Novelis Records $118 Million Profit in Fourth Quarter of Fiscal Year 2008



    
    Operational Improvements Help Narrow Full-Year Loss to $69 Million
    

    ATLANTA, June 19 /CNW/ -- Novelis Inc., a subsidiary of Hindalco
Industries Limited (BSE: HINDALCO), today reported net income of US$118
million for the fourth quarter of fiscal year 2008, which ended on March 31,
2008.  For the full fiscal year, the company recorded a net loss of $69
million.  This compares with net losses of $64 million and $265 million,
respectively, for the corresponding prior-year periods.
    
    (Logo:  http://www.newscom.com/cgi-bin/prnh/20070809/NOVELISLOGO )
    
    Novelis changed its fiscal year-end from December 31 to March 31
following its acquisition by Hindalco on May 15, 2007 (see note below).
    "In the face of an inflationary environment, we are focused on
operational performance and risk management improvement," said Martha Finn
Brooks, President and Chief Operating Officer.  "We made good progress last
year through initiatives such as portfolio optimization, price increases,
working capital improvements and reductions in corporate costs. The benefits
can be seen in our increased revenues and stronger cash flow."
    "At the same time," Brooks added, "we continued to expand our business
with capacity increases in the fast-growing markets of Asia and South America
and further implementation of our proprietary Novelis Fusion(TM) technology
for multi-alloy products."
    Fourth Quarter Summary (see Note below regarding combined results of
operations and comparability)
    Flat-rolled product shipments increased in the fourth quarter versus the
prior year in all of the company's reported regions except Europe.  Despite
continued challenging conditions in North America, total rolled products
shipments increased 21 kilotonnes (kt) over the corresponding prior period,
from 772 kt to 793 kt.
    Novelis reported pre-tax income of $117 million on sales of $2,862
million for the fourth quarter, compared with the prior-year period when it
incurred a pre-tax loss of $57 million on sales of $2,630 million.  The $174
million increase in pre-tax earnings includes non-cash unrealized gains on
derivatives of $118 million versus a loss of $1 million for the same
prior-year period. The gain was primarily driven by an increase in the forward
aluminum price on the London Metal Exchange (LME) during the fourth quarter of
fiscal year 2008.
    The increased earnings also reflect significant underlying operational
improvement for Novelis, including the following:
    -- Product mix improvements and price increases added approximately $49
million of pre-tax earnings in the quarter 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 and exclusive of the impact of the
accounting associated with the acquisition, compared with the corresponding
quarter of 2007; and
    -- Corporate selling, general and administrative (SG&A) expenses were
reduced by $44 million including a reduction in sale transaction fees of $32
million and other reductions driven by streamlining of corporate staff and
costs related to financial reporting requirements in the prior-year period.
    Improved operational performance was partially offset by higher input and
operational costs in the quarter compared with the prior-year period.  Higher
operational costs were driven primarily by the strengthening currencies in
Europe and Brazil.
    Included in the net income of $118 million for the fourth quarter of
fiscal year 2008 is $1 million of income tax benefit.  This effective tax rate
differs from the statutory rate primarily due to the following tax items:
    -- $20 million of tax benefit related to exchange translation and
re-measurement items;
    
    -- $60 million of tax benefit on change in valuation allowances;
    
    -- $24 million of tax expense associated with expense/income items with
no tax effect; and
    
    -- $25 million of tax expense associated with enacted tax rate changes.
    
    Cash taxes paid during the fourth quarter of fiscal year 2008 were $14
million.
    Full Year Results (see Note below regarding combined results of
operations and comparability)
    For the fiscal year ended March 31, 2008, Novelis reported a combined net
loss of $69 million.  This compares with a net loss of $265 million for the
corresponding period of 2007.
    Full-year products shipments increased to 3,150 kt from 3,113 kt in the
prior year.  The company incurred a combined pre-tax loss of $62 million on
combined net sales of $11,246 million in the current year, which represents an
improvement of $302 million over the prior year when Novelis reported a
pre-tax loss of $364 million on net sales of $10,160 million.
    The combined pre-tax loss for the fiscal year 2008 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 Novelis and
$32 million for sale transaction costs, among other items, as the company
previously disclosed in its financial results for the first quarter of fiscal
year 2008.  Excluding the transaction expenses, pre-tax earnings improvement
was $379 million compared with the corresponding period of 2007.  This was
primarily driven by improvements in prices, product mix and volumes, reduced
corporate costs and reduced exposure to contracts with metal price ceilings.
In addition, the combined pre-tax loss for the fiscal year ended March 31,
2008, was impacted by certain income and expense items associated with fair
value adjustments recorded at the date of acquisition.  The net pre-tax impact
of these items was a benefit of $21 million primarily driven by the
amortization of accruals related to unfavorable contracts (recorded at fair
value at the date of acquisition) partially offset by higher depreciation and
amortization.
    Included in the net loss of $69 million is $7 million of income tax
expense.  This compares with the corresponding period of 2007 when the net
loss of $265 million included an income tax benefit of $99 million.
Significant tax items in the fiscal year 2008 included $92 million of tax
expense related to exchange translation and re-measurement items, and $78
million of tax benefit associated with enacted tax rate changes.
    
    Cash taxes paid during the fiscal year 2008 were $73 million.
    
    For further information regarding Novelis' fiscal year results, please
review the company's Annual Report on Form 10-K as filed with the U.S.
Securities and Exchange Commission on June 19, 2008.
    NOTE REGARDING COMBINED RESULTS OF OPERATIONS AND SELECTED FINANCIAL AND
OPERATING INFORMATION DUE TO THE ACQUISITION
    Under generally accepted accounting principles in the United States of
America (US GAAP), the consolidated financial statements for the fiscal year
ended March 31, 2008, 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
fiscal year ended March 31, 2008, in comparison with the twelve months ended
March 31, 2007, 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 (2) our results
of operations for periods allocable to the Successor, Predecessor and the
combined presentation for the fiscal year ended March 31, 2008:


    
                                   May 16, 2007    April 1, 2007
                                     Through          Through    Year Ended
                                     March 31,         May 15,    March 31,
                                       2008             2007        2008
    

    
    Combined Shipments (kt)(A)       Successor    Predecessor     Combined
      Rolled products(B)                 2,640            348        2,988
      Ingot products(C)                    147             15          162
      Total shipments                    2,787            363        3,150
    
    (A) One kilotonne (kt) is 1,000 metric tonnes. One metric tonne is
equivalent to 2,204.6 pounds.
    (B) Rolled products include tolling (the conversion of customer-owned
metal).

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


    
                                   May 16, 2007    April 1, 2007
                                     Through          Through    Year Ended
                                     March 31,         May 15,    March 31,
                                       2008             2007        2008
    

    
    Combined Results of
     Operations ($ in millions)      Successor     Predecessor    Combined
    

    
    Net sales                           $9,965          $1,281     $11,246
    Cost of goods sold (exclusive
     of depreciation and
     amortization shown below)           9,042           1,205      10,247
    Selling, general and
     administrative expenses               319              95         414
    Depreciation and amortization          367              28         395
    Research and development expenses       46               6          52
    Interest expense and amortization
     of debt issuance costs - net          173              26         199
    (Gain) loss on change in fair
     value of derivative
     instruments - net                     (22)            (20)        (42)
    Equity in net (income) loss of
     non-consolidated affiliates             4              (1)          3
    Sale transaction fees                    -              32          32
    Other (income) expenses - net            -               4           4
                                         9,929           1,375      11,304
    Loss before provision for taxes
     and minority interests' share          36             (94)        (58)
    Provision for taxes                      3               4           7
    Loss before minority
     interests' share                       33             (98)        (65)
    Minority interests' share               (5)              1          (4)
    Net loss                           $    28         $   (97)    $   (69)
    Change in Fiscal Year End
    
    On June 26, 2007, our Board of Directors approved the change of our
fiscal year end to March 31 from December 31.  On June 28, 2007, we filed a
Transition Report on Form 10-Q for the three-month period ended March 31,
2007, with the United States Securities and Exchange Commission (SEC) pursuant
to Rule 13a-10 under the Securities Exchange Act of 1934 for transition period
reporting.
    Data for all periods, except as of and for the year ended March 31, 2007,
are derived from our audited consolidated and combined financial statements
included in our Annual Report on Form 10-K for the year ended March 31, 2008.
All data as of and for the year ended March 31, 2007, are derived from our
unaudited condensed consolidated financial statements included in our
transition period ended March 31, 2007, and our Quarterly Report on Form 10-Q
for the period ended December 31, 2007.
    
    About Novelis
    
    Novelis Inc. is the global leader in aluminum rolled products and
aluminum can recycling.  The company operates in 11 countries, has
approximately 12,700 employees and reported revenue of $11.2 billion in 2008. 
Novelis supplies premium aluminum sheet and foil products to automotive,
transportation, packaging, construction, industrial and printing markets
throughout Asia, Europe, North America and South America.  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.  For more information on Novelis, please visit www.novelis.com.
    Statements made in this news release which describe Novelis' intentions,
expectations, beliefs or predictions may be forward-looking statements within
the meaning of securities laws.  Forward-looking statements include statements
preceded by, followed by, or including the words "believes," "expects,"
"anticipates," "plans," "estimates," "projects," "forecasts," or similar
expressions.  Novelis cautions that, by their nature, forward-looking
statements involve risk and uncertainty and that Novelis' actual results could
differ materially from those expressed or implied in such statements.  We do
not intend, and we disclaim any obligation, to update any forward-looking
statements, whether as a result of new information, future events or
otherwise.  Factors that could cause actual results or outcomes to differ from
the results expressed or implied by forward-looking statements include, among
other things: the level of our indebtedness and our ability to generate cash;
relationships with, and financial and operating conditions of, our customers
and suppliers; changes in the prices and availability of aluminum (or premiums
associated with such prices) or other materials and raw materials we use; the
effect of metal price ceilings in certain of our sales contracts; our ability
to successfully negotiate with our customers to remove or limit metal price
ceilings in our contracts; the effectiveness of our metal hedging activities,
including our internal used beverage can and smelter hedges; fluctuations in
the supply of, and prices for, energy in the areas in which we maintain
production facilities; our ability to access financing for future capital
requirements; continuing obligations and other relationships resulting from
our spin-off from Alcan; changes in the relative values of various currencies;
factors affecting our operations, such as litigation, environmental
remediation and clean-up costs, labor relations and negotiations, breakdown of
equipment and other events; economic, regulatory and political factors within
the countries in which we operate or sell our products, including changes in
duties or tariffs; competition from other aluminum rolled products producers
as well as from substitute materials such as steel, glass, plastic and
composite materials; changes in general economic conditions; our ability to
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
agreements and other financing arrangements; the development of the most
efficient tax structure for the Company; and the ongoing integration with
Hindalco.  The above list of factors is not exhaustive.  Other important risk
factors are included under the caption "Risk Factors" in our Annual Report on
Form 10-K for the fiscal year ended March 31, 2008, as filed with the SEC, and
may be discussed in subsequent filings with the SEC.  Further, the risk
factors included in our Annual Report on Form 10-K for the fiscal year ended
March 31, 2008, are specifically incorporated by reference into this news
release.




For further information:

For further information: Charles Belbin of Novelis Inc.,
+1-404-814-4260,  charles.belbin@novelis.com Web Site:
http://www.novelis.com/

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