##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
   (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    June 30,
    2010Oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    001-32312
  Novelis
    Inc.
 (Exact name of registrant as
    specified in its charter)
   Canada

98-0442987(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification Number)3399 Peachtree Road NE, Suite 1500
    Atlanta, Georgia(Address of principal
    executive offices)

30326(Zip
    Code)   Telephone:
    (404) 814-4200
 (Registrants telephone
    number, including area code)
  þ o
  Regulation S-T o o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ




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##### 



TABLE OF
    CONTENTS
   
 PART I. FINANCIAL INFORMATIONItem 1.


Financial StatementsCondensed Consolidated Statements of Operations
    for the Three Months Ended June 30, 2010 and 2009
    (unaudited)


2Condensed Consolidated Balance Sheets as of
    June 30, 2010 and March 31, 2010 (unaudited)


3Condensed Consolidated Statements of Cash Flows
    for the Three Months Ended June 30, 2010 and 2009
    (unaudited)


4Condensed Consolidated Statement of
    Shareholders Equity for the Three Months Ended
    June 30, 2010 (unaudited)


5Condensed Consolidated Statements of
    Comprehensive Income for the Three Months Ended June 30,
    2010 and 2009 (unaudited)


6Notes to the Condensed Consolidated Financial
    Statements (unaudited)


7Item 2.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


34Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


47Item 4.


Controls and Procedures


50PART II. OTHER INFORMATIONItem 1.


Legal Proceedings


51Item 1A.


Risk Factors


51Item 6.


Exhibits


51EX-31.1EX-31.2EX-32.1EX-32.2   1




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  Novelis
    Inc.
  CONDENSED
    CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 (In
    millions)
  Three MonthsEndedJune 30,2010


2009Net sales

$
2,533


$
1,960Cost of goods sold (exclusive of depreciation and amortization
    shown below)


2,208



1,533Selling, general and administrative expenses


81



78Depreciation and amortization


103



100Research and development expenses


9



8Interest expense and amortization of debt issuance costs


39



43Interest income


(3
)


(3
)(Gain) loss on change in fair value of derivative instruments,
    net


6



(72
)Restructuring charges, net


6



3Equity in net loss of non-consolidated affiliates


3



10Other (income) expense, net


7



(13
)2,459



1,687Income before income taxes


74



273Income tax provision


15



112Net income


59



161Net income attributable to noncontrolling interests


9



18Net income attributable to our common shareholder

$
50


$
143    2




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##### Table of Contents



Novelis
    Inc.
  CONDENSED
    CONSOLIDATED BALANCE SHEETS (unaudited)
 (In
    millions, except number of shares)
  June 30,


March 31,2010


2010ASSETSCurrent assetsCash and cash equivalents

$
419


$
437Accounts receivable (net of allowances of $4 as of June 30,
    2010 and March 31, 2010) third parties


1,242



1,143 related parties


18



24Inventories


1,075



1,083Prepaid expenses and other current assets


45



39Fair value of derivative instruments


158



197Deferred income tax assets


28



12Total current assets


2,985



2,935Property, plant and equipment, net


2,499



2,632Goodwill


611



611Intangible assets, net


718



749Investment in and advances to non-consolidated affiliates


650



709Fair value of derivative instruments, net of current portion


5



7Long-term deferred income tax assets


6



5Other long-term assets third parties


93



93 related parties


18



21Total assets

$
7,585


$
7,762LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
107


$
106Short-term borrowings


29



75Accounts payable third parties


1,084



1,076 related parties


44



53Fair value of derivative instruments


107



110Accrued expenses and other current liabilities


422



436Deferred income tax liabilities


32



34Total current liabilities


1,825



1,890Long-term debt, net of current portion


2,485



2,490Long-term deferred income tax liabilities


495



497Accrued postretirement benefits


486



499Other long-term liabilities


343



376Total liabilities


5,634



5,752Commitments and contingenciesShareholders equityCommon stock, no par value; unlimited number of shares
    authorized; 77,459,658 shares issued and outstanding
    as of June 30, 2010 and March 31, 2010






Additional paid-in capital


3,497



3,497Accumulated deficit


(1,475
)


(1,525
)Accumulated other comprehensive loss


(213
)


(103
)Total Novelis shareholders equity


1,809



1,869Noncontrolling interests


142



141Total equity


1,951



2,010Total liabilities and shareholders equity

$
7,585


$
7,762    3




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##### Table of Contents



Novelis
    Inc.
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 (In
    millions)
  Three Months EndedJune 30,2010


2009OPERATING ACTIVITIESNet income

$
59


$
161Adjustments to determine net cash provided by (used in)
    operating activities:Depreciation and amortization


103



100(Gain) loss on change in fair value of derivative instruments,
    net


6



(72
)Deferred income taxes


(11
)


98Write-off and amortization of fair value adjustments, net


5



(51
)Equity in net loss of non-consolidated affiliates


3



10Foreign exchange remeasurement of debt


7



(7
)Gain on sale of assets


(13
)


(1
)Other, net


3



3Changes in assets and liabilities:Accounts receivable


(146
)


(80
)Inventories


(38
)


11Accounts payable


51



29Other current assets


(8
)


3Other current liabilities


16



29Other noncurrent assets


(3
)


(9
)Other noncurrent liabilities


(12
)


32Net cash provided by operating activities


22



256INVESTING ACTIVITIESCapital expenditures


(23
)


(24
)Proceeds from sales of assets


15



3Changes to investment in and advances to non-consolidated
    affiliates






3Proceeds from related party loans receivable, net


3



6Net proceeds (outflow) from settlement of derivative instruments


32



(221
)Net cash provided by (used in) investing activities


27



(233
)FINANCING ACTIVITIESProceeds from issuance of debt, related parties






3Principal payments


(4
)


(12
)Short-term borrowings, net


(41
)


(33
)Dividends, noncontrolling interest


(17
)


(1
)Net cash used in financing activities


(62
)


(43
)Net decrease in cash and cash equivalents


(13
)


(20
)Effect of exchange rate changes on cash balances held in
    foreign currencies


(5
)


9Cash and cash equivalents  beginning of period


437



248Cash and cash equivalents  end of period

$
419


$
237    4




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##### Table of Contents



Novelis
    Inc.
  CONDENSED
    CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
    (unaudited)
 (In
    millions, except number of shares)
  Novelis Inc. ShareholderAccumulatedOtherAdditional





Comprehensive


Non-Common Stock


Paid-in


Accumulated


Loss


controlling


TotalShares


Amount


Capital


Deficit


(AOCI)


Interests


EquityBalance as of March 31, 2010


77,459,658


$



$
3,497


$
(1,525
)

$
(103
)

$
141


$
2,010Net income attributable to our common shareholder














50











50Net income attributable to noncontrolling interests






















9



9Currency translation adjustment


















(116
)


(8
)


(124
)Change in fair value of effective portion of cash flow hedges,
    net of tax provision of $3 included in AOCI


















6







6Balance as of June 30, 2010


77,459,658


$



$
3,497


$
(1,475
)

$
(213
)

$
142


$
1,951    5




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##### Table of Contents



Novelis
    Inc.
  CONDENSED
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
 (In
    millions)
  Three Months Ended


Three Months EndedJune 30, 2010


June 30, 2009Attributable to


Attributable to





Attributable to


Attributable toOur Common


Noncontrolling





Our Common


NoncontrollingShareholder


Interests


Total


Shareholder


Interests


TotalNet income

$
50


$
9


$
59


$
143


$
18


$
161Other comprehensive income (loss):Currency translation adjustment


(116
)


(8
)


(124
)


50



7



57Net change in fair value of effective portion of cash flow hedges


9







9



11







11Postretirement benefit plans:Change in pension and other benefits














3







3Other comprehensive income (loss) before income tax effect


(107
)


(8
)


(115
)


64



7



71Income tax provision related to items of other comprehensive
    income (loss)


3







3



2







2Other comprehensive income (loss), net of tax


(110
)


(8
)


(118
)


62



7



69Comprehensive income (loss)

$
(60
)

$
1


$
(59
)

$
205


$
25


$
230    6




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)
  1.
    BUSINESS
    AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES    Description
    of Business and Basis of Presentation
    Form 10-K
    Acquisition
    of Novelis Common Stock
    Consolidation
    Policy
   7




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Reclassifications
    and Adjustment
      Recently
    Adopted Accounting Standards
  No. 2009-17, Consolidations: Improvements to Financial Reporting by
    Enterprises Involved with Variable Interest Entities. No. 2009-17 No. 2009-16, Transfers and Servicing: Accounting for Transfers of
    Financial Assets
  Recently
    Issued Accounting Standards
    2.
    RESTRUCTURING
    PROGRAMS    North





South





RestructuringEurope


America


Asia


America


Corporate


ReservesBalance as of March 31, 2010

$
28


$
10


$



$



$



$
38Provisions, net


1



5















6Cash payments


(4
)


(5
)














(9
)Impact of exchange rate changes






















Balance as of June 30, 2010

$
25


$
10


$



$



$



$
35   Europe
   8




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  North
    America
    3.
    INVENTORIES    June 30,


March 31,2010


2010Finished goods

$
227


$
270Work in process


425



431Raw materials


334



295Supplies


95



931,081



1,089Allowances


(6
)


(6
)Inventories

$
1,075


$
1,083   4.
    CONSOLIDATION
    OF VARIABLE INTEREST ENTITIES (VIE)       9




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    June 30,


March 31,2010


2010AssetsCurrent assetsCash and cash equivalents

$
3


$
3Accounts receivable


31



29Inventories, net


31



31Prepaid expenses and other current assets


1



1Total current assets


66



64Property, plant and equipment, net


9



10Goodwill


12



12Deferred income taxes


42



41Other long-term assets


3



3Total assets

$
132


$
130LiabilitiesCurrent liabilitiesAccounts payable

$
25


$
23Accrued expenses and other current liabilities


11



12Total current liabilities


36



35Accrued postretirement benefits


98



97Other long-term liabilities


3



3Total liabilities

$
137


$
135   5.
    INVESTMENT
    IN AND ADVANCES TO NON-CONSOLIDATED AFFILIATES AND RELATED PARTY
    TRANSACTIONS    Three MonthsEndedJune 30,2010


2009Net sales

$
56


$
56Costs, expenses and provisions for taxes on income


59



66Net loss

$
(3
)

$
(10
)    10




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
      June 30,

March 31,2010

2010Accounts receivable

$
18


$
24Other long-term receivables

$
18


$
21Accounts payable

$
44


$
53   6.
    DEBT    June 30, 2010


March 31, 2010Unamortized








UnamortizedInterest





Fair Value


Carrying





Fair Value


CarryingRates(A)


Principal


Adjustments(B)


Value


Principal


Adjustments(B)


ValueThird party debt:Short term borrowings


1.84
%

$
29


$



$
29


$
75


$



$
75Novelis Inc.Floating rate Term Loan Facility, due July 2014


2.36
%(C)


291







291



292







29211.5% Senior Notes, due February 2015


11.50
%


185



(3
)


182



185



(3
)


1827.25% Senior Notes, due February 2015


7.25
%


1,124



38



1,162



1,124



41



1,165Novelis CorporationFloating rate Term Loan Facility, due July 2014


2.30
%(C)


857



(43
)


814



859



(46
)


813Novelis Switzerland S.A.Capital lease obligation, due December 2019 (Swiss francs (CHF)
    47 million)


7.50
%


43



(2
)


41



45



(3
)


42Capital lease obligation, due August 2011 (CHF 1 million)


2.49
%


1







1



1







1Novelis Korea LimitedBank loan, due October 2010


1.32
%(C)


100







100



100







100OtherOther debt, due December 2011 through December 2012


1.00
%


1







1



1







1Total debt  third parties






2,631



(10
)


2,621



2,682



(11
)


2,671Less: Short term borrowings






(29
)






(29
)


(75
)






(75
)Current portion of long term debt






(116
)


9



(107
)


(116
)


10



(106
)Long-term debt, net of current portion  third
    parties:





$
2,486


$
(1
)

$
2,485


$
2,491


$
(1
)

$
2,490     (A)
    
    Interest rates are as of June 30, 2010 and exclude the
    effects of accretion/amortization of fair value adjustments as a
    result of the Arrangement and the debt exchange completed in
    fiscal 2009. 11




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   (B)
    
    Debt existing at the time of the Arrangement was recorded at
    fair value. Additional floating rate Term Loan with a face value
    of $220 million issued in March 2009 was recorded at a fair
    value of $165 million. Additional 11.5% Senior Notes
    with a face value of $185 million issued in August 2009
    were recorded at fair value of $181 million.(C)
    
    Excludes the effect of related interest rate swaps and the
    effect of accretion of fair value.    As of June 30, 2010

AmountWithin one year

$
1452 years


163 years


164 years


165 years


2,414Thereafter


24Total

$
2,631   Senior
    Secured Credit Facilities
    Short-Term
    Borrowings and Lines of Credit
      Interest
    Rate Swaps
     12




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    7.
    SHARE-BASED
    COMPENSATION      Three Months EndedJune 30,2010


2009Novelis Long-Term Incentive Plan 2009

$
1


$
Novelis Long-Term Incentive Plan 2010


1



Total compensation expense

$
2


$
     Weighted


Weighted Average


AggregateAverage


Remaining


IntrinsicNumber of


Exercise Price


Contractual Term


Value (USD2010 LTIP

SARs


(in Indian Rupees)


(In years)


in millions)SARs outstanding as of March 31, 2010


13,680,431



87.68



6.24


$
29Exercised


131,336



85.79Forfeited/Cancelled


306,540



85.79SARs outstanding as of June 30, 2010


13,242,555



87.98



6.00


$
16   Weighted


Weighted Average


AggregateAverage


Remaining


IntrinsicNumber of


Exercise Price


Contractual Term


Value (USD2009 LTIP

SARs


(in Indian Rupees)


(In years)


in millions)SARs outstanding as of March 31, 2010


11,371,399



60.50



5.25


$
18Exercised


1,213,342



60.50Forfeited/Cancelled


316,266



60.50SARs outstanding as of June 30, 2010


9,841,791



60.50



5.00


$
15  13




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    2010 LTIP

2009 LTIPRisk-free interest rate

7.34  7.61%

7.16%  7.42%Dividend yield

0.93%

0.93%Volatility

49.53%

53.12%Time interval (in years)

0.004

0.004       8.
    POSTRETIREMENT
    BENEFIT PLANS      Pension Benefit Plans


Other BenefitsThree Months Ended


Three Months EndedJune 30,


June 30,2010


2009


2010


2009Service cost

$
9


$
8


$
2


$
2Interest cost


16



14



2



3Expected return on assets


(14
)


(10
)






Amortization  losses


3



3







Net periodic benefit cost

$
14


$
15


$
4


$
5     Employer
    Contributions to Plans
   14




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    Three Months EndedJune 30,2010


2009Funded pension plans

$
9


$
3Unfunded pension plans


3



4Savings and defined contribution pension plans


5



3Total contributions

$
17


$
10     9.
    CURRENCY
    (GAINS) LOSSES    Three Months EndedJune 30,2010


2009Net (gain) on change in fair value of currency derivative
    instruments(A)

$
(24
)

$
(22
)Net (gain) loss on remeasurement of monetary assets and
    liabilities(B)


21



(4
)Net currency gain

$
(3
)

$
(26
)     (A)
    
    Included in (Gain) loss on change in fair value of derivative
    instruments, net.(B)
    
    Included in Other (income) expense, net.    Three Months Ended


Year EndedJune 30, 2010


March 31, 2010Cumulative currency translation adjustment  beginning
    of period

$
(3
)

$
(78
)Effect of changes in exchange rates


(124
)


75Cumulative currency translation adjustment  end of
    period

$
(127
)

$
(3
)  15




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  10.
    FINANCIAL
    INSTRUMENTS AND COMMODITY CONTRACTS    June 30, 2010Assets


Liabilities


Net Fair ValueCurrent


Noncurrent


Current


Noncurrent(A)


Assets/(Liabilities)Derivatives designated as hedging instruments:Interest rate swaps

$



$



$
(5
)

$
(1
)

$
(6
)Electricity swap










(6
)


(20
)


(26
)Total derivatives designated as hedging instruments










(11
)


(21
)


(32
)Derivatives not designated as hedging instruments:Aluminum contracts


83



1



(72
)


(6
)


6Currency exchange contracts


75



4



(21
)


(6
)


52Energy contracts










(3
)






(3
)Total derivatives not designated as hedging instruments


158



5



(96
)


(12
)


55Total derivative fair value

$
158


$
5


$
(107
)

$
(33
)

$
23   March 31, 2010Assets


Liabilities


Net Fair ValueCurrent


Noncurrent


Current


Noncurrent(A)


Assets/(Liabilities)Derivatives designated as hedging instruments:Currency exchange contracts

$



$



$



$
(21
)

$
(21
)Interest rate swaps










(6
)


(1
)


(7
)Electricity swap










(8
)


(27
)


(35
)Total derivatives designated as hedging instruments










(14
)


(49
)


(63
)Derivatives not designated as hedging instruments:Aluminum contracts


149



6



(80
)






75Currency exchange contracts


48



1



(10
)


(1
)


38Energy contracts










(6
)






(6
)Total derivatives not designated as hedging instruments


197



7



(96
)


(1
)


107Total derivative fair value

$
197


$
7


$
(110
)

$
(50
)

$
44     (A)
    
    The noncurrent portions of derivative liabilities are included
    in Other long-term liabilities in the accompanying condensed
    consolidated balance sheets. 16




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   Net
    Investment Hedges
    Cash Flow
    Hedges
            Amount of Gain or (Loss)Amount of Gain or (Loss)

Recognized in Income/(Expense) onAmount of Gain or (Loss)

Reclassified from

Derivative (Ineffective PortionRecognized in OCI on Derivative

AOCI into Income/(Expense)

and Amount Excluded from(Effective Portion)

(Effective Portion)

Effectiveness Testing)Three Months

Three Months

Three Months

Three Months

Three Months

Three MonthsEnded

Ended

Ended

Ended

Ended

EndedJune 30,

June 30,

June 30,

June 30,

June 30,

June 30,2010

2009

2010

2009

2010

2009Electricity swap

$
(10
)

$
9


$
(1
)

$
(1
)

$



$
2Interest rate swaps

$



$
1


$



$



$



$
  17




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Derivative
    Instruments Not Designated as Hedges
                Three MonthsEndedJune 30,2010


2009Derivative Instruments Not Designated as HedgesAluminum contracts

$
(33
)

$
48Currency exchange contracts


24



22Energy contracts


1



Gain (loss) recognized


(8
)


70Derivative Instruments Designated as Cash Flow HedgesElectricity swap


2



2Gain (loss) on change in fair value of derivative instruments,
    net

$
(6
)

$
72  18




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    Three MonthsEndedJune 30,2010


2009Realized gains (losses) included in segment income

$
41


$
(228
)Realized gains (losses) on corporate derivative instruments






1Unrealized gains (losses)


(47
)


299Gain (loss) on change in fair value of derivative instruments,
    net

$
(6
)

$
72       11.
    FAIR
    VALUE MEASUREMENTS            Derivative
    Contracts
     19




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
            June 30, 2010


March 31, 2010Assets


Liabilities


Assets


LiabilitiesLevel 2Aluminum contracts

$
80


$
(74
)

$
151


$
(76
)Currency exchange contracts


79



(27
)


49



(32
)Energy contracts






(3
)






(6
)Interest rate swaps






(6
)






(7
)Total Level 2 Instruments


159



(110
)


200



(121
)Level 3Aluminum contracts


4



(4
)


4



(4
)Electricity swap






(26
)






(35
)Total Level 3 Instruments


4



(30
)


4



(39
)Total

$
163


$
(140
)

$
204


$
(160
)       Level 3DerivativeInstruments(A)Balance as of March 31, 2010

$
(35
)Net realized/unrealized (losses) included in earnings(B)


2Net realized/unrealized (losses) included in Other comprehensive
    income (loss)(C)


9Net purchases, issuances and settlements


(2
)Net transfers from Level 3 to Level 2


Balance as of June 30, 2010

$
(26
)
  20




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    (A)
    
    Represents derivative assets net of derivative liabilities.(B)
    
    Included in (Gain) loss on change in fair value of derivative
    instruments, net.(C)
    
    Included in Change in fair value of effective portion of hedges,
    net.  Financial
    Instruments Not Recorded at Fair Value
    June 30, 2010

March 31, 2010Carrying

Fair

Carrying

FairValue

Value

Value

ValueAssetsLong-term receivables from related parties

$
18


$
18


$
21


$
21LiabilitiesTotal debt  third parties (excluding short term
    borrowings)


2,592



2,413



2,596



2,432   12.
    OTHER
    (INCOME) EXPENSE, NET    Three Months EndedJune 30,2010


2009Exchange (gains) losses, net

$
21


$
(4
)Gain on sale of assets


(13
)


(1
)Gain on tax litigation settlement in Brazil






(6
)Other, net


(1
)


(2
)Other (income) expense, net

$
7


$
(13
)  21




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  13.
    INCOME
    TAXES    Three Months EndedJune 30,2010


2009Pre-tax income before equity in net income of non-consolidated
    affiliates and noncontrolling interests

$
77


$
283Canadian statutory tax rate


29
%


30
%Provision at the Canadian statutory rate


22



85Increase (decrease) for taxes on income (loss) resulting from:Exchange translation items


(2
)


12Exchange remeasurement of deferred income taxes


(2
)


23Change in valuation allowances


3



1Expense (income) items not subject to tax


(1
)


1Tax rate differences on foreign earnings


(5
)


(11
)Uncertain tax positions, net


1



1Other  net


(1
)


Income tax provision

$
15


$
112Effective tax rate


19
%


40
%
     14.
    COMMITMENTS
    AND CONTINGENCIES   22




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Legal
    Proceedings
  Coca-Cola
    Lawsuit. Coca-Cola
  Environmental
    Matters
        clean-up
 23




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    Brazil
    Tax Matters
      Guarantees
    of Indebtedness
        Maximum

LiabilityPotential

CarryingType of Entity

Future Payment

ValueWholly-owned subsidiaries

$
130


$
37    24




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  15.
    SEGMENT,
    MAJOR CUSTOMER AND MAJOR SUPPLIER INFORMATION  Segment
    Information
      Adjustment to Eliminate Proportional
    Consolidation.
    Selected
    Segment Financial Information
  North





South

CorporateTotal Assets

America

Europe

Asia

America

and Other

Eliminations

TotalJune 30, 2010

$
2,747


$
2,702


$
949


$
1,349


$
51


$
(213
)

$
7,585March 31, 2010

$
2,726


$
2,870


$
965


$
1,344


$
49


$
(192
)

$
7,762   Selected Operating Results

North





South

CorporateThree Months Ended June 30, 2010

America

Europe

Asia

America

and Other

Eliminations

TotalNet sales

$
959


$
842


$
457


$
277


$



$
(2
)

$
2,533Depreciation and amortization


42



33



15



23



2



(12
)


103Capital expenditures


7



8



6



5



3



(6
)


23   Selected Operating Results

North





South

CorporateThree Months Ended June 30, 2009

America

Europe

Asia

America

and Other

Eliminations

TotalNet sales

$
767


$
665


$
326


$
204


$



$
(2
)

$
1,960Depreciation and amortization


41



48



11



18



1



(19
)


100Capital expenditures


6



11



3



7







(3
)


24  25




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    Three Months EndedJune 30,2010


2009North America

$
101


$
57Europe


88



33Asia


44



38South America


49



11Corporate and other(A)


(19
)


(15
)Depreciation and amortization


(103
)


(100
)Interest expense and amortization of debt issuance costs


(39
)


(43
)Interest income


3



3Unrealized gains (losses) on change in fair value of derivative
    instruments, net(B)


(47
)


299Adjustment to eliminate proportional consolidation


(10
)


(16
)Restructuring charges, net


(6
)


(3
)Other income, net


13



9Income before income taxes


74



273Income tax provision


15



112Net income


59



161Net income attributable to noncontrolling interests


9



18Net income attributable to our common shareholder

$
50


$
143     (A)
    
    Corporate and other includes functions that are managed directly
    from our corporate office, which focuses on strategy development
    and oversees governance, policy, legal compliance, human
    resources and finance matters. These expenses have not been
    allocated to the regions. It also includes realized gains
    (losses) on corporate derivative instruments.(B)
    
    Unrealized gains (losses) on change in fair value of derivative
    instruments, net represents the portion of gains (losses) that
    were not settled in cash during the period. Total realized and
    unrealized gains (losses) are included in the aggregate each
    period in (Gain) loss on change in fair value of derivative
    instruments, net on our condensed consolidated statements of
    operations. See Note 10  Financial Instruments
    and Commodity Contracts for additional discussion. 26




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   Information
    about Major Customers and Primary Supplier
    Three Months EndedJune 30,2010

2009Rexam


16
%


20
%Anheuser-Busch


13
%


12
%     16.
    SUPPLEMENTAL
    INFORMATION    June 30,


March 31,2010


2010Currency translation adjustment

$
(124
)

$
(8
)Fair value of effective portion of cash flow hedges


(21
)


(27
)Pension and other benefits


(68
)


(68
)Accumulated other comprehensive loss

$
(213
)

$
(103
)     Three Months EndedJune 30,2010

2009Interest paid

$
9


$
18Income taxes paid (refunded)

$
9


$
(7
)   17.
    SUPPLEMENTAL
    GUARANTOR INFORMATION  Rule 3-10(h)(1) Regulation S-X,
   27




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING STATEMENT OF OPERATIONS
 (In
    millions)
  Three Months June 30, 2010Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
260


$
2,032


$
749


$
(508
)

$
2,533Cost of goods sold (exclusive of depreciation and amortization
    shown below)


242



1,804



670



(508
)


2,208Selling, general and administrative expenses


(3
)


69



15







81Depreciation and amortization


2



77



24







103Research and development expenses


6



3











9Interest expense and amortization of debt issuance costs


29



23



1



(14
)


39Interest income


(14
)


(3
)






14



(3
)(Gain) loss on change in fair value of derivative instruments,
    net


1







5







6Restructuring charges, net






5



1







6Equity in net (income) loss of non-consolidated affiliates


(47
)


3







47



3Other (income) expense, net


(4
)






11







7212



1,981



727



(461
)


2,459Income (loss) before income taxes


48



51



22



(47
)


74Income tax provision (benefit)


(2
)


13



4







15Net income (loss)


50



38



18



(47
)


59Net income (loss) attributable to noncontrolling interests










9







9Net income (loss) attributable to our common shareholder

$
50


$
38


$
9


$
(47
)

$
50   28




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Three Months Ended June 30, 2009Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
168


$
1,534


$
551


$
(293
)

$
1,960Cost of goods sold (exclusive of depreciation and amortization
    shown below)


156



1,214



456



(293
)


1,533Selling, general and administrative expenses


10



56



12







78Depreciation and amortization


1



78



21







100Research and development expenses


5



3











8Interest expense and amortization of debt issuance costs


26



30



3



(16
)


43Interest income


(15
)


(3
)


(1
)


16



(3
)(Gain) loss on change in fair value of derivative instruments,
    net


(2
)


(61
)


(9
)






(72
)Restructuring charges, net






3











3Equity in net (income) loss of non-consolidated affiliates


(147
)


10







147



10Other (income) expense, net


(7
)


7



(13
)






(13
)27



1,337



469



(146
)


1,687Income (loss) before income taxes


141



197



82



(147
)


273Income tax provision (benefit)


(2
)


101



13







112Net income (loss)


143



96



69



(147
)


161Net income (loss) attributable to noncontrolling interests










18







18Net income (loss) attributable to our common shareholder

$
143


$
96


$
51


$
(147
)

$
143  29




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING BALANCE SHEET
 (In
    millions)
  June 30, 2010Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedASSETSCurrent assetsCash and cash equivalents

$
26


$
263


$
130


$



$
419Accounts receivable, net of allowances third parties


27



809



406







1,242 related parties


724



252



60



(1,018
)


18Inventories


50



759



266







1,075Prepaid expenses and other current assets


2



34



9







45Fair value of derivative instruments


4



116



47



(9
)


158Deferred income tax assets






21



7







28Total current assets


833



2,254



925



(1,027
)


2,985Property, plant and equipment, net


136



1,891



472







2,499Goodwill






600



11







611Intangible assets, net


5



710



3







718Investments in and advances to non-consolidated affiliates


1,946



649



1



(1,946
)


650Fair value of derivative instruments, net of current portion


1



6



1



(3
)


5Deferred income tax assets


1



3



2







6Other long-term assets


909



195



73



(1,066
)


111Total assets

$
3,831


$
6,308


$
1,488


$
(4,042
)

$
7,585LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
3


$
3


$
101


$



$
107Short-term borrowings third parties






12



17







29 related parties


25



460



17



(502
)


Accounts payable third parties


68



565



451







1,084 related parties


67



360



132



(515
)


44Fair value of derivative instruments


6



95



16



(10
)


107Accrued expenses and other current liabilities


68



271



84



(1
)


422Deferred income tax liabilities






32











32Total current liabilities


237



1,798



818



(1,028
)


1,825Long-term debt, net of current portion third parties


1,632



853











2,485 related parties


111



865



89



(1,065
)


Deferred income tax liabilities






483



12







495Accrued postretirement benefits


33



335



118







486Other long-term liabilities


9



325



12



(3
)


343Total liabilities


2,022



4,659



1,049



(2,096
)


5,634Commitments and contingenciesShareholders equityCommon stock


















Additional paid-in capital


3,497



(694
)


(109
)


803



3,497Retained earnings/(accumulated deficit)


(1,475
)


2,514



464



(2,978
)


(1,475
)Accumulated other comprehensive income (loss)


(213
)


(171
)


(58
)


229



(213
)Total Novelis shareholders equity


1,809



1,649



297



(1,946
)


1,809Noncontrolling interests










142







142Total equity


1,809



1,649



439



(1,946
)


1,951Total liabilities and shareholders equity

$
3,831


$
6,308


$
1,488


$
(4,042
)

$
7,585  30




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING BALANCE SHEET
 (In
    millions)
  As of March 31, 2010Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedASSETSCurrent assetsCash and cash equivalents

$
22


$
266


$
149


$



$
437Accounts receivable, net of allowances third parties


24



747



372







1,143 related parties


695



312



62



(1,045
)


24Inventories


47



770



266







1,083Prepaid expenses and other current assets


2



28



9







39Fair value of derivative instruments


5



161



43



(12
)


197Deferred income tax assets






7



5







12Total current assets


795



2,291



906



(1,057
)


2,935Property, plant and equipment, net


138



1,976



518







2,632Goodwill






600



11







611Intangible assets, net


6



740



3







749Investments in and advances to non-consolidated affiliates


1,998



708



1



(1,998
)


709Fair value of derivative instruments, net of current portion






7



2



(2
)


7Deferred income tax assets


1



3



1







5Other long-term assets


976



199



78



(1,139
)


114Total assets

$
3,914


$
6,524


$
1,520


$
(4,196
)

$
7,762LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
3


$
3


$
100


$



$
106Short-term borrowings third parties






61



14







75 related parties


41



457



21



(519
)


Accounts payable third parties


58



600



418







1,076 related parties


62



350



166



(525
)


53Fair value of derivative instruments


7



102



13



(12
)


110Accrued expenses and other current liabilities


52



279



106



(1
)


436Deferred income tax liabilities






33



1







34Total current liabilities


223



1,885



839



(1,057
)


1,890Long-term debt, net of current portion third parties


1,635



854



1







2,490 related parties


115



929



94



(1,138
)


Deferred income tax liabilities






485



12







497Accrued postretirement benefits


31



349



119







499Other long-term liabilities


41



333



5



(3
)


3762,045



4,835



1,070



(2,198
)


5,752Commitments and contingenciesShareholders equityCommon stock


















Additional paid-in capital


3,497















3,497Retained earnings (accumulated deficit)


(1,525
)


1,818



349



(2,167
)


(1,525
)Accumulated other comprehensive income (loss)


(103
)


(129
)


(40
)


169



(103
)Total equity of our common shareholder


1,869



1,689



309



(1,998
)


1,869Noncontrolling interests










141







141Total equity


1,869



1,689



450



(1,998
)


2,010Total liabilities and equity

$
3,914


$
6,524


$
1,520


$
(4,196
)

$
7,762  31




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
 (In
    millions)
  Three Months Ended June 30, 2010Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedOPERATING ACTIVITIESNet cash provided by (used in) operating activities

$
29


$
(18
)

$
11


$



$
22INVESTING ACTIVITIESCapital expenditures


(4
)


(13
)


(6
)






(23
)Proceeds from sales of assets






14



1







15Proceeds from loans receivable, net  related parties






3











3Net proceeds from settlement of derivative instruments


(4
)


36











32Net cash provided by (used in) investing activities


(8
)


40



(5
)






27FINANCING ACTIVITIESPrincipal payments third parties


(1
)


(3
)










(4
) related parties






22



(8
)


(14
)


Short-term borrowings, net third parties






(45
)


4







(41
) related parties


(16
)


4



(2
)


14



Dividends  noncontrolling interests










(17
)






(17
)Net cash provided by (used in) financing activities


(17
)


(22
)


(23
)






(62
)Net increase (decrease) in cash and cash equivalents


4







(17
)






(13
)Effect of exchange rate changes on cash balances held in
    foreign currencies






(3
)


(2
)






(5
)Cash and cash equivalents  beginning of period


22



266



149







437Cash and cash equivalents  end of period

$
26


$
263


$
130


$



$
419  32




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
 (In
    millions)
  Three Months Ended June 30, 2009Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedOPERATING ACTIVITIESNet cash provided by (used in) operating activities

$
3


$
129


$
151


$
(27
)

$
256INVESTING ACTIVITIESCapital expenditures


(1
)


(18
)


(5
)






(24
)Proceeds from sales of assets










3







3Changes to investment in and advances to non-consolidated
    affiliates






3











3Proceeds from loans receivable, net  related parties






6











6Net proceeds from settlement of derivative instruments


(1
)


(177
)


(43
)






(221
)Net cash provided by (used in) investing activities


(2
)


(186
)


(45
)






(233
)FINANCING ACTIVITIESProceeds from issuance of debt  related party


3















3Principal payments third parties


(1
)


(3
)


(8
)






(12
) related parties


(9
)


5



(59
)


63



Short-term borrowings, net third parties






(8
)


(25
)






(33
) related parties


10



26







(36
)


Dividends  noncontrolling interests










(1
)






(1
)Net cash provided by (used in) financing activities


3



20



(93
)


27



(43
)Net increase (decrease) in cash and cash equivalents


4



(37
)


13







(20
)Effect of exchange rate changes on cash balances held in
    foreign currencies






4



5







9Cash and cash equivalents  beginning of period


3



175



70







248Cash and cash equivalents  end of period

$
7


$
142


$
88


$



$
237  33




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  FORWARD
    LOOKING STATEMENTS
  The following information should be read together with our
    unaudited condensed consolidated financial statements and
    accompanying notes included elsewhere in this quarterly report
    for a more complete understanding of our financial condition and
    results of operations. The following discussion contains
    forward-looking statements that reflect our plans, estimates and
    beliefs. Our actual results could differ materially from those
    discussed in these forward-looking statements. Factors that
    could cause or contribute to these differences include, but are
    not limited to, those discussed below, particularly in
    SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND
    MARKET DATA.
  OVERVIEW
    AND REFERENCES
        Form 10-K Form 10-K
    HIGHLIGHTS
    
    Net sales for the first quarter of fiscal 2011 were
    $2.5 billion, an increase of 29% compared to the
    $2.0 billion reported in the same period a year ago.
    Shipments of aluminum rolled products totaled 746 kt for the
    first quarter of fiscal 2011, an increase of 15% compared to
    shipments of 650 kt in the first quarter of the previous year,
    driven by stronger end-market demand across all our regions.
    This represents the second consecutive quarter since the
    economic downturn that shipments grew in all four regions
    year-over-year.
    We reported pre-tax income of $74 million for the three
    months ended June 30, 2010, as compared to pre-tax income
    of $273 million for the three months ended June 30,
    2009. The prior year quarter includes unrealized gains on
    derivative instruments of $299 million and the current
    quarter results include $47 million of unrealized losses on
    derivatives. 34




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##### Table of Contents



BUSINESS
    AND INDUSTRY CLIMATE
    Key
    Sales and Shipment Trends
  Three Months Ended


Year Ended


Three Months EndedJune 30,


September 30,


December 31,


March 31,


March 31,


June 30,2009


2009


2009


2010


2010


2010(In millions, excepts shipments which are in kt)Net sales

$
1,960


$
2,181


$
2,112


$
2,420


$
8,673


$
2,533Percentage increase (decrease) in net sales versus comparable
    previous year period


(37
)%


(26
)%


(3
)%


25
%


(15
)%


29
%Rolled product shipments:North America


254



258



243



274



1,029



278Europe


185



203



188



227



803



232Asia


130



139



134



129



532



146South America


81



93



84



86



344



90Total


650



693



649



716



2,708



746Beverage and food cans


396



407



371



406



1,580



425All other rolled products


254



286



278



310



1,128



321Total


650



693



649



716



2,708



746Percentage increase (decrease) in rolled products shipments
    versus comparable previous year period:North America


(11
)%


(12
)%



%


11
%


(4
)%


9
%Europe


(32
)%


(20
)%


(5
)%


21
%


(12
)%


25
%Asia


(2
)%


14
%


26
%


50
%


19
%


12
%South America


(7
)%


7
%


(3
)%


1
%


(1
)%


11
%Total


(16
)%


(8
)%


3
%


18
%


(2
)%


15
%Beverage and food cans


(5
)%


(2
)%


2
%


12
%


1
%


7
%All other rolled products


(29
)%


(16
)%


3
%


27
%


(7
)%


26
%Total


(16
)%


(8
)%


3
%


18
%


(2
)%


15
%   Business
    Model and Key Concepts
  Conversion
    Business Model
     35




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##### Table of Contents



Metal
    Derivative Instruments
          Metal
    Price Ceilings
     36




---



##### Table of Contents



LME
    Three Months EndedJune 30,


Percent2010


2009


ChangeLondon Metal Exchange PricesAluminum (per metric tonne, and presented in U.S. dollars):Closing cash price as of beginning of period

$
2,288


$
1,366



67
%Average cash price during the period

$
2,096


$
1,484



41
%Closing cash price as of end of period

$
1,924


$
1,616



19
%     Foreign
    Exchange
    Average Exchange RateExchange Rate as of


Three Months EndedJune 30,


March 31,


June 30,2010


2010


2010


2009U.S. dollar per Euro


1.225



1.353



1.285



1.379Brazilian real per U.S. dollar


1.801



1.784



1.785



2.036South Korean won per U.S. dollar


1,210



1,131



1,164



1,302Canadian dollar per U.S. dollar


1.063



1.014



1.035



1.149       RESULTS
    OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2010 COMPARED
    TO THE THREE MONTHS ENDED JUNE 30, 2009
   37




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##### Table of Contents



Segment
    Review
        Selected Operating Results

North








SouthThree Months Ended June 30, 2010

America


Europe


Asia


America


Eliminations


TotalNet sales

$
959


$
842


$
457


$
277


$
(2
)

$
2,533Shipments (kt)Rolled products


278



232



146



90







746Ingot products


5



17



1



10







33Total shipments


283



249



147



100







779   Selected Operating Results

North








SouthThree Months Ended June 30, 2009

America


Europe


Asia


America


Eliminations


TotalNet sales

$
767


$
665


$
326


$
204


$
(2
)

$
1,960Shipments (kt)Rolled products


254



185



130



81







650Ingot products


7



27







7







41Total shipments


261



212



130



88







691  38




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##### Table of Contents



North








SouthChanges in Segment income

America


Europe


Asia


AmericaSegment income  three months ended June 30, 2009

$
57


$
33


$
38


$
11Volume


16



32



9



6Conversion premium and product mix


15



1



7



7Conversion costs(A)


27



(15
)


(1
)


4Metal price lag


(6
)


30



8



8Foreign exchange


(7
)


(11
)


(13
)


1Primary metal production














15Other changes(B)


(1
)


18



(4
)


(3
)Segment income  three months ended June 30, 2010

$
101


$
88


$
44


$
49     (A)
    
    Conversion costs include expenses incurred in production such as
    direct and indirect labor, energy, freight, scrap usage, alloys
    and hardeners, coatings, alumina, melt loss, the incremental
    benefit of used beverage cans (UBCs) and other metal costs.
    Fluctuations in this component reflect cost efficiencies during
    the period as well as cost inflation (deflation).(B)
    
    Other changes include selling, general &
    administrative costs and research and development for all
    segments and certain other items which impact one or more
    regions, including such items as the impact of purchase
    accounting and metal price ceiling contracts. Significant
    fluctuations in these items are discussed below.  North
    America
        Europe
     39




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##### Table of Contents



Asia
        South
    America
       40




---



##### Table of Contents



Reconciliation
    of segment results to Net income
    Three MonthsEndedJune 30,2010


2009North America

$
101


$
57Europe


88



33Asia


44



38South America


49



11Corporate and other


(19
)


(15
)Depreciation and amortization


(103
)


(100
)Interest expense and amortization of debt issuance costs


(39
)


(43
)Interest income


3



3Unrealized gains (losses) on change in fair value of derivative
    instruments, net


(47
)


299Adjustment to eliminate proportional consolidation


(10
)


(16
)Restructuring charges, net


(6
)


(3
)Other income, net


13



9Income before income taxes


74



273Income tax provision


15



112Net income


59



161Net income attributable to noncontrolling interests


9



18Net income attributable to our common shareholder

$
50


$
143            41




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##### Table of Contents




    Our functional currency in Brazil is the U.S. dollar where
    the company holds significant U.S. dollar denominated debt.
    As the value of the local currency strengthens and weakens
    against the U.S. dollar, unrealized gains or losses are
    created for tax purposes, while the underlying gains or losses
    are not recorded in our income statement.
    We have significant net deferred tax liabilities in Brazil that
    are remeasured to account for currency fluctuations as the taxes
    are payable in local currency.
    Our income is taxed at various statutory tax rates in varying
    jurisdictions. Applying the corresponding amounts of income and
    loss to the various tax rates results in differences when
    compared to our Canadian statutory tax rate.
    We record increases and decreases to valuation allowances
    primarily related to tax losses in certain jurisdictions where
    we believe it is more likely than not that we will not be able
    to utilize those losses.      LIQUIDITY
    AND CAPITAL RESOURCES
     42




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##### Table of Contents



Available
    Liquidity
    June 30,


March 31,2010


2010Cash and cash equivalents

$
419


$
437Overdrafts


(17
)


(14
)Availability under the ABL facility


649



603Total estimated liquidity

$
1,051


$
1,026     Free
    Cash Flow
      Three Months EndedJune 30,2010


2009


ChangeNet cash provided by operating activities

$
22


$
256


$
(234
)Net cash provided by (used in) investing activities


27



(233
)


260Less: Proceeds from sales of assets


(15
)


(3
)


(12
)Free cash flow

$
34


$
20


$
14Ending cash and cash equivalents

$
419


$
237


$
182     Operating
    Activities
   43




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##### Table of Contents



Investing
    Activities
    Three Months EndedJune 30,2010


2009


ChangeCapital expenditures

$
(23
)

$
(24
)

$
1Net proceeds (outflow) from settlement of derivative instruments


32



(221
)


253Proceeds from sales of assets


15



3



12Changes to investment in and advances to non-consolidated
    affiliates






3



(3
)Proceeds from related parties loans receivable, net


3



6



(3
)Net cash provided by (used in) investing activities

$
27


$
(233
)

$
260           Financing
    Activities
    Three Months EndedJune 30,2010


2009


ChangeProceeds from issuance of debt, related parties

$



$
3


$
(3
)Principal payments, third parties


(4
)


(12
)


8Short-term borrowings, net


(41
)


(33
)


(8
)Dividends, noncontrolling interest


(17
)


(1
)


(16
)Net cash used in financing activities

$
(62
)

$
(43
)

$
(19
)    44




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##### Table of Contents



OFF-BALANCE
    SHEET ARRANGEMENTS
    Derivative
    Instruments
    Guarantees
    of Indebtedness
        Maximum

LiabilityPotential

CarryingType of Entity

Future Payment

ValueWholly-owned subsidiaries

$
130


$
37     Other
    CONTRACTUAL
    OBLIGATIONS
  Form 10-K
  DIVIDENDS
    CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
  Form 10-K
 45




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##### Table of Contents



RECENT
    ACCOUNTING STANDARDS
    SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET
    DATA
  Form 10-Q
    
    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,
    including our internal used beverage cans (UBCs) and smelter
    hedges;
    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;
    continuing obligations and other relationships resulting from
    our spin-off from Alcan Inc.;
    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; 46




---



##### Table of Contents




    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.  Form 10-K
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  marked-to-market
      Commodity
    Price Risks
    Aluminum
     47




---



##### Table of Contents



Sensitivities
    Energy
            Sensitivities
    Change in

Change inPrice

Fair ValueElectricity


(10
)%

$
(1
)Natural Gas


(10
)%


(2
)  48




---



##### Table of Contents



Foreign
    Currency Exchange Risks
    non-U.S. dollar
      Sensitivities
    Change in

Change inExchange Rate

Fair ValueCurrency measured against the U.S. dollarBrazilian real


(10
)%

$
(16
)Euro


10
%


(29
)Korean won


(10
)%


(6
)Canadian dollar


10
%


(4
)British pound


10
%


(3
)Swiss franc


10
%


(2
)   Interest
    Rate Risks
     49




---



##### Table of Contents



Sensitivities
    Change in

Change inRate

Fair ValueInterest Rate ContractsNorth America


(10
)%

$
Asia


(10
)%

$
   Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Rule 13a-15
  Changes
    in Internal Control Over Financial Reporting
  Rule 13a-15(f)
 50




---



##### Table of Contents



PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    Item 1A.
    Risk
    Factors  Form 10-K
  Item 6.
    Exhibits  ExhibitNo.

Description2
.1

Arrangement Agreement by and among Hindalco Industries Limited,
    AV Aluminum Inc. and Novelis Inc., dated as of February 10, 2007
    (incorporated by reference to Exhibit 2.1 to our Current Report
    on Form 8-K filed on February 13, 2007) (File No. 001-32312))3
.1

Restated Certificate and Articles of Incorporation of Novelis
    Inc. (incorporated by reference to Exhibit 3.1 to our Current
    Report on Form 8-K filed on January 7, 2005 (File No. 001-32312))3
.2

Novelis Inc. Amended and Restated Bylaws, adopted as of July 24,
    2008 (incorporated by reference to Exhibit 3.2 to our Current
    Report on Form 8-K filed on July 25, 2008 (File No. 001-32312))10
.1*

Novelis 2011 Long-term Incentive Plan (incorporated by reference
    to Exhibit 10.1 to our Current Report on Form 8-K filed on May
    18, 2010 (File No. 001-32312).10
.2*

Novelis 2011 Annual Incentive Plan (incorporated by reference to
    Exhibit 10.2 to our Current Report on Form 8-K filed on May 28,
    2010 (File No. 001-32312).31
.1

Section 302 Certification of Principal Executive Officer31
.2

Section 302 Certification of Principal Financial Officer32
.1

Section 906 Certification of Principal Executive Officer32
.2

Section 906 Certification of Principal Financial Officer     *
    
    Indicates a management contract or compensatory plan or
    arrangement. 51




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Steven
    Fisher       By
    /s/  Robert
    P. Nelson       52




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description2
.1

Arrangement Agreement by and among Hindalco Industries Limited,
    AV Aluminum Inc. and Novelis Inc., dated as of February 10,
    2007 (incorporated by reference to Exhibit 2.1 to our Current
    Report on Form 8-K filed on February 13, 2007) (File No.
    001-32312))3
.1

Restated Certificate and Articles of Incorporation of Novelis
    Inc. (incorporated by reference to Exhibit 3.1 to our Current
    Report on Form 8-K filed on January 7, 2005 (File No. 001-32312))3
.2

Novelis Inc. Amended and Restated Bylaws, adopted as of July 24,
    2008 (incorporated by reference to Exhibit 3.2 to our Current
    Report on Form 8-K filed on July 25, 2008 (File No. 001-32312))10
.1*

Novelis 2011 Long-term Incentive Plan (incorporated by reference
    to Exhibit 10.1 to our Current Report on Form 8-K filed on May
    18, 2010 (File No. 001-32312).10
.2*

Novelis 2011 Annual Incentive Plan (incorporated by reference to
    Exhibit 10.2 to our Current Report on Form 8-K filed on May 28,
    2010 (File No. 001-32312).31
.1

Section 302 Certification of Principal Executive Officer31
.2

Section 302 Certification of Principal Financial Officer32
.1

Section 906 Certification of Principal Executive Officer32
.2

Section 906 Certification of Principal Financial Officer     *
    
    Indicates a management contract or compensatory plan or
    arrangement. 53