Novelis Reports First Quarter Results for New Fiscal Year

- Results Reflect Operational Improvement

- Transaction Costs Contribute to Net Loss

- Debt Restructured with More Favorable Terms

ATLANTA, Aug. 10 /PRNewswire/ -. Novelis Inc. has reported financial results for the first quarter of its new fiscal year ending March 31, 2008. The company changed its fiscal year end from December 31 to March 31 following its acquisition by Hindalco Industries Ltd. on May 15, 2007.

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For the three months ending June 30, 2007, total rolled products shipments increased to 755 kilotonnes (kt) compared with 753 kt in the prior year period. Novelis incurred a net loss before tax of US$114 million on sales of $2,828 million, compared with the corresponding period of 2006 when it incurred a net loss before tax of $10 million on sales of $2,564 million.

The first-quarter loss (before tax) this year includes a number of non- recurring expenses related to the acquisition by Hindalco. These include:

    -- $45 million of stock compensation expense triggered by the sale of

    -- $32 million for sale transaction costs;

    -- $29 million of expense related to stepping up inventory to fair value
       at the date of acquisition; and

    -- $9 million write-off of in-process research and development costs which
       were required to be expensed at the date of acquisition.

Other purchase accounting effects include higher depreciation and amortization expense and unfavorable contract accretion resulting from adjusting our assets and liabilities to fair value at the date of acquisition.

Net, the impact of all purchase accounting related items was an expense of $19 million for the first quarter, which negatively impacted earnings before tax.

As a result of rising metal prices, Novelis' results during the quarter ended June 30, 2006, included a benefit from metal price lag of $77 million that did not occur in the same period ended June 30, 2007. Metal price lag is a timing difference on the pass-through to customers of changing aluminum prices.

Adjusting for metal price lag and the items described above, Novelis' results for the first quarter improved by $69 million (before tax) compared to the same period in the prior year.

After consideration of these factors, the earnings before tax is a loss of $18 million for the first quarter of fiscal year 2008, compared with a loss of $87 million for the comparable prior year period, demonstrating an underlying operational improvement. This improvement is due to a number of positive business factors, including the following:

    -- Product mix improvements and price increases, primarily in Europe and
       South America, benefited net sales by $26 million compared with the
       prior year period.

    -- The company's exposure to customer contracts with metal price ceilings
       was reduced by $27 million, net of hedges, compared with the prior year

    -- Corporate selling, general and administrative (SG&A) expenses, which
       were driven by one-time costs relating to the company's financial
       restatement in the prior year period, fell by $10 million for the three
       months ending June 30, 2007.

    -- Lower unrealized losses on derivatives, offset by exchange losses and
       other items, provided a net benefit of $6 million, compared with the
       prior year period.

"Novelis business operations continue to prove their global leadership in the marketplace," said Martha Brooks, President and Chief Operating Officer of Novelis, "and we are beginning to see the benefits of the combined management expertise of Novelis and Hindalco. Our companies are moving forward with integration efforts aimed at sharing best practices in areas such as risk management and identifying cost saving opportunities in fields such as Information Technology. We have also begun to identify new market opportunities for both Hindalco and Novelis as a result of our collaboration efforts."

"Since the acquisition, Novelis has completed the restructuring of its debt with more favorable terms and has achieved a stronger financial position," said Steve Fisher, Chief Financial Officer of Novelis. "And, we were able to keep our public bonds in place and avoided paying consent fees or any meaningful premiums on the bonds."

For the three months ending June 30, 2007, Novelis incurred a net loss of $151 million, compared with the corresponding period of 2006 when it earned a net income of $6 million. Included in the net loss of $151 million for the first quarter of fiscal year 2008 is $40 million of income tax expense. Significant non-cash tax expense items that impacted taxes payable in the quarter included:

    -- $49 million of exchange translation and re-measurement items; and

    -- $34 million of valuation allowances increases primarily related to tax
       losses in certain jurisdictions where the Company believes, based on
       current facts and circumstances, it will not be able to utilize those

Cash taxes paid during the first quarter of Novelis' new fiscal year were $21 million.

"We continue to incur significant deferred tax expense driven primarily by unfavorable foreign exchange re-measurement related to our debt structure inherited at the time of our original 2005 spin-off from Alcan Inc.," said Mr. Fisher. "We are developing plans in order to achieve a more efficient tax structure for the Company."

About Novelis

Novelis Inc. is the global leader in aluminum rolled products and aluminum can recycling. The company operates in 11 countries, has approximately 12,900 employees and reported revenue of $9.8 billion in 2006. Novelis supplies premium aluminum sheet and foil products to automotive, transportation, packaging, construction, industrial and printing markets throughout Asia, Europe, North America, South America and, increasingly, the Middle East. For more information, visit

Novelis is a subsidiary of Hindalco Industries Limited, Asia's largest integrated producer of aluminum and a leading copper producer. Hindalco is the flagship company of the Aditya Birla Group, a multinational conglomerate based in Mumbai, India.


Under generally accepted accounting principles in the United States of America (GAAP), the condensed consolidated financial statements for the three months ended June 30, 2007, are presented in two distinct periods, as Predecessor and Successor entities are not comparable in all material respects. However, in order to facilitate an understanding of our results of operations for the three months ended June 30, 2007, in comparison with the three months ended June 30, 2006, in this section, our Predecessor results and our Successor results are presented and discussed on a combined basis. The combined results of operations are non-GAAP financial measures, do not include any pro-forma assumptions or adjustments and should not be used in isolation or substitution of the Predecessor and Successor results.

    Shown below are combining schedules of (1) shipments and selected
financial information and (2) our results of operations for periods allocable
to the Successor, Predecessor and the combined presentation for the three
months ended June 30, 2007:

                               May 16, 2007    April 1, 2007     Three Months
                                 Through          Through           Ended
                              June 30, 2007    May 15, 2007     June 30, 2007
    Combined Shipments and
     Selected Financial
     Information:                Successor      Predecessor        Combined

    Shipments (kt (A)):
      Rolled products               407               348             755
      Ingot products (B)             23                15              38
      Total shipments               430               363             793

    (A) One kilotonne (kt) is 1,000 metric tonnes. One metric tonne is
        equivalent to 2,204.6 pounds.

    (B) Ingot products shipments include primary ingot in Brazil, foundry
        products sold in Korea and Europe, secondary ingot in Europe and other
        miscellaneous recyclable aluminum sales.

                                   May 16, 2007   April 1, 2007  Three Months
                                     Through         Through         Ended
                                  June 30, 2007   May 15, 2007   June 30, 2007

    Combined Results of
    ($ in millions)                 Successor     Predecessor      Combined

    Net sales                         $1,547        $1,281          $2,828
    Cost of goods sold
     (exclusive of depreciation
     and amortization shown
     below)                            1,436         1,205           2,641
    Selling, general and
     administrative expenses              42            95             137
    Depreciation and amortization         53            28              81
    Research and development expenses     13             6              19
    Interest expense and amortization
     of debt issuance costs - net         25            26              51
    Gain on change in fair value of
     derivative instruments - net        (14)          (20)            (34)
    Equity in net (income) loss of
     non-consolidated affiliates           1            (1)              -
    Sale transaction fees                  -            32              32
    Other expenses - net                  11             4              15
                                       1,567         1,375           2,942
    Loss before provision for taxes
     on loss and minority interests'
     share                               (20)          (94)           (114)
    Provision for taxes on loss           36             4              40
    Loss before minority interests'
     share                               (56)          (98)           (154)
    Minority interests' share              2             1               3
      Net loss                         $ (54)         $(97)          $(151)

Statements made in the news release which describe Novelis' intentions, expectations, beliefs or predictions may be forward-looking statements within the meaning of securities laws. Examples of forward-looking statements in this news release include those related to the integration of Novelis and Hindalco, the cost savings and new market opportunities to be realized in connection with Hindalco's acquisition of Novelis, Novelis' financial position following the restructuring of its debt, and Novelis' plans to achieve a more efficient tax structure. We caution that, by their nature, forward-looking statements involve risk and uncertainty. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward- looking statements. We do not intend, and we disclaim any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise. Important risk factors which could impact Novelis are included under the caption "Risk Factors" in Novelis' Annual Report on Form 10-K for the year ended December 31, 2006, as amended and filed with the U.S. Securities and Exchange Commission, and are specifically incorporated by reference into this news release.

SOURCE Novelis Inc.