage types released in aluminum
  • Rising consumer preference favors aluminum sustainable package

Automotive

  • Exposure to trucks, SUVs, electric & premium vehicles
  • North America market remains strong
  • Broad aluminizationtrend throughout Europe
  • Some challenges in Europe due to exposure to one large customer
  • Trade war/weak consumer confidence in China

Specialties

  • Strong demand in North America
  • Increasing competition with Chinese imports in regions outside U.S.
  • Novelis capacity constraints create opportunities for portfolio optimization

ALERIS ACQUISITION UPDATE

  • Continue to work through regulatory and closing process
  • Expected to close the transaction in the fourth quarter of calendar 2019, subject to customary closing conditions and regulatory approvals
  • Commitment to Net Debt/Adjusted EBITDA forecasted to peak below 4x at close; return to 3x within two years

FINANCIAL HIGHLIGHTS

Q1 FISCAL 2020 FINANCIAL HIGHLIGHTS

Q1FY20 vs Q1FY19

  • Net income of \$127 million
  • Excluding tax-effected special items*, net income of \$145 million compared to \$115 million in the prior year
  • Adjusted EBITDA up 11% from \$334 million to \$372 million
  • Adjusted EBITDA per ton up 7% to \$448
  • Sales down 6% to \$2.9 billion on lower LME prices
  • Total FRP Shipments up 4% to 830 kilotonnes

Quarterly Adjusted EBITDA per ton (\$)

© 2019 Novelis

*Tax-effected special items may include restructuring & impairment, metal price lag, gain/loss on assets held for sale, loss on extinguishment of debt, loss on sale of business, business acquisition and other integration costs.

Q1 ADJUSTED EBITDA BRIDGE

\$ Millions

Strong operational performance in favorable market conditions

FREE CASH FLOW AND NET LEVERAGE

\$
M
i
l
l
io
ns		 Q
1
F
Y
2
0		 Q
1
F
Y
1
9
A
d
j
d
E
B
I
T
D
A
t
u
s
e		 3
2
7		 3
3
4
I
t
t
i
d
n
e
r
e
s
p
a		 (
)
6
4		 (
)
6
5
T
i
d
a
e
s
p
a
x		 (
4
0
)		 (
4
1
)
W
k
i
i
l
&
h
t
t
o
r
n
g
c
a
p
a
o
e
r		 (
2
0
0
)		 (
1
8
)
7
f
f
C
F
h
l
b
E
r
e
e
c
a
s
o
w
e
o
r
e
a
p
x		 6
8		 5
0
C
i
l
d
i
t
t
a
p
a
e
p
e
n
r
e
s
x
u		 (
1
6
2
)		 (
5
4
)
f
F
h
l
r
e
e
c
a
s
o
w		 (
)
9
4		 (
)
4

Prior period is adjusted to conform to current presentation

  • Free cash flow before capital expenditures increased 36%
  • Higher adjusted EBITDA
  • Lower working capital from lower aluminum prices and inventory
  • Offsetting factors include prior year \$33 million metal price lag benefit and other nonoperational items
  • Capital expenditures tripled YoY, primarily to support strategic capacity expansions
  • Strong liquidity of \$1.7 billion
  • Net leverage ratio of 2.5x

STRATEGIC CAPACITY INVESTMENTS ON TRACK

  • Organic expansions progressing on time and on budget
  • Construction is well underway with all three significant projects
  • 200kt greenfield automotive finishing lines in the U.S. to begin customer qualification late FY20
  • 100kt automotive finishing expansion in China commissioning in FY21
  • 100kt rolling and 60kt recycling expansion in Brazil commissioning in FY21

SUMMARY

SUMMARY

  • Delivering high-quality, sustainable, innovative products to customers in broadly positive market conditions for the near and long term
  • Continued focus on optimizing manufacturing operations and product portfolio to maximize existing capacity in favorable market conditions
  • Strategic investments to diversify our product portfolio and strengthen our business for the long term are on track
  • Continue working with regulatory agencies to close the Aleris transaction in a timely manner

THANK YOUQUESTIONS?

APPENDIX

NET INCOME RECONCILIATION TO ADJUSTED EBITDA

\$
(
)
in
m		 Q
1		 Q
2		 Q
3		 Q
4		 F
Y
1
9		 Q
1 F
Y
2
0
Ne
in
i
bu
b
le
ha
ho
l
de
t
t
tr
ta
to
co
m
e
a
o
ur
c
om
m
on
s
re
r		 1
3
7		 1
1
6		 8
7		 1
0
3		 4
3
4		 1
2
7
No
l
l
ing
in
tro
te
ts
nc
on
re
s
-		 - - - - - -
Inc
ta
is
ion
om
e
x
p
ro
v
-		 5
3		 6
4		 3
7		 4
8		 2
0
2		 6
3
In
te
t,
t
re
s
ne
-		 6
3		 6
6		 6
4		 6
5		 2
5
8		 6
2
De
ia
ion
d
iza
ion
t
t
t
p
re
c
a
n
am
or
-		 8
6		 8
6		 8
8		 9
0		 3
0
5		 8
8
E
B
I
T
D
A		 3
3
9		 3
3
2		 2
6
7		 3
0
6		 1,
2
4
4		 3
4
0
Un
l
ize
d
(
in
)
los
de
iva
ive
t
re
a
g
a
s o
n
r
s
-		 4 (
1
)		 6 1 1
0		 (
6
)
Re
l
ize
d
(
in
)
los
de
iva
ive
ins
inc
lu
de
d
in
inc
t
tru
ts
t
t
a
g
a
s o
n
r
m
en
no
se
g
m
en
om
e
-		 - (
1
)		 - (
1
)		 (
2
)		 2
Pr
t
ion
l c
l
i
da
t
ion
op
or
a
on
so
-		 1
6		 1
5		 1
4		 1
3		 5
8		 1
5
(
Ga
)
f
f
in
los
le
ixe
d
ts
s o
n s
a
o
as
se
-		 3 (
1
)		 2 2 6 (
1
)
Re
ing
d
im
irm
tru
tu
t,
t
s
c
r
a
n
p
a
en
ne
-		 1 - 1 - 2 1
Me
ta
l p
ice
lag
(
inc
)
r
om
e
ex
p
en
se
-		 (
3
3
)		 (
1
)		 1
3		 2
5		 4 2
(
)
Bu
ine
is
i
t
ion
d
t
he
in
te
t
ion
ts
A
s
ss
a
cq
u
a
n
o
r
g
ra
co
s
-		 2 8 1
4		 9 3
3		 1
7
O
he
t
t
r,
ne
-		 2 4 5 2 1
3		 2
A
d
j
te
d
E
B
I
T
D
A
us		 \$
3
3
4		 \$
3
5
5		 \$
3
2
2		 \$
3
5
7		 \$
1,
3
6
8		 \$
3
7
2

(A) Effective in the first quarter of fiscal 2019, management removed the impact of business acquisition and other integration costs from Adjusted EBITDA in order to enhance the visibility of the underlying operating performance of the Company. The impact of "Business acquisition and other integration costs", which are costs, primarily legal and professional fees, presented above associated with our proposed acquisition of Aleris, is now reported as a separate line item in this reconciliation and on our condensed consolidated statement of operations. Management reclassified \$2 million for the three months ending 6/30/18 from SG&A to "Business acquisition and other integration costs". This change in presentation does not impact our condensed consolidated financial statements.

FREE CASH FLOW AND LIQUIDITY

\$
(
in
)
m		 Q
1		 Q
2		 Q
3		 Q
4		 F
Y
1
9		 1 F
Q
Y
2
0
Ca
(
)
h
i
de
d
by
d
in
t
in
t
iv
i
t
ie
s
p
ro
v
us
e
op
er
a
g
ac
s		 8
4		 1
6
2		 1
1
4		 0
4
4		 2
8
7		 5
7
Ca
h
i
de
d
by
(
d
in
)
in
in
iv
i
ie
t
t
t
s
p
ro
v
us
e
ve
s
g
ac
s		 (
5
2
)		 (
2
9
1
)		 (
9
1
)		 (
1
2
3
)		 (
5
5
7
)		 (
1
4
9
)
Ca
f a
P
lu
h
d
in
t
he
is
i
t
io
ts
de
s:
s
us
e
a
cq
u
n
o
ss
e
u
n
r a
i
ta
l
le
ca
p
as
e		 - 2
3
9		 - - 2
3
9		 -
(
)
f
fro
f a
f
Le
ds
t
low
le
ts
t o
ss
:
p
ro
ce
e
ou
s
m
s
a
o
ss
e
ne
,
tra
t
io
fe
h
in
ta
d
he
dg
in
ns
ac
n
es
ca
s
co
m
e
xe
s
an
g
,		 - (
)
2		 - - (
)
2		 (
)
2
f
Fr
h
lo
ee
c
as
w		 \$
(
)
4		 \$
1
0
8		 \$
2
3		 \$
2
8
1		 \$
4
0
8		 \$
(
)
9
4
Ca
i
ta
l e
d
i
tu
p
xp
en
re
s		 5
4		 6
0		 9
6		 1
4
1		 3
5
1		 1
6
2

"Free cash flow" consists of: (a) "net cash provided by (used in) operating activities," (b) plus "net cash provided by (used in) investing activities" (c) plus cash used in the "Acquisition of assets under a capital lease", and (d) less "proceeds from sales of assets and business, net of transaction fees, cash income taxes and hedging". All prior periods presented conform to the presentation adopted for the current period.

\$
(
in
m		 )
Q
1		 Q
2		 Q
3		 Q
4		 F
Y
1
9		 Q
1 F
Y
2
0
Ca
h
d
h
iva
le
ts
s
an
ca
s
eq
u
n
Av
i
la
b
i
l
i
de
i
d
d
i
fa
i
l
i
ie
ty
t
te
t
t
a
u
n
r c
om
m
cr
e
c
s		 8
3
5
1,
0
9
5		 8
2
9
9
0
7		 9
7
7
8
8
4		 9
0
5
8
9
7		 9
0
5
8
9
7		 8
9
5
8
0
7
L
iq
i
d
i
ty
u		 \$
1,
9
1
2		 \$
1,
3
6
7		 \$
1,
6
8
1		 \$
1,
8
4
7		 \$
1,
8
4
7		 \$
1,
2
9
7

More from Hindalco Industries Ltd.

Regulatory Filings 2026
Jun 9
Regulatory Filings 2026
Jun 9
Regulatory Filings 2026
Jun 5
Regulatory Filings 2026
Jun 4
Regulatory Filings 2026
Jun 4
Regulatory Filings 2026
Jun 2
Regulatory Filings 2026
Jun 2
Regulatory Filings 2026
May 29
Regulatory Filings 2026
May 29
Regulatory Filings 2026
May 28
View all filings →