##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, 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,
    2009Oro

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
  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
    Three Months Ended June 30, 2009 and 2008 (unaudited)


2Condensed Consolidated Balance Sheets as of
    June 30, 2009 and March 31, 2009 (unaudited)


3Condensed Consolidated Statements of Cash Flows
    Three Months Ended June 30, 2009 and 2008 (unaudited)


4Condensed Consolidated Statement of
    Shareholders Equity Three Months Ended June 30, 2009
    (unaudited)


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


6Notes to the Condensed Consolidated Financial
    Statements (unaudited)


7Item 2.


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


35Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


54Item 4.


Controls and Procedures


57PART II. OTHER INFORMATIONItem 1.


Legal Proceedings


59Item 1A.


Risk Factors


59Item 6.


Exhibits


59EX-10.2EX-10.3EX-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 Months EndedJune 30,2009


2008Net sales

$
1,960


$
3,103Cost of goods sold (exclusive of depreciation and amortization
    shown below)


1,533



2,831Selling, general and administrative expenses


78



84Depreciation and amortization


100



116Research and development expenses


8



12Interest expense and amortization of debt issuance costs


43



45Interest income


(3
)


(5
)Gain on change in fair value of derivative instruments, net


(72
)


(65
)Restructuring charges, net


3



(1
)Equity in net loss of non-consolidated affiliates


10



2Other (income) expenses, net


(13
)


231,687



3,042Income before income taxes


273



61Income tax provision


112



35Net income


161



26Net income attributable to noncontrolling interests


18



2Net income attributable to our common shareholder

$
143


$
24    2




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##### Table of Contents



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


March 31,2009


2009ASSETSCurrent assetsCash and cash equivalents

$
237


$
248Accounts receivable (net of allowances of $3 and $2 as of
    June 30, 2009 and March 31, 2009) third parties


1,154



1,049 related parties


19



25Inventories


813



793Prepaid expenses and other current assets


50



51Fair value of derivative instruments


111



119Deferred income tax assets


125



216Total current assets


2,509



2,501Property, plant and equipment, net


2,795



2,799Goodwill


582



582Intangible assets, net


781



787Investment in and advances to non-consolidated affiliates


740



719Fair value of derivative instruments, net of current portion


58



72Deferred income tax assets


5



4Other long-term assets third parties


87



80 related parties


23



23Total assets

$
7,580


$
7,567LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
45


$
51Short-term borrowings


237



264Accounts payable third parties


785



725 related parties


52



48Fair value of derivative instruments


338



640Accrued expenses and other current liabilities


507



516Deferred income tax liabilities






Total current liabilities


1,964



2,244Long-term debt, net of current portion third parties


2,416



2,417 related parties


94



91Deferred income tax liabilities


495



469Accrued postretirement benefits


517



495Other long-term liabilities


356



342Total liabilities


5,842



6,058Commitments and contingenciesShareholders equityCommon stock, no par value; unlimited number of shares
    authorized; 77,459,658 shares issued and outstanding as of
    June 30, 2009 and March 31, 2009






Additional paid-in capital


3,497



3,497Accumulated deficit


(1,787
)


(1,930
)Accumulated other comprehensive loss


(86
)


(148
)Total equity of our common shareholder


1,624



1,419Noncontrolling interests


114



90Total equity


1,738



1,509Total liabilities and equity

$
7,580


$
7,567    3




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##### Table of Contents



Novelis
    Inc.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (unaudited)(In millions)
  Three Months EndedJune 30,2009


2008OPERATING ACTIVITIESNet income

$
161


$
26Adjustments to determine net cash provided by (used in)
    operating activities:Depreciation and amortization


100



116Gain on change in fair value of derivative instruments, net


(72
)


(65
)Deferred income taxes


98



10Write-off and amortization of fair value adjustments, net


(51
)


(64
)Equity in net loss of non-consolidated affiliates


10



2Foreign exchange remeasurement of debt


(7
)


Other, net


2



1Changes in assets and liabilities:Accounts receivable


(80
)


(339
)Inventories


11



(129
)Accounts payable


31



74Other current assets


3



(29
)Other current liabilities


29



(5
)Other noncurrent assets


(9
)


8Other noncurrent liabilities


32



43Net cash provided by (used in) operating activities


258



(351
)INVESTING ACTIVITIESCapital expenditures


(24
)


(33
)Proceeds from sales of assets


3



1Changes to investment in and advances to non-consolidated
    affiliates


3



6Proceeds from related party loans receivable, net


6



8Net proceeds (outflows) from settlement of derivative instruments


(223
)


34Net cash provided by (used in) investing activities


(235
)


16FINANCING ACTIVITIESProceeds from issuance of debt, related parties


3



Principal payments


(12
)


(4
)Short-term borrowings, net


(33
)


313Dividends, noncontrolling interest


(1
)


Net cash provided by (used in) financing activities


(43
)


309Net decrease in cash and cash equivalents


(20
)


(26
)Effect of exchange rate changes on cash balances held in
    foreign currencies


9



(4
)Cash and cash equivalents  beginning of period


248



326Cash and cash equivalents  end of period

$
237


$
296Supplemental disclosures of cash flow information:Interest paid

$
18


$
17Income taxes paid (refunded)

$
(7
)

$
55    4




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##### Table of Contents



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


AccumulatedAdditional


Earnings


Other


Non-Common Stock


Paid-in


(Accumulated


Comprehensive


controlling


TotalShares


Amount


Capital


Deficit)


Income (Loss)


Interests


EquityBalance as of March 31, 2009


77,459,658


$



$
3,497


$
(1,930
)

$
(148
)

$
90


$
1,509Net income attributable to our common shareholder














143











143Net income attributable to noncontrolling interests






















18



18Currency translation adjustment, net of tax


















53



7



60Change in fair value of effective portion of hedges, net of tax


















7







7Postretirement benefit plans:Change in pension and other benefits, net of tax


















2







2Noncontrolling interests cash dividends






















(1
)


(1
)Balance as of June 30, 2009


77,459,658


$



$
3,497


$
(1,787
)

$
(86
)

$
114


$
1,738    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, 2009


June 30, 2008Attributable to


Attributable to





Attributable to


Attributable toOur Common


Noncontrolling





Our Common


NoncontrollingShareholder


Interests


Total


Shareholder


Interests


TotalNet income

$
143


$
18


$
161


$
24


$
2


$
26Other comprehensive income (loss):Currency translation adjustment


50



7



57



10



(2
)


8Change in fair value of effective portion of hedges, net


11







11



19







19Postretirement benefit plans:Change in pension and other benefits


3







3











Other comprehensive income (loss) before income tax effect


64



7



71



29



(2
)


27Income tax provision related to items of other comprehensive
    income (loss)


2







2



8







8Other comprehensive income (loss), net of tax


62



7



69



21



(2
)


19Comprehensive income

$
205


$
25


$
230


$
45


$



$
45    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
    Recently
    Adopted Accounting Standards
    Noncontrolling
    Interests in Consolidated Financial Statements
 7




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    No. FAS 142-3, Determination of Useful Life of Intangible Assets FAS 142-3). FAS 142-3 FAS 142-3
  No. 107-1 FAS 107-1) 28-1 28-1), Interim Disclosures about Fair Value of Financial
    Instruments FAS 107-1 28-1 Interim
    Financial Reporting
  No. 157-4, Determining Fair Value When the Volume and Level of Activity
    for the Asset or Liability Have Significantly Decreased and
    Identifying Transactions That Are Not Orderly FAS 157-4). FAS 157-4 Fair Value Measurements
  No. 115-2 FAS 115-2) No. 124-2 FAS 124-2), Recognition of
    Other-than-Temporary-Impairments. FAS No. 115-2 FAS No. 124-2 other-than-temporary
  Business
    Combinations
  Accounting
    for Assets Acquired and Liabilities Assumed in a Business
    Combination That Arise from Contingencies
 8




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Accounting for Contingencies, Reasonable Estimation of the
    Amount of a Loss
  No. 08-06, Equity Method Investment Accounting Considerations (EITF 08-06). EITF 08-6 Non-controlling Interests in Consolidated
    Financial Statements. EITF 08-06 EITF 08-6
  Recently
    Issued Accounting Standards
    Amendments to FASB Interpretation No. 46(R) Consolidation of Variable Interest
    Entities Accounting for Transfers of Financial
    Assets
  Employers Disclosures about Pensions and Other
    Postretirement Benefits
   9




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   2.
    RESTRUCTURING
    PROGRAMS    North





South





RestructuringEurope


America


Asia


America


Corporate


ReservesBalance as of March 31, 2009

$
61


$
16


$



$
2


$
1


$
80Three Months Ended June 30, 2009 Activity:Provisions (recoveries), net


1



















1Cash payments


(13
)


(3
)






(1
)






(17
)Adjustments  other(A)


7



















7Balance as of June 30, 2009

$
56


$
13


$



$
1


$
1


$
71     (A)
    
    Consists of the impact of exchange rates on restructuring
    balances.  Europe
    North
    America
    South
    America
    3.
    INVENTORIES    June 30,


March 31,2009


2009Finished goods

$
203


$
215Work in process


326



296Raw materials


199



207Supplies


88



79816



797Allowances


(3
)


(4
)Inventories

$
813


$
793  10




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   4.
    CONSOLIDATION
    OF VARIABLE INTEREST ENTITIES  Consolidation of Variable Interest
    Entities
    June 30,


March 31,2009


2009Current assets

$
66


$
64Total assets

$
126


$
124Current liabilities

$
(34
)

$
(35
)Total liabilities

$
(137
)

$
(135
)Net carrying value

$
(11
)

$
(11
)   5.
    INVESTMENT
    IN AND ADVANCES TO NON-CONSOLIDATED AFFILIATES AND RELATED PARTY
    TRANSACTIONS    Three Months EndedJune 30,2009


2008Net sales

$
113


$
157Costs, expenses and provisions for taxes on income


116



142Net income (loss)

$
(3
)

$
15      11




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    Three Months EndedJune 30,2009


2008Purchases of tolling services and electricityAluminium Norf GmbH(A)

$
56


$
74Consorcio Candonga(B)


1



3Total purchases from related parties

$
57


$
77     (A)
    
    We purchase tolling services from Aluminium Norf GmbH.(B)
    
    We obtain electricity from Consorcio Candonga for our operations
    in South America.    June 30,


March 31,2009


2009Accounts receivable(A)

$
19


$
25Other long-term receivables(A)

$
23


$
23Accounts payable(B)

$
52


$
48     (A)
    
    The balances represent current and non-current portions of a
    loan due from Aluminium Norf GmbH.(B)
    
    We purchase tolling services from Aluminium Norf GmbH and
    electricity from Consorcio Candonga. 12




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   6.
    DEBT    June 30, 2009


March 31, 2009Unamortized








UnamortizedInterest





Fair Value


Carrying





Fair Value


CarryingRates(A)


Principal


Adjustments(B)


Value


Principal


Adjustments(B)


ValueThird party debt:Short term borrowings


2.81
%

$
237


$



$
237


$
264


$



$
264Novelis Inc.7.25% Senior Notes, due February 2015


7.25
%


1,124



45



1,169



1,124



47



1,171Floating rate Term Loan Facility, due July 2014


2.60
%(C)


294







294



295







295Novelis CorporationFloating rate Term Loan Facility, due July 2014


2.60
%(C)


865



(52
)


813



867



(54
)


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


7.50
%


46



(3
)


43



45



(3
)


42Capital lease obligation, due August 2011 (CHF 2 million)


2.49
%


2







2



2







2Novelis Korea LimitedBank loan, due October 2010


4.09
%


100







100



100







100Bank loan, due February 2010 (Korean won (KRW) 50 billion)


3.76
%


39







39



37







37Bank loan, due May 2009 (KRW 10 billion)


7.47
%














7







7OtherOther debt, due December 2011 through December 2012


1.00
%


1







1



1







1Total debt  third parties






2,708



(10
)


2,698



2,742



(10
)


2,732Less: Short term borrowings






(237
)






(237
)


(264
)






(264
)Current portion of long tern debt






(54
)


9



(45
)


(59
)


8



(51
)Long-term debt, net of current portion  third
    parties:





$
2,417


$
(1
)

$
2,416


$
2,419


$
(2
)

$
2,417Related party debtNovelis Inc.Unsecured credit facility  related party, due January
    2015


13.00
%

$
94


$



$
94


$
91


$



$
91     (A)
    
    Interest rates are as of June 30, 2009 and exclude the
    effects of accretion/amortization of fair value adjustments as a
    result of the Arrangement and the debt exchange completed in the
    fourth quarter of fiscal 2009.(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.(C)
    
    Excludes the effect of related interest rate swaps and the
    effect of accretion of fair value. 13




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   Senior
    Secured Credit Facilities
    Short-Term
    Borrowings and Lines of Credit
      Interest
    Rate Swaps
        7.
    SHARE-BASED
    COMPENSATION    Novelis
    Long-Term Incentive Plan
   14




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
      8.
    POSTRETIREMENT
    BENEFIT PLANS      Pension Benefit Plans


Other BenefitsThree Months Ended


Three Months EndedJune 30,


June 30,2009


2008


2009


2008Service cost

$
8


$
10


$
2


$
2Interest cost


14



15



3



3Expected return on assets


(10
)


(13
)






Amortization  (gains) losses


3











Curtailment/settlement losses






1







(2
)Net periodic benefit cost

$
15


$
13


$
5


$
3     Employer
    Contributions to Plans
    Three Months EndedJune 30,2009


2008Funded pension plans

$
3


$
4Unfunded pension plans


4



4Savings and defined contribution pension plans


3



5Total contributions

$
10


$
13  15




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    9.
    CURRENCY
    (GAINS) LOSSES    Three Months EndedJune 30,2009


2008Net gain on change in fair value of currency derivative
    instruments(A)

$
(22
)

$
(32
)Net (gain) loss on remeasurement of monetary assets and
    liabilities(B)


(4
)


20$
(26
)

$
(12
)     (A)
    
    Included in (Gain) loss on change in fair value of derivative
    instruments, net.(B)
    
    Included in Other (income) expenses, net.    Three Months Ended


Year EndedJune 30, 2009


March 31, 2009Cumulative currency translation adjustment  beginning
    of period

$
(78
)

$
85Effect of changes in exchange rates


60



(163
)Cumulative currency translation adjustment  end of
    period

$
(18
)

$
(78
)  16




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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, 2009Assets


Liabilities


Net Fair ValueCurrent


Noncurrent


Current


Noncurrent(A)


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

$



$



$
(1
)

$
(23
)

$
(24
)Interest rate swaps






3



(14
)






(11
)Electricity swap










(4
)


(2
)


(6
)Total derivatives designated as hedging instruments






3



(19
)


(25
)


(41
)Derivatives not designated as hedging instruments:Aluminum forward contracts


86



27



(268
)


(7
)


(162
)Currency exchange contracts


25



28



(44
)


(4
)


5Energy contracts










(7
)






(7
)Total derivatives not designated as hedging instruments


111



55



(319
)


(11
)


(164
)Total derivative fair value

$
111


$
58


$
(338
)

$
(36
)

$
(205
)   March 31, 2009Assets


Liabilities


Net Fair ValueCurrent


Noncurrent


Current


Noncurrent(A)


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

$



$



$



$
(11
)

$
(11
)Interest rate swaps










(13
)






(13
)Electricity swap










(6
)


(12
)


(18
)Total derivatives designated as hedging instruments










(19
)


(23
)


(42
)Derivatives not designated as hedging instruments:Aluminum contracts


99



41



(532
)


(13
)


(405
)Currency exchange contracts


20



31



(77
)


(12
)


(38
)Energy contracts










(12
)






(12
)Total derivatives not designated as hedging instruments


119



72



(621
)


(25
)


(455
)Total derivative fair value

$
119


$
72


$
(640
)

$
(48
)

$
(497
)     (A)
    
    The noncurrent portions of derivative liabilities are included
    in Other long-term liabilities in the accompanying condensed
    consolidated balance sheets. 17




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##### Table of Contents



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


(Ineffective Portion and AmountGain (Loss)


Reclassified from


Excluded fromRecognized in OCI


AOCI into Income


Effectiveness Testing)Three Months Ended


Three Months Ended


Three Months EndedJune 30, 2009


June 30, 2009


June 30, 2009Energy contracts

$
9


$
(1
)

$
2Interest rate swaps

$
1


$



$
   18




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Gain or (Loss)Recognized in IncomeGain (Loss)


(Ineffective Portion and AmountGain (Loss)


Reclassified from


Excluded fromRecognized in OCI


AOCI into Income


Effectiveness Testing)Three Months Ended


Three Months Ended


Three Months EndedJune 30, 2008


June 30, 2008


June 30, 2008Energy contracts

$
10


$
(3
)

$
Interest rate swaps

$
6


$



$
   Derivative
    Instruments Not Designated as Hedges
             19




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    Three Months EndedJune 30,2009


2008Derivative Instruments Not Designated as HedgesAluminum contracts

$
48


$
22Currency exchange contracts


22



32Energy contracts






7Gain (loss) recognized


70



61Derivative Instruments Designated as Cash Flow HedgesInterest rate swaps






Electricity swap


2



4Gain (loss) on change in fair value of derivative instruments,
    net

$
72


$
65   11.
    FAIR
    VALUE MEASUREMENTS  Disclosure about Fair Value of
    Financial Instruments (FASB 107)
  FASB
    157 Instruments
    June 30, 2009Fair Value Measurements UsingLevel 1(A)


Level 2(B)


Level 3(C)


TotalAssets  Derivative instruments

$



$
169


$



$
169Liabilities  Derivative instruments

$



$
(347
)

$
(27
)

$
(374
)   March 31, 2009Fair Value Measurements UsingLevel 1(A)


Level 2(B)


Level 3(C)


TotalAssets  Derivative instruments

$



$
191


$



$
191Liabilities  Derivative instruments

$



$
(644
)

$
(44
)

$
(688
)     (A)
    
    Level 1  Unadjusted quoted prices in active
    markets for identical, unrestricted assets or liabilities that
    we have the ability to access at the measurement date.(B)
    
    Level 2  Inputs other than quoted prices
    included within Level 1 that are observable for the asset
    or liability, either directly or indirectly.(C)
    
    Level 3  Unobservable inputs for which there is
    little or no market data, which require us to develop our own
    assumptions based on the best information available as what
    market participants would use in pricing the asset or liability.   20




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
              Level 3DerivativeInstruments(A)Balance as of March 31, 2009

$
(44
)Net realized/unrealized gains included in earnings(B)


10Net realized/unrealized gains included in Other comprehensive
    income(C)


5Net purchases, issuances and settlements


2Net transfers in and/or (out) of Level 3


Balance as of June 30, 2009

$
(27
)     (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.  FASB
    107 Instruments
   21




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    June 30, 2009


March 31, 2009Carrying


Fair


Carrying


FairValue


Value


Value


ValueAssetsLong-term receivables from related parties

$
23


$
22


$
23


$
21LiabilitiesLong-term debtNovelis Inc.7.25% Senior Notes, due February 2015


1,169



859



1,171



454Floating rate Term Loan facility, due July 2014


294



243



295



200Unsecured credit facility  related party, due January
    2015


94



107



91



93Novelis CorporationFloating rate Term Loan facility, due July 2014


813



710



813



584Novelis Switzerland S.A.Capital lease obligation, due December 2019 (CHF 50 million)


43



40



42



36Capital lease obligation, due August 2011 (CHF 2 million)


2



2



2



2Novelis Korea LimitedBank loan, due October 2010


100



90



100



83Bank loan, due February 2010 (KRW 50 billion)


39



37



37



33Bank loan, due May 2009 (KRW 10 billion)










7



7OtherOther debt, due April 2009 through December 2012


1



1



1



1Financial commitmentsLetters of credit






102







134   12.
    OTHER
    (INCOME) EXPENSES, NET    Three Months EndedJune 30,2009


2008Exchange (gains) losses, net

$
(4
)

$
20Impairment charges on long-lived assets






1Gain on disposal of property, plant and equipment, net


(1
)


(1
)Gain on tax litigation settlement in Brazil


(6
)


Other, net


(2
)


3Other (income) expenses, net

$
(13
)

$
23  22




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   13.
    INCOME
    TAXES    Three Months EndedJune 30,2009


2008Pre-tax income before equity in net loss of non-consolidated
    affiliates

$
283


$
63Canadian statutory tax rate


30
%


31
%Provision at the Canadian statutory rate


85



20Increase (decrease) for taxes on income (loss) resulting from:Exchange translation items


12



9Exchange remeasurement of deferred income taxes


23



20Change in valuation allowances


1



3Expense (income) items not subject to tax


1



(4
)Tax rate differences on foreign earnings


(11
)


(14
)Uncertain tax positions


1



1Provision

$
112


$
35Effective tax rate


40
%


56
%     14.
    COMMITMENTS
    AND CONTINGENCIES  Legal
    Proceedings
  Coca-Cola
    Lawsuit. Coca-Cola Coca-Cola Coca-Cola
 23




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Environmental
    Matters
      clean-up
    Brazil
    Tax Matters
   24




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  35-45% 80-100% 60-120 monthly 30-35% 70-80% 120-180 monthly 25-30% 60-70%
  Guarantees
    of Indebtedness
          Maximum


LiabilityPotential


CarryingType of Entity

Future Payment


ValueWholly-owned subsidiaries

$
45


$
7Aluminium Norf GmbH

$
14


$
     15.
    SEGMENT,
    MAJOR CUSTOMER AND MAJOR SUPPLIER INFORMATION  Segment
    Information
   25




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Adjustment to Eliminate Proportional
    Consolidation.
  Disclosure About the Segments of
    an Enterprise and Related Information.
      Selected
    Segment Financial Information
  Adjustment toEliminateNorth








South


Corporate


ProportionalTotal Assets

America


Europe


Asia


America


and Other


Consolidation


TotalJune 30, 2009

$
2,808


$
2,793


$
817


$
1,341


$
38


$
(217
)

$
7,580March 31, 2009

$
2,973


$
2,750


$
732


$
1,296


$
50


$
(234
)

$
7,567   Adjustment toEliminateSelected Operating Results

North








South


Corporate


ProportionalThree Months Ended June 30, 2009

America


Europe


Asia


America


and Other


Consolidation


TotalNet sales

$
767


$
665


$
326


$
204


$



$
(2
)

$
1,960Segment income


57



33



38



11



(15
)






124Depreciation and amortization


41



48



11



18



1



(19
)


100Capital expenditures


6



11



3



7







(3
)


24   26




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Adjustment toEliminateSelected Operating Results

North








South


Corporate


ProportionalThree Months Ended June 30, 2008

America


Europe


Asia


America


and Other


Consolidation


TotalNet sales

$
1,083


$
1,219


$
511


$
295


$



$
(5
)

$
3,103Segment income


42



111



31



47



(13
)






218Depreciation and amortization


42



63



15



17



1



(22
)


116Capital expenditures


7



19



5



6







(4
)


33     Three Months EndedJune 30,2009


2008Total Segment income

$
124


$
218Depreciation and amortization


(100
)


(116
)Interest expense and amortization of debt issuance costs


(43
)


(45
)Interest income


3



5Unrealized gains on change in fair value of derivative
    instruments, net(A)


299



20Impairment charges on long-lived assets






(1
)Adjustment to eliminate proportional consolidation


(16
)


(18
)Restructuring recoveries (charges), net


(3
)


1Other costs, net


9



(3
)Income before income taxes


273



61Income tax provision


112



35Net income


161



26Net income attributable to noncontrolling interests


18



2Net income attributable to our common shareholder

$
143


$
24     (A)
    
    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 shown in the table below and 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.  Three Months EndedJune 30,2009


2008Gains (losses) on change in fair value of derivative
    instruments, net:Realized gains (losses) included in Segment income

$
(228
)

$
45Realized gains on corporate derivative instruments


1



Unrealized gains


299



20Gains on change in fair value of derivative instruments, net

$
72


$
65  27




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Information
    about Major Customers and Primary Supplier
    Three Months EndedJune 30,2009


2008Rexam


20
%


16
%Anheuser-Busch


12
%


7
%     16.
    SUPPLEMENTAL
    GUARANTOR INFORMATION     28




---



##### 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 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) expenses, 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


143



96



69



(147
)


161Net income 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 STATEMENT OF OPERATIONS
 (In
    millions)
  Three Months Ended June 30, 2008Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
395


$
2,582


$
836


$
(710
)

$
3,103Cost of goods sold (exclusive of depreciation and amortization
    shown below)


387



2,377



777



(710
)


2,831Selling, general and administrative expenses






62



22







84Depreciation and amortization


6



89



21







116Research and development expenses


8



3



1







12Interest expense and amortization of debt issuance costs


28



34



8



(25
)


45Interest income


(21
)


(5
)


(4
)


25



(5
)(Gain) loss on change in fair value of derivative instruments,
    net






(61
)


(4
)






(65
)Restructuring charges, net






(1
)










(1
)Equity in net (income) loss of non-consolidated affiliates


(31
)


2







31



2Other (income) expenses, net


(7
)


15



15







23370



2,515



836



(679
)


3,042Income (loss) before income taxes


25



67







(31
)


61Income tax provision (benefit)


1



33



1







35Net income (loss)


24



34



(1
)


(31
)


26Net income attributable to noncontrolling interests










2







2Net income (loss) attributable to our common shareholder

$
24


$
34


$
(3
)

$
(31
)

$
24  30




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING BALANCE SHEET
 (In
    millions)
  June 30, 2009Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedASSETSCurrent assetsCash and cash equivalents

$
7


$
142


$
88


$



$
237Accounts receivable, net of allowances third parties


16



817



321







1,154 related parties


502



199



42



(724
)


19Inventories


34



543



236







813Prepaid expenses and other current assets


4



32



14







50Fair value of derivative instruments


3



124



7



(23
)


111Deferred income tax assets






109



16







125Total current assets


566



1,966



724



(747
)


2,509Property, plant and equipment, net


156



2,126



513







2,795Goodwill






571



11







582Intangible assets, net






781











781Investments in and advances to non-consolidated affiliates


1,823



739



1



(1,823
)


740Fair value of derivative instruments, net of current portion


3



32



26



(3
)


58Deferred income tax assets


1



4











5Other long-term assets


1,014



211



92



(1,207
)


110Total assets

$
3,563


$
6,430


$
1,367


$
(3,780
)

$
7,580LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
3


$
3


$
39


$



$
45Short-term borrowings third parties






227



10







237 related parties


17



356



23



(396
)


Accounts payable third parties


39



456



290







785 related parties


37



233



107



(325
)


52Fair value of derivative instruments


9



277



75



(23
)


338Accrued expenses and other current liabilities


58



366



85



(2
)


507Deferred income tax liabilities


















Total current liabilities


163



1,918



629



(746
)


1,964Long-term debt, net of current portion third parties


1,461



854



101







2,416 related parties


222



963



117



(1,208
)


94Deferred income tax liabilities






476



19







495Accrued postretirement benefits


29



361



127







517Other long-term liabilities


63



291



5



(3
)


356Total liabilities


1,938



4,863



998



(1,957
)


5,842Commitments and contingenciesShareholders equityCommon stock


















Additional paid-in capital


3,497















3,497Retained earnings/(accumulated deficit)/owners net
    investment


(1,786
)


1,615



378



(1,994
)


(1,787
)Accumulated other comprehensive income (loss)


(86
)


(48
)


(123
)


171



(86
)Total equity of our common shareholder


1,625



1,567



255



(1,823
)


1,624Noncontrolling interests










114







114Total equity


1,625



1,567



369



(1,823
)


1,738Total liabilities and equity

$
3,563


$
6,430


$
1,367


$
(3,780
)

$
7,580  31




---



##### 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, 2009Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedASSETSCurrent assetsCash and cash equivalents

$
3


$
175


$
70


$



$
248Accounts receivable, net of allowances third parties


21



761



267







1,049 related parties


411



183



32



(601
)


25Inventories


31



523



239







793Prepaid expenses and other current assets


4



31



16







51Fair value of derivative instruments






145



7



(33
)


119Deferred income tax assets






192



24







216Total current assets


470



2,010



655



(634
)


2,501Property, plant and equipment, net


162



2,146



491







2,799Goodwill






570



12







582Intangible assets, net






787











787Investments in and advances to non-consolidated affiliates


1,647



719







(1,647
)


719Fair value of derivative instruments, net of current portion






46



28



(2
)


72Deferred income tax assets


1



3











4Other long-term assets


1,028



207



96



(1,228
)


103Total assets

$
3,308


$
6,488


$
1,282


$
(3,511
)

$
7,567LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
3


$
4


$
44


$



$
51Short-term borrowings third parties






231



33







264 related parties


7



330



22



(359
)


Accounts payable third parties


33



458



234







725 related parties


41



157



90



(240
)


48Fair value of derivative instruments


7



540



126



(33
)


640Accrued expenses and other current liabilities


34



395



90



(3
)


516Deferred income tax liabilities


















Total current liabilities


125



2,115



639



(635
)


2,244Long-term debt, net of current portion third parties


1,464



852



101







2,417 related parties


223



976



120



(1,228
)


91Deferred income tax liabilities






459



10







469Accrued postretirement benefits


27



346



122







495Other long-term liabilities


50



288



5



(1
)


342Total liabilities


1,889



5,036



997



(1,864
)


6,058Commitments and contingenciesShareholders equityCommon stock


















Additional paid-in capital


3,497















3,497Retained earnings/(accumulated deficit)/owners net
    investment


(1,930
)


1,533



325



(1,858
)


(1,930
)Accumulated other comprehensive income (loss)


(148
)


(81
)


(130
)


211



(148
)Total equity of our common shareholder


1,419



1,452



195



(1,647
)


1,419Noncontrolling interests










90







90Total equity


1,419



1,452



285



(1,647
)


1,509Total liabilities and equity

$
3,308


$
6,488


$
1,282


$
(3,511
)

$
7,567  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


$
131


$
151


$
(27
)

$
258INVESTING ACTIVITIESCapital expenditures


(1
)


(18
)


(5
)






(24
)Proceeds from sales of property, plant and equipment










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
)


(179
)


(43
)






(223
)Net cash provided by (used in) investing activities


(2
)


(188
)


(45
)






(235
)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



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, 2008Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedOPERATING ACTIVITIESNet cash provided by (used in) operating activities

$
4


$
(313
)

$
(7
)

$
(35
)

$
(351
)INVESTING ACTIVITIESCapital expenditures


(1
)


(25
)


(7
)






(33
)Proceeds from sales of property, plant and equipment






1











1Changes to investment in and advances to non-consolidated
    affiliates






6











6Proceeds from loans receivable  net 
    related parties






8











8Net proceeds from settlement of derivative instruments






21



13







34Net cash provided by (used in) investing activities


(1
)


11



6







16FINANCING ACTIVITIESPrincipal payments third parties


(1
)


(2
)


(1
)






(4
) related parties






5



(30
)


25



Short-term borrowings  net third parties






288



25







313 related parties






(5
)


(5
)


10



Net cash provided by (used in) financing activities


(1
)


286



(11
)


35



309Net increase (decrease) in cash and cash equivalents


2



(16
)


(12
)






(26
)Effect of exchange rate changes on cash balances held in
    foreign currencies










(4
)






(4
)Cash and cash equivalents  beginning of period


12



177



137







326Cash and cash equivalents  end of period

$
14


$
161


$
121


$



$
296  34




---



##### 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
  market-focused
      Form 10-K Form 10-K
    HIGHLIGHTS
    
    We reported pre-tax income of $273 million for the first
    quarter of fiscal 2010, as compared to pre-tax income of
    $61 million for the first quarter of fiscal 2009. Results
    include $299 million of unrealized gains on derivatives as
    compared to $20 million in the prior year first quarter.
    The $299 million of unrealized gains includes a
    $224 million reversal of previously recognized losses upon
    settlement of derivatives and $75 million of unrealized
    gains relating to mark to market adjustments on metal and
    currency derivatives.
    Shipments of flat rolled products decreased 16% in the current
    quarter to 650 kt from 777 kt in the prior year quarter.
    Shipments in North America and Asia increased in the first
    quarter as compared to the fourth quarter of fiscal 2009, with
    signs of economic recovery evident in Asia where shipments were
    up more than 50%. 35




---



##### Table of Contents




    Shipments to construction, automotive and industrial companies
    continued to be impacted by the global economic downturn in the
    first quarter of fiscal 2010, while can sheet shipments remain
    stable in most regions.  
    We continue to effectively manage inventory levels. Metal
    inventories as of June 30, 2009 totaled 307 kt.  BUSINESS
    AND INDUSTRY CLIMATE
    Business
    Model and Key Concepts
        Three Months EndedJune 30,


Percent2009


2008


ChangeAluminum (per metric tonne, and presented in U.S. dollars):Closing cash price as of March 31, 2009 and 2008

$
1,365


$
2,935



(53
)%Average cash price during period

$
1,488


$
2,940



(49
)%Closing cash price as of June 30, 2009 and 2008

$
1,616


$
3,075



(47
)%     
    Our products have a price structure based upon the LME price.
    Increases or decreases in the LME price have a direct impact on
    net sales, cost of goods sold and working capital.
    We pay cash to brokers to settle derivative contracts in advance
    of billing and collecting cash from our customers, which
    negatively impacts our liquidity position. The lag between
    derivative settlement and customer collection typically ranges
    from 30 to 60 days, which temporarily reduces our liquidity
    in periods following declines in LME. During the first quarter
    of fiscal 2010, we had net outflows of $223 million for
    payments related to the settlement of derivatives. 36




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##### Table of Contents



Metal
    Price Ceilings
        
    We maximize the amount of our internally supplied metal inputs
    from our smelting, refining and mining operations in Brazil and
    rely on output from our recycling operations which utilize used
    beverage cans (UBCs). Both of these sources of aluminum supply
    have historically provided an offsetting benefit to the metal
    price ceiling contracts. We refer to these two sources as
    internal hedges.
    We entered into derivative instruments to hedge projected
    aluminum volume requirements above our assumed internal hedge
    position, mitigating our exposure to further increases in LME
    prices. As a result of these instruments, we will continue to
    incur cash losses related to these contracts even if LME prices
    remain below the ceiling price. As of June 30, 2009 the
    fair value of the liability associated with these derivative
    instruments was $67 million.    Metal
    Price Lag
     37




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##### Table of Contents



Foreign
    Exchange Impact
    Exchange Rate as of


Average Exchange RateJune 30,


March 31,


Three Months Ended2009


2009


June 30, 2009U.S. dollar per Euro


1.403



1.328



1.379Brazilian real per U.S. dollar


1.960



2.301



2.036South Korean won per U.S. dollar


1,285



1,377



1,302Canadian dollar per U.S. dollar


1.161



1.258



1.149   Exchange Rate as of


Average Exchange RateJune 30,


March 31,


Three Months Ended,2008


2008


June 30, 2008U.S. dollar per Euro


1.575



1.581



1.563Brazilian real per U.S. dollar


1.594



1.744



1.638South Korean won per U.S. dollar


1,043



992



1,027Canadian dollar per U.S. dollar


1.019



1.028



1.007     RESULTS
    OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2009 COMPARED TO
    THE QUARTER ENDED JUNE 30, 2008
        Segment
    Review
   38




---



##### Table of Contents



Disclosure About the Segments of
    an Enterprise and Related Information.
      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   Selected Operating Results

North








SouthThree Months Ended June 30, 2008

America


Europe


Asia


America


Eliminations


TotalNet sales

$
1,083


$
1,218


$
510


$
295


$
(3
)

$
3,103Shipments (kt)Rolled products


286



271



133



87







777Ingot products


8



28



7



5







48Total shipments


294



299



140



92







825     North








South


CorporateChanges in Segment Income

America


Europe


Asia


America


and Other


TotalSegment income  three months ended June 30, 2008

$
42


$
111


$
31


$
47


$
(13
)

$
218Volume:Rolled products


(24
)


(81
)


(2
)


(3
)






(110
)Other






(1
)






2







1Conversion premium and product mix


9



46



14



6







75Conversion costs(A)


21



5



11



3







40Metal price lag


10



(44
)


(24
)


(10
)






(68
)Foreign exchange


2



9



9



(4
)


2



18Other changes(B)


(3
)


(12
)


(1
)


(30
)


(4
)


(50
)Segment income  three months ended June 30, 2009

$
57


$
33


$
38


$
11


$
(15
)

$
124  39




---



##### Table of Contents



(A)
    
    Conversion costs include expenses incurred in production such as
    direct and indirect labor, energy, freight, scrap usage, alloys
    and hardeners, coatings, alumina and melt loss. 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
         40




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##### Table of Contents



Asia
        South
    America
        Corporate
    and Other
   41




---



##### Table of Contents



Reconciliation
    of Segment Income to Net Income
    Three Months EndedJune 30,2009


2008Total Segment income

$
124


$
218Depreciation and amortization


(100
)


(116
)Interest expense and amortization of debt issuance costs


(43
)


(45
)Interest income


3



5Unrealized gains on change in fair value of derivative
    instruments, net


299



20Impairment charges on long-lived assets






(1
)Adjustment to eliminate proportional consolidation(A)


(16
)


(18
)Restructuring recoveries (charges), net


(3
)


1Other costs, net


9



(3
)Income before income taxes


273



61Income tax provision


112



35Net income


161



26Net income attributable to noncontrolling interests


18



2Net income attributable to our common shareholder

$
143


$
24     (A)
    
    Our financial information for our segments (including Segment
    income) includes the results of our non-consolidated affiliates
    on a proportionately consolidated basis, which is consistent
    with the way we manage our business segments. However, under
    GAAP, these non-consolidated affiliates are accounted for using
    the equity method of accounting. Therefore, in order to
    reconcile total Segment income to Net income attributable to our
    common shareholder, the proportional Segment income of these
    non-consolidated affiliates is removed from total Segment
    income, net of our share of their net after-tax results, which
    is reported as Equity in net loss of non-consolidated affiliates
    on our condensed consolidated statements of operations. See
    Note 5  Investment in and Advances to
    Non-Consolidated Affiliates and Related Party Transactions for
    further information about these non-consolidated affiliates.         42




---



##### Table of Contents




    Our functional currency in Canada and Brazil is the
    U.S. dollar and the company holds significant
    U.S. dollar denominated debt in these locations. As the
    value of the local currencies strengthens and weakens against
    the U.S. dollar, unrealized gains or losses are created in
    those locations 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.      LIQUIDITY
    AND CAPITAL RESOURCES
   43




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##### Table of Contents



Available
    Liquidity
    June 30,


March 31,2009


2009Cash and cash equivalents

$
237


$
248Overdrafts


(10
)


(11
)Gross availability under the ABL Facility


299



233Borrowing availability limitation due to fixed charge coverage
    ratio


(80
)


(80
)Total estimated liquidity

$
446


$
390       Operating
    Activities
   44




---



##### Table of Contents



Three Months EndedJune 30,2009


2008


ChangeNet cash provided by (used in) operating activities

$
258


$
(351
)

$
609Net cash provided by (used in) investing activities


(235
)


16



(251
)Less: Proceeds from sales of assets


(3
)


(1
)


(2
)Free cash flow

$
20


$
(336
)

$
356Ending cash and cash equivalents

$
237


$
296


$
(59
)         Investing
    Activities
    Three Months EndedJune 30,2009


2008


ChangeCapital expenditures

$
(24
)

$
(33
)

$
9Proceeds from sales of assets


3



1



2Changes to investment in and advances to non-consolidated
    affiliates


3



6



(3
)Proceeds from related parties loans receivable, net


6



8



(2
)Net proceeds (outflow) from settlement of derivative instruments


(223
)


34



(257
)Net cash provided by (used in) investing activities

$
(235
)

$
16


$
(251
)    45




---



##### Table of Contents



Financing
    Activities
    Three Months EndedJune 30,2009


2008


ChangeProceeds from issuance of debt, related parties

$
3


$



$
3Principal payments


(12
)


(4
)


(8
)Short-term borrowings, net


(33
)


313



(346
)Dividends, noncontrolling interest


(1
)






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

$
(43
)

$
309


$
(352
)           OFF-BALANCE
    SHEET ARRANGEMENTS
    
    any obligation under certain derivative instruments;
    any obligation under certain guarantees or contracts;
    a retained or contingent interest in assets transferred to an
    unconsolidated entity or similar entity or similar arrangement
    that serves as credit, liquidity or market risk support to that
    entity for such assets; and
    any obligation under a material variable interest held by the
    registrant in an unconsolidated entity that provides financing,
    liquidity, market risk or credit risk support to the registrant,
    or engages in leasing, hedging or research and development
    services with the registrant.   46




---



##### Table of Contents



Derivative
    Instruments
      June 30, 2009Assets


Liabilities


Net Fair ValueCurrent


Noncurrent


Current


Noncurrent(A)


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

$



$



$
(1
)

$
(23
)

$
(24
)Interest rate swaps






3



(14
)






(11
)Electricity swap










(4
)


(2
)


(6
)Total derivatives designated as hedging instruments






3



(19
)


(25
)


(41
)Derivatives not designated as hedging instruments:Aluminum forward contracts


86



27



(268
)


(7
)


(162
)Currency exchange contracts


25



28



(44
)


(4
)


5Energy contracts










(7
)






(7
)Total derivatives not designated as hedging instruments


111



55



(319
)


(11
)


(164
)Total derivative fair value

$
111


$
58


$
(338
)

$
(36
)

$
(205
)   March 31, 2009Assets


Liabilities


Net Fair ValueCurrent


Noncurrent


Current


Noncurrent(A)


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

$



$



$



$
(11
)

$
(11
)Interest rate swaps










(13
)






(13
)Electricity swap










(6
)


(12
)


(18
)Total derivatives designated as hedging instruments










(19
)


(23
)


(42
)Derivatives not designated as hedging instruments:Aluminum contracts


99



41



(532
)


(13
)


(405
)Currency exchange contracts


20



31



(77
)


(12
)


(38
)Energy contracts










(12
)






(12
)Total derivatives not designated as hedging instruments


119



72



(621
)


(25
)


(455
)Total derivative fair value

$
119


$
72


$
(640
)

$
(48
)

$
(497
)     (A)
    
    The noncurrent portions of derivative liabilities are included
    in Other long-term liabilities in the accompanying condensed
    consolidated balance sheets. 47




---



##### Table of Contents



Net
    Investment Hedges
      Cash Flow
    Hedges
            Gain or (Loss)Recognized in IncomeGain (Loss)


(Ineffective Portion and AmountGain (Loss)


Reclassified from


Excluded fromRecognized in OCI


AOCI into Income


Effectiveness Testing)Three Months Ended


Three Months Ended


Three Months EndedJune 30, 2009


June 30, 2009


June 30, 2009Energy contracts

$
9


$
(1
)

$
2Interest rate swaps

$
1


$



$
   48




---



##### Table of Contents



Gain or (Loss)Recognized in IncomeGain (Loss)


(Ineffective Portion and AmountGain (Loss)


Reclassified from


Excluded fromRecognized in OCI


AOCI into Income


Effectiveness Testing)Three Months Ended


Three Months Ended


Three Months EndedJune 30, 2008


June 30, 2008


June 30, 2008Energy contracts

$
10


$
(3
)

$
Interest rate swaps

$
6


$



$
   Derivative
    Instruments Not Designated as Hedges
             49




---



##### Table of Contents



Three Months EndedJune 30,2009


2008Derivative Instruments Not Designated as HedgesAluminum contracts

$
48


$
22Currency exchange contracts


22



32Energy contracts






7Gain (loss) recognized


70



61Derivative Instruments Designated as Cash Flow HedgesInterest rate swaps






Electricity swap


2



4Gain (loss) on change in fair value of derivative instruments,
    net

$
72


$
65   Guarantees
    of Indebtedness
    
    certain of our wholly-owned and majority-owned
    subsidiaries; and
    Aluminium Norf GmbH, which is a fifty percent (50%) owned joint
    venture that does not meet the requirements for consolidation
    under FASB Interpretation No. 46 (Revised),
    Consolidation of Variable Interest Entities.        Maximum


LiabilityPotential Future


CarryingPayment


ValueWholly-owned Subsidiaries

$
45


$
7Aluminium Norf GmbH

$
14


$
     Other
   50




---



##### Table of Contents



CONTRACTUAL
    OBLIGATIONS
  Form 10-K
  DIVIDENDS
    CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
  Form 10-K
  RECENT
    ACCOUNTING STANDARDS
  Recently
    Adopted Accounting Standards
    Noncontrolling
    Interests in Consolidated Financial Statements
  No. FAS 142-3, Determination of Useful Life of Intangible Assets FAS 142-3). FAS 142-3 FAS 142-3
  No. 107-1 FAS 107-1) 28-1 28-1), Interim Disclosures about Fair Value of Financial
    Instruments FAS 107-1 28-1 Interim
    Financial Reporting
  No. 157-4, Determining Fair Value When the Volume and Level of Activity
    for the Asset or Liability Have Significantly Decreased and
    Identifying Transactions That Are Not Orderly FAS 157-4). FAS 157-4
 51




---



##### Table of Contents



Fair Value Measurements
  No. 115-2 FAS 115-2) No. 124-2 FAS 124-2), Recognition of
    Other-than-Temporary-Impairments. FAS No. 115-2 FAS No. 124-2 other-than-temporary
  Business
    Combinations
  Accounting
    for Assets Acquired and Liabilities Assumed in a Business
    Combination That Arise from Contingencies Accounting for Contingencies, Reasonable Estimation of the Amount of a
    Loss
  No. 08-06, Equity Method Investment Accounting Considerations (EITF 08-06). EITF 08-6 Non-controlling Interests in Consolidated
    Financial Statements. EITF 08-06 EITF 08-6
  Recently
    Issued Accounting Standards
    Amendments to FASB Interpretation No. 46(R) Consolidation of Variable Interest
    Entities Accounting for Transfers of Financial
    Assets
 52




---



##### Table of Contents



Employers Disclosures about Pensions and Other
    Postretirement Benefits
    SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET
    DATA
  Form 10-Q
    
    the level of our indebtedness and our ability to generate cash;
    changes in the prices and availability of aluminum (or premiums
    associated with such prices) or other materials and raw
    materials we use;
    the effect of metal price ceilings in certain of our sales
    contracts;
    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; 53




---



##### Table of Contents




    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 Rio Tinto Alcan;
    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 further
    deterioration in the global economy;
    our ability to improve and maintain effective internal control
    over financial reporting and disclosure controls and procedures
    in the future;
    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; and
    the effect of taxes and changes in tax rates.  10-Q Form 10-K
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  marked-to-market
      Commodity
    Price Risks
   54




---



##### Table of Contents



Aluminum
              Sensitivities
    Energy
       55




---



##### Table of Contents



Sensitivities
    Change in


Change inPrice


Fair ValueElectricity


(10
)%

$
(3
)Natural Gas


(10
)%


(1
)Heating Oil


(10
)%


(1
)   Foreign
    Currency Exchange Risks
    non-U.S. dollar
     56




---



##### Table of Contents



Sensitivities
    Change in


Change inExchange Rate


Fair ValueCurrency measured against the U.S. dollarEuro


10
%

$
(33
)Korean won


(10
)%


(4
)Brazilian real


(10
)%


(11
)British pound


10
%


2Canadian dollar


(10
)%


(2
)Swiss franc


(10
)%


(2
)       Interest
    Rate Risks
        Sensitivities
    Change in


Change inRate


Fair ValueInterest Rate ContractsNorth America


(10
)%

$
(2
)Asia


(10
)%


   Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
   57




---



##### Table of Contents



Form 10-Q Rule 13a-15(e)
  Changes
    in Internal Control Over Financial Reporting
  Rule 13a-15(f)
  Material
    Weakness Existing as of June 30, 2009 and Remediation
    Plan
  Form 10-K/A
             58




---



##### Table of Contents



PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  Coca-Cola
    Lawsuit. Coca-Cola Coca-Cola Coca-Cola
  Item 1A.
    Risk
    Factors  As part of our ongoing evaluation of our operations, we
    may undertake additional restructuring efforts in the future
    which could in some instances result in significant
    severance-related costs, environmental remediation expenses and
    impairment and other restructuring charges.
    
    ceasing production of commercial grade alumina at our Ouro Preto
    facility in Brazil;
    the closure of our aluminum sheet mill in Rogerstone, South
    Wales, U.K.;
    a restructuring plan to streamline our operations at our Rugles
    facility located in Upper Normandy, France;
    a voluntary separation program for salaried employees in North
    America and the corporate office aimed at reducing staff levels;
    a voluntary retirement program in Asia; and
    the closure of our light gauge converter products facility in
    Louisville, Kentucky.    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 the
    Form 8-K
    filed by Novelis Inc. on January 7, 2005 (File
    No. 001-32312)) 59




---



##### Table of Contents



ExhibitNo.

Description3
.2

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

Employment Agreement of Philip Martens, dated as of
    April 11, 2009 (incorporated by reference to
    Exhibit 10.36 to our Annual Report on
    Form 10-K
    filed on June 29, 2009) (File
    No. 001-32312))10
.2*

Change in Control Agreement between Novelis and Philip Martens,
    dated April 16, 200910
.3*

Separation and Release Agreement between Novelis and Martha
    Brooks, dated May 8, 200910
.4*

Novelis Long-Term Incentive Plan for Fiscal Years
    2010  2013 (incorporated by reference to
    Exhibit 10.1 to our Current Report on
    Form 8-K
    filed on July 1, 2009) (File
    No. 001-32312))10
.5*

Novelis Annual Incentive Plan for Fiscal Year 2010 (incorporated
    by reference to Exhibit 10.2 to our Current Report on
    Form 8-K
    filed on July 1, 2009) (File
    No. 001-32312))10
.6*

Form Change in Control Agreement (incorporated by reference
    to Exhibit 10.3 to our Current Report on
    Form 8-K
    filed on July 1, 2009) (File
    No. 001-32312))10
.7*

Form Severance Agreement (incorporated by reference to
    Exhibit 10.4 to our Current Report on
    Form 8-K
    filed on July 1, 2009) (File
    No. 001-32312))10
.8*

Termination of Employment Agreement between Novelis AG and
    Arnaud deWeert, dated June 26, 2009 (incorporated by
    reference to Exhibit 10.5 to our Current Report on
    Form 8-K
    filed on July 1, 2009) (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. 60




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##### Table of Contents



SIGNATURES
      By:
    /s/  Steven
    Fisher      By
    /s/  Robert
    P. Nelson       61




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##### 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 the
    Form 8-K
    filed by Novelis Inc. on January 7, 2005 (File
    No. 001-32312))3
.2

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

Employment Agreement of Philip Martens, dated as of
    April 11, 2009 (incorporated by reference to
    Exhibit 10.36 to our Annual Report on
    Form 10-K
    filed on June 29, 2009) (File
    No. 001-32312))10
.2*

Change in Control Agreement between Novelis and Philip Martens,
    dated April 16, 200910
.3*

Separation and Release Agreement between Novelis and Martha
    Brooks, dated May 8, 200910
.4*

Novelis Long-Term Incentive Plan for Fiscal Years
    2010  2013 (incorporated by reference to
    Exhibit 10.1 to our Current Report on
    Form 8-K
    filed on July 1, 2009) (File
    No. 001-32312))10
.5*

Novelis Annual Incentive Plan for Fiscal Year 2010 (incorporated
    by reference to Exhibit 10.2 to our Current Report on
    Form 8-K
    filed on July 1, 2009) (File
    No. 001-32312))10
.6*

Form Change in Control Agreement (incorporated by reference
    to Exhibit 10.3 to our Current Report on
    Form 8-K
    filed on July 1, 2009) (File
    No. 001-32312))10
.7*

Form Severance Agreement (incorporated by reference to
    Exhibit 10.4 to our Current Report on
    Form 8-K
    filed on July 1, 2009) (File
    No. 001-32312))10
.8*

Termination of Employment Agreement between Novelis AG and
    Arnaud deWeert, dated June 26, 2009 (incorporated by
    reference to Exhibit 10.5 to our Current Report on
    Form 8-K
    filed on July 1, 2009) (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. 62