Novelis Records $25 Million Profit in First Quarter of Fiscal Year 2009



    ATLANTA, Aug. 14 /CNW/ -- Novelis Inc., a subsidiary of Hindalco
Industries Limited (BSE: HINDALCO), today reported net income of US$25 million
for the first quarter of fiscal year 2009, which ended on June 30, 2008. This
compares with a net loss of $142 million for the corresponding prior year
period, which included a number of non-recurring expenses related to the
acquisition by Hindalco.

    (Logo: http://www.newscom.com/cgi-bin/prnh/20070809/NOVELISLOGO)

    Shipments of flat-rolled aluminum products increased in the first quarter
versus the prior year period in all of the company's reported regions except
Europe. Total rolled products shipments increased 3 percent or 22 kilotonnes
(kt) over the corresponding prior period, from 755 kt to 777 kt. The primary
driver of this increase was strong global demand for aluminum can sheet. This
was partially offset by decreases in light gauge and specialty products due to
weaker construction markets in North America and Europe.
    "Today's inflationary environment is clearly very challenging," said
Martha Finn Brooks, President and Chief Operating Officer, "but I am
encouraged by the continued strength in demand for our products, particularly
can stock, which is growing well in a number of markets."
    "We continue our efforts to offset rising costs through portfolio
optimization, price increases and initiatives to address energy, freight and
alloy costs," said Ms. Brooks. "Sustained high metal prices, however, have
increased our working capital which drove a substantial negative free cash
flow for the first quarter."
    Novelis reported pre-tax income of $62 million on sales of $3,103 million
for the first quarter, an improvement of $176 million over the prior year
period when it incurred a pre-tax loss of $114 million on sales of $2,828
million. The prior year period was affected by several non-recurring expenses
related to the sale of Novelis, including $45 million of stock compensation
expense and $32 million of transaction costs. The improvement was also due to
the benefit of non-cash unrealized gains on derivatives of $21 million versus
unrealized losses of $10 million for the corresponding prior period. The gain
was primarily driven by an increase in the forward aluminum price on the
London Metal Exchange (LME) during the first quarter of fiscal year 2009.
    In addition to these items, the first quarter of fiscal year 2009 was
favorably impacted versus the prior year quarter by $18 million for certain
income and expense items associated with fair value adjustments recorded at
the date of acquisition. The pre-tax impact of these items was primarily
driven by the accretion of reserves related to unfavorable contracts (recorded
at fair value at the date of acquisition) and inventory adjustments in the
prior period that did not occur in the current fiscal year, partially offset
by higher depreciation and amortization.
    The remaining $50 million improvement in pre-tax income was driven
primarily by the following factors, which are exclusive of exchange impact:
    -- Product mix improvements and price increases added approximately $33
million of pre-tax earnings in the quarter compared with the prior year
period.
    -- The company realized a $45 million improvement in metal price lag over
the prior year period.  Metal price lag positively impacted pre-tax earnings
by $34 million in the quarter ended June 30, 2008, compared with $11 million
of negative impact in the prior year period.  (Metal price lag is a timing
difference on the pass-through to customers of changing aluminum prices.)
    -- The company's exposure to customer contracts with metal price ceilings
was reduced by $13 million, net of hedges and exclusive of the impact of the
accounting associated with the acquisition, compared with the corresponding
quarter of fiscal year 2008.
    -- Selling, general and administrative (SG&A) expenses were reduced by
approximately $15 million.
    -- Interest expense was approximately $11 million lower, driven primarily
by reduced borrowing costs.

    These gains were offset by the following factors:

    -- Input and operational costs in the quarter were approximately $48
million higher than in the prior year period, primarily as a result of energy,
freight and alloy costs.
    -- Costs associated with currency exposure, primarily to the Brazilian
real, were $26 million higher. The average Brazilian real per U.S. dollar
strengthened approximately 16% this quarter versus the prior year quarter.
    Income tax expense in the first quarter of 2009 included $29 million of
income tax expense related to exchange translation and re-measurement items,
offset by a $14 million tax benefit associated with statutory tax rate
differences on foreign earnings. The prior year period included a net $68
million of tax expense associated with discrete period items and tax rate
differences on foreign earnings.
    Cash taxes paid were $55 million and $21 million during the first
quarters of fiscal years 2009 and 2008, respectively. This increase was driven
by higher earnings in jurisdictions where we pay cash taxes and the timing of
such payments.
    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 condensed consolidated financial statements for the
quarter 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 quarter ended June 30, 2007, in comparison with the quarter
ended June 30, 2008, 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 comparative (1) shipments, (2) results of operations and
(3) cash flows for the quarter ended June 30, 2008, and for the combined
quarter ended June 30, 2007. To facilitate reconciliation of combined
schedules to GAAP financial measures we have included the respective
Predecessor and Successor periods in each table.



    
                    Three Months   Three Months   May 16, 2007   April 1, 2007
                       Ended          Ended          Through        Through
                   June 30, 2008  June 30, 2007  June 30, 2007   May 15, 2007
    Shipments:       Successor      Combined        Successor     Predecessor
      Shipments (kt)(A):
        Rolled
         products(B)     777            755            407             348
        Ingot
         products(C)      48             38             23              15
        Total shipments  825            793            430             363
    


    
    (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 and Europe, foundry
        products in Korea, secondary ingot in Europe and other miscellaneous
        recyclable aluminum.
    



    
                               Novelis Inc.
             Condensed Consolidated Statements of Operations
                             ($ in millions)
    

    
                    Three Months   Three Months   May 16, 2007   April 1, 2007
                       Ended          Ended          Through        Through
                   June 30, 2008  June 30, 2007  June 30, 2007   May 15, 2007
                                    (Restated)      (Restated)
                     Successor       Combined       Successor     Predecessor
    

    
    Net sales          $3,103          $2,828          $1,547         $1,281
    

    
    Cost of goods
     sold (exclusive
     of depreciation
     and amortization
     shown below)       2,831           2,641           1,436          1,205
    Selling, general
     and administrative
     expenses              84             137              42             95
    Depreciation and
     amortization         116              81              53             28
    Research and
     development
     expenses              12              19              13              6
    Interest expense and
     amortization of debt
     issuance costs - net  40              51              25             26
    (Gain) loss on change
     in fair value of
     derivative
     instruments - net    (66)            (34)            (14)           (20)
    Equity in net
     (income) loss of
     non-consolidated
     affiliates             2               -               1             (1)
    Sale transaction fees   -              32               -             32
    Other (income)
     expenses - net        22              15              11              4
                        3,041           2,942           1,567          1,375
    

    
    Income (loss)
     before provision
     (benefit) for
     taxes on income
     (loss) and
     minority interests'
     share                 62            (114)            (20)           (94)
    Provision (benefit)
     for taxes on
     income (loss)         35              31              27              4
    Income (loss) before
     minority interests'
     share                 27            (145)            (47)           (98)
    Minority interests'
     share                 (2)              3               2              1
    Net income (loss)     $25          $ (142)           $(45)          $(97)
    



    
                                    Novelis Inc.
              Condensed Consolidated Statements of Cash Flows
                                  ($ in millions)
    

    
                    Three Months   Three Months   May 16, 2007   April 1, 2007
                       Ended          Ended          Through        Through
                   June 30, 2008  June 30, 2007  June 30, 2007    May 15, 2007
                     Successor       Combined       Successor      Predecessor
    

    
    OPERATING ACTIVITIES
    Net cash provided
     by (used in)
     operating
     activities         $(351)         $(274)          $(44)          $(230)
    INVESTING ACTIVITIES
    Capital expenditures  (33)           (39)           (22)            (17)
    Proceeds from sales
     of assets
             1              1              1               -
    Changes to investment
     in and advances to
     non-consolidated
     affiliates             6              2              1               1
    Proceeds from loans
     receivable - net -
     related parties        8              4              4               -
    Net proceeds from
     settlement of
     derivative
     instruments           34             47             29              18
    Net cash provided by
     (used in) investing
     activities            16             15             13               2
    FINANCING ACTIVITIES
    Proceeds from issuance
     of common stock        -             92             92               -
    Proceeds from issuance
     of debt                -            150              -             150
    Principal repayments   (4)           (47)           (46)             (1)
    Short-term borrowings
    - net                 313            143             83              60
    Dividends - minority
     interests              -             (8)            (1)             (7)
    Debt issuance costs     -            (15)           (13)             (2)
    Proceeds from the
     exercise of stock
     options                -              1              -               1
    Net cash provided by
     (used in) financing
     activities           309            316            115             201
    Net increase
     (decrease) in cash
     and cash equivalents (26)            57             84             (27)
    Effect of exchange
     rate changes on cash
     balances held in
     foreign currencies    (4)             1              -               1
    Cash and cash
     equivalents -
     beginning of period  326            128            102             128
    Cash and cash
     equivalents - end
     of period           $296           $186           $186            $102
    About Novelis
    

    Novelis Inc. is the global leader in aluminum rolled products and
aluminum can recycling. The company operates in 11 countries, employs
approximately 12,700 people and reported revenue of $11.2 billion in fiscal
year 2008. Novelis supplies premium aluminum sheet and foil products to
automotive, transportation, packaging, construction, industrial and printing
markets throughout North America, South America, Europe and Asia. The company
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, 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 amended Annual
Report on Form 10-K/A 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 amended Annual Report on Form 10-K/A 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, Novelis Inc., (404) 814-4260,
charles.belbin@novelis.com, Web Site: http://www.novelis.com

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