martha brooks, chief operating officer desjardins ... · statements are based on beliefs and...
TRANSCRIPT
Operational Performance Operational Performance
Martha Brooks, Chief Operating OfficerDesjardins Materials Conference December 4, 2006
Martha Brooks, Chief Operating OfficerDesjardins Materials Conference December 4, 2006
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Safe Harbor StatementSafe Harbor StatementStatements 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 may include statements preceded by, followed by, or including the words “believes,” “expects,” “anticipates”, “plans,”estimates,” “projects,” “forecasts,” or similar expressions. Examples of such forward-looking statements in this presentation include, among other matters, our expectations to perfect the conversion business model, enhance financial and risk management systems, improve operational efficiency, improve working capital reductions, execute cost cutting measures, strategically align operations, de-lever the capital structure enhance the portfolio, innovate for growth, create new sheet products, capitalize on innovation opportunities, eliminate or reduce remaining metal price ceiling exposure, implement new models for passing through energy and transpiration costs, execute on our hedging strategy, complete working capital reductions, complete price increases in all market segments, improve volumes and scrap recovery, execute general and administrative reductions, review strategic alternatives for Europe, Brazil, Asia, North America, drive business to high-end products, evaluate the divestment of non-core assets, Free Cash Flow and other financial targets for the remainder of 2006 and 2007 and achieve the long term financial targets for Regional Income less Corporate Costs, Annual Free Cash Flow, Return on Invested Capital and Debt to EBITDA. 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. These statements are based on beliefs and assumptions of Novelis’ management, which in turn are based on currently available information. These assumptions could prove inaccurate. 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: the level of our indebtedness and our ability to generate cash; relationships with, and financial and operating conditions of, our customers and suppliers; changes in the prices and availability of aluminum (or premiums associated with such prices) or other raw materials we use; the effect of metal price ceilings in certain of our sales contracts; our ability to successfully negotiate with our customers to remove or limit metal price ceilings in our contracts; the effectiveness of our hedging activities, including our internal used beverage can and smelter hedges; 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; continuing obligations and other relationships resulting from our spin-off from Alcan; changes in the relative values of various currencies; factors affecting our operations, such as litigation, 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; our ability to improve and maintain effective internal control over financial reporting and disclosure controls and procedures in the future; changes in the fair market value of derivatives; 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 environmental, health or safety compliance; changes in interest rates that have the effect of increasing the amounts we pay under our principal credit agreements and other financing arrangements; the continued cooperation of certain debt holders and regulatory authorities with respect to extensions of our 2006 filing deadlines; the development of the most efficient tax structure for the Company; and the payment of special interest due to our failure to timely file our SEC reports and the payment of fees in connection with any related waivers or amendments to our principal debt agreements. The above list of factors is not exhaustive. Other important risk factors are included under the caption "Risk Factors" in our Registration Statements on Form S-4, as amended and filed with the SEC, and may be discussed in subsequent filings with the SEC. Further, the risk factors included in our Registration Statement on Form S-4, as amended, are specifically incorporated by reference into this presentation.
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2005 Global Aluminum Rolled Products Production
6% 6%6%
16%
19%
47%
Novelis
Alcan
OthersAlcoa
Norsk Hydro
100% = 15,600 ktTop 5 = 53%
Source: CRU, based on production data.
#1 rolled products supplier worldwide
Leader in: • Can, Auto, Foil markets• Europe, Asia & S-A• Rolling Technology• Casting Technology • Recycling
Aleris/Corus
Global Leader in Rolled AluminumGlobal Leader in Rolled Aluminum
• Enhance the Portfolio, Innovate for Growth• Perfect the Conversion Business Model• Improve Operational Efficiency • Strategically Align Operations• De-lever Capital Structure
• Enhance the Portfolio, Innovate for Growth• Perfect the Conversion Business Model• Improve Operational Efficiency • Strategically Align Operations• De-lever Capital Structure
Our StrategyOur Strategy
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• Drive business to high-end products – Positive economic environment– Competitive advantage– Stability and profitability
• Innovation / Novelis Fusion Technology– Enhance existing products and develop new high-end products
Enhance the Portfolio, Innovate for GrowthEnhance the Portfolio, Innovate for Growth
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• Can price ceiling impact - $350 million (2006 year-to-date)– Partially offset by $120 million of gains on call options– In 2007, reduced exposure from 20% to a maximum of 10%
• Brazilian currency impact - $21 million (2006 year-to-date)– Partially offset by $6 million, due to hedging ~ ½ of the cash flow
exposure year to date.– In 4Q’06, increased currency hedges to ~ 2/3 of the cash flow
exposure.• Higher energy and transportations cost – over $50 million
(2006 vs. 2005)– Implementing a new model for passing through energy and
transportation cost
Perfect the Conversion Business ModelPerfect the Conversion Business Model
Enhance financial systems and risk management resources to mitigate or eliminate risk to the conversion business model
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Operational EfficiencyOperational Efficiency
• Working capital reductions
• Constant volume and scrap recovery improvements
• General and administrative reductions
• World class cost position using Lean Six Sigma
• Price increases where possible
Effectively utilizing our global footprint to create new cash streams and cost reduction programs.
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• Sale of plants in Italy & France• Sale of plants in Italy & France
• Streamlined European management and R&D
• Streamlined European management and R&D
• Reorganization of plants in Germany• Reorganization of plants in Germany
Strategically Align Operations Strategically Align Operations
CompleteCompleteComplete
StatusStatusStatusRecent ActivitiesRecent ActivitiesRecent Activities
• Reviewing strategic alternatives for Foil and Technical Products in Europe
• Reviewing strategic alternatives for Foil and Technical Products in Europe
CompleteCompleteComplete
On-goingOnOn--goinggoing
On-goingOnOn--goinggoing
• Divestment of certain non-core assets in Brazil
• Divestment of certain non-core assets in Brazil
CompleteCompleteComplete
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Strategically Align Operations Strategically Align Operations
StatusStatusStatusStrategic InvestmentsStrategic InvestmentsStrategic Investments
• Investing in Asia Expansion• Investing in Asia Expansion UnderwayUnderwayUnderway
• Invest in Global Fusion• Invest in Global Fusion Partially CompletePartially CompletePartially Complete
• Invest in Automotive Capability• Invest in Automotive Capability CompleteCompleteComplete
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De-lever the Capital StructureDe-lever the Capital Structure
2,951
2,4462,4832,630
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2,800
3,000
3,200
Total Debt atSpin-Off
4Q05 2Q06 3Q06
(US$MM)
Reduced total debt by $505MM since spin-off (through Q3-06)
$505
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“It is clearly a major development,” said Adam Rowley, a commodities and mining analyst at Macquarie Bank Ltd in London.
Novelis has developed a “game-changing Technology” that simultaneously casts multiple layers into a single aluminum rolling ingot.
Focused on InnovationFocused on Innovation
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Novelis Fusion in Industrial ProductionNovelis Fusion in Industrial Production
• Current Investments– Oswego, New York – Sierre, Switzerland – Ulsan, Korea
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A New Generation of Sheet ProductsA New Generation of Sheet Products
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Innovation OpportunitiesInnovation Opportunities
Our StrategyOur StrategyEnhance the Portfolio, Innovate for GrowthPerfect the Conversion Business ModelImprove Operational Efficiency Strategically Align OperationsDe-lever Capital Structure
Enhance the Portfolio, Innovate for GrowthPerfect the Conversion Business ModelImprove Operational Efficiency Strategically Align OperationsDe-lever Capital Structure
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Longer-term TargetsLonger-term Targets
• Annual growth of 7-10 % for Regional Income less corporate costs
• Annual returns on invested capital above 12%
• Annual free cash flow surpassing $400 MM
• Debt-to-EBITDA ratio between 2.5x and 3x
Successfully executing our strategy will enhance shareholder value turning an already solid company into a great one.
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