Novelis Reports Results for Second Quarter of Fiscal Year 2008



    Company Shows Operational Improvements Year Over Year

    ATLANTA, Nov. 12 /CNW/ - Novelis Inc., a subsidiary of Hindalco
Industries Limited (BSE: HINDALCO), has reported its financial results for the
second quarter of fiscal year 2008, which ended on September 30, 2007.
(Novelis changed its fiscal year end from December 31 to March 31 following
its acquisition by Hindalco on May 15, 2007.)
    
    (Logo: http://www.newscom.com/cgi-bin/prnh/20070809/NOVELISLOGO )
    
    Total rolled products shipments in the quarter increased to 747
kilotonnes (kt) compared with 737 kt in the corresponding period of 2006. 
Novelis incurred a pre-tax loss of US$23 million on sales of $2,821 million,
compared with the prior-year period when it incurred a pre-tax loss of
$154 million on sales of $2,494 million.
    The $131 million increase in pre-tax earnings reflects significant
underlying operational improvement despite difficult market conditions in
North America and Asia.  This increase is due to a number of positive business
factors, including the following:

    
    -- The company's exposure to customer contracts with metal price ceilings
       was reduced by $44 million, net of hedges, compared with the
       prior-year period.
    -- Product mix improvements, price increases, and volume increases
       primarily in Europe and South America, benefited net sales by
       approximately $22 million compared with the prior-year period.
    -- The company realized a $29 million improvement in metal price lag over
       the prior-year period, largely as a result of better risk management.
       Metal price lag negatively impacted pre-tax earnings by $4 million in
       the quarter ended September 30, 2007, compared with $33 million in the
       prior-year period.  (Metal price lag is a timing difference on the
       pass-through to customers of changing aluminum prices.)
    -- Corporate selling, general and administrative (SG&A) expenses were
       reduced by $17 million, driven by streamlining of corporate staff and
       unusual items related to financial reporting requirements and
       executive changes in the prior year.
    -- The company reversed $21 million of reserves ($15 million net of tax)
       relating to previously disputed applications of social contribution
       tax credits as a result of a favorable Superior Court ruling in
       Brazil.
    -- Improved operational performance was partially offset by higher input
       and operational costs in the current quarter compared with the prior
       year period.
    

    In addition to these items, pre-tax earnings during the quarter ended
September 30, 2007, were 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 $29 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.
    Martha Brooks, President and Chief Operating Officer of Novelis, said,
"During the second quarter, further improvements in Novelis' business
operations enabled us to achieve an increase in pre-tax results despite soft
conditions in the North American marketplace.  While the effect of these
improvements was partially offset by increased input and operating costs, our
financial performance also benefited from stronger risk management
capabilities, and in particular, our ability to manage our metal price
volatility in a more effective manner.
    "Market conditions in North America and Asia were challenging, primarily
related to the transportation and housing sectors in North America and strong
competition from Chinese manufacturers in Asia; however, we continued to see
very strong demand for our products in South America and Europe.  Demand for
the aluminum beverage can, a market in which we have a strong global position,
is growing strongly on three continents."
    For the three months ended September 30, 2007, Novelis reported net
income of $13 million, compared with the corresponding period of 2006 when it
incurred a net loss of $102 million.  Included in net income of $13 million
for the second quarter of fiscal year 2008 is $36 million of income tax
benefit.  Significant tax items in the quarter included:

    
    -- $27 million of tax expense related to exchange translation and re
       measurement items;
    -- $19 million of tax expense on valuation allowance 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 losses; and
    -- $74 million of tax benefit associated with a reduction in tax rates in
       Germany.
    

    Cash taxes paid during the second quarter of fiscal year 2008 were
$18 million.

    
    Six Months (see Note below regarding combined results of operations)
    
    For the six months ended September 30, 2007, total rolled products
shipments increased to 1,504 kt from 1,490 kt for the corresponding period of
2006.  For the six-month period, the company incurred a combined pre-tax loss
of $134 million on combined net sales of $5,649 million, an improvement of $34
million compared with a pre-tax loss of $168 million on net sales of $5,058
million for the same period of 2006.
    The combined pre-tax loss for the first six months of fiscal 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 improvement was $111 million compared with the corresponding period of
2006.
    For the six months ended September 30, 2007, Novelis incurred a net loss
of $138 million, including $4 million of income tax expense.  This compares
with the corresponding period of 2006 when it incurred a net loss of $96
million.  Significant tax items in the first six months of fiscal year 2008
included:

    
    -- $80 million of exchange translation and re-measurement expense;
    -- $53 million of valuation allowance 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
       losses; and
    -- $69 million of tax benefit associated with enacted tax rate changes
       (primarily in Germany).
    

    Cash taxes paid during the first six months of fiscal year 2008 were
$39 million.

    For further information regarding Novelis' second quarter and
year-to-date results, please review the company's Quarterly Report on Form
10-Q as filed with the U.S. Securities and Exchange Commission on November 9,
2007.
    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 (GAAP), the condensed consolidated financial statements for the six
months ended September 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 six months ended September 30, 2007, in comparison with the
six months ended September 30, 2006, 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 six months ended September 30, 2007:



    
                                      May 16, 2007  April 1, 2007  Six Months
                                          Through       Through       Ended
                                      September 30,     May 15,  September 30
                                           2007           2007          2007

    Combined Shipments (kt)(A)          Successor     Predecessor    Combined
     Rolled products(B)                   1,156             348       1,504
     Ingot products(C)                       66              15          81
     Total shipments                      1,222             363       1,585


    (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   Six Months
                                       Through        Through        Ended
                                    September 30,     May 15,      September
                                        2007            2007        30, 2007

    Combined Results of Operations   Successor      Predecessor     Combined
     ($ in millions)
    Net sales                         $4,368          $1,281         $5,649
    Cost of goods sold (exclusive
     of depreciation and
      amortization shown below)        3,991           1,205          5,196
    Selling, general and
     administrative expenses             130              95            225
    Depreciation and amortization        155              28            183
    Research and development
     expenses                             23               6             29
    Interest expense and
     amortization of debt issuance
      costs - net                         81              26            107
    Gain on change in fair value of
     derivative instruments - net         22             (20)             2
    Equity in net (income) loss of
     non-consolidated affiliates           5              (1)             4
    Sale transaction fees                  -              32             32
    Other expenses - net                   4               4              8
                                       4,411           1,375          5,786

    Loss before provision for taxes
     on loss and minority interests'
      share                              (43)            (94)          (137)
    Provision for taxes on loss            -               4              4
    Loss before minority interests'
     share                               (43)            (98)          (141)
    Minority interests' share              2               1              3
    Net loss                            $(41)           $(97)         $(138)
    


    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 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.  Examples of forward-looking statements in
this news release include those regarding our improved risk management
capabilities and our ability to manage volatility.  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.





For further information:

For further information: Charles Belbin of Novelis Inc.,
+1-404-814-4260, office, +1-404-803-2588, mobile, charles.belbin@novelis.com,
Web Site: http://www.novelis.com

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Novelis Inc.

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HINDALCO INDUSTRIES LIMITED

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