Novelis Reports Results for Third Quarter of Fiscal Year 2008



    Company Continues to Show Operational Improvements

    ATLANTA, Feb. 8 /CNW/ -- Novelis Inc., a subsidiary of Hindalco
Industries Limited (BSE: HINDALCO), today reported a net loss of $49 million
for the third quarter of fiscal year 2008, which ended on December 31, 2007.
This compares with a net loss of $105 million for the corresponding period of
2006. (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 )
    
    Challenging market conditions in North America and a slow end to 2007 in
Europe were offset by record volumes in both Asia and South America. Total
rolled products shipments in the quarter increased slightly to 730 kilotonnes
(kt) from 729 kt in the corresponding period of 2006.
    Novelis incurred a pre-tax loss of US$45 million on sales of $2,735
million, compared with the prior-year period when it incurred a pre-tax loss
of $140 million on sales of $2,472 million. The $95 million increase in pre-
tax earnings reflects significant underlying operational improvement. This
increase is due to a number of positive business factors, including the
following:

    
    -- Product mix improvements and price increases added approximately
       $45 million of pre-tax earnings compared with the prior-year period.

    -- The company's exposure to customer contracts with metal price ceilings
       was reduced by $42 million, net of hedges, compared with the
       prior-year period.

    -- Corporate selling, general and administrative (SG&A) expenses were
       reduced by $22 million driven by streamlining of corporate staff and
       costs related to financial reporting requirements in the prior year.

    -- Interest expense was $10 million lower primarily due to penalty
       interest and the write-off of backstop commitment fees incurred during
       the prior year as a result of our delayed filings and lower interest
       rates in the current year.
    

    The prior year's quarter included the benefit of a $26 million gain from
the sale of an equity interest in a non-consolidated affiliate and certain
rights to develop hydroelectric power plants in South America.
    In addition to these items, pre-tax earnings during the quarter ended
December 31, 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 $8 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.
    "While the bottom line is still not satisfactory, these results reflect
continued progress towards improving our performance in an environment of high
energy costs and volatile metal price and currencies," said Martha Brooks,
President and Chief Operating Officer. "Product mix improvements, price
increases and reduced exposure to contracts with metal price ceilings are
examples of the steps we have taken to improve our business fundamentals."
    Included in the net loss of $49 million for the third quarter of fiscal
year 2008 is $4 million of income tax expense.  Significant tax items in the
quarter included:

    
    -- $32 million of tax expense related to exchange translation and
       re-measurement items;

    -- $14 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

    -- $32 million of tax benefit associated with enacted tax rate changes.
    

    Cash taxes paid during the third quarter of fiscal year 2008 were
$19 million.
    Nine Month Results (see Note below regarding combined results of
operations)
    For the nine months ended December 31, 2007, ("year-to-date" or "current
year"), Novelis reported a combined net loss of $187 million. This compares
with a net loss of $201 million for the corresponding period of 2006.
    Year-to-date rolled products shipments increased to 2,234 kt from
2,219 kt in the prior year. The company incurred a combined pre-tax loss of
$182 million on combined net sales of $8,384 million in the current year,
which represents an improvement of $124 million over the prior year when
Novelis reported a pre-tax loss of $306 million on net sales of $7,530
million.
    The combined pre-tax loss for the first nine months of 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 improvement was $201 million compared with the corresponding period of
2006. 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 nine months
ended December 31, 2007, 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 $18 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 $187 million is $8 million of income tax
expense. This compares with the corresponding period of 2006 when the net loss
of $201 million included an income tax benefit of $106 million. Significant
tax items in the first nine months of fiscal year 2008 included:

    
    -- $112 million of exchange translation and re-measurement expense;

    -- $67 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

    -- $101 million of tax benefit associated with enacted tax rate changes.
    

    Cash taxes paid during the first nine months of fiscal year 2008 were
$59 million.
    For further information regarding Novelis' third 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 February 8, 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 (GAAP), the condensed consolidated financial statements for the nine
months ended December 31, 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 nine months ended December 31, 2007, in comparison with the
nine months ended December 31, 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 nine months ended December 31, 2007:


    
                                      May 16, 2007  April 1, 2007 Nine Months
                                         Through       Through       Ended
                                      December 31,     May 15,   December 31,
                                           2007           2007          2007

    Combined Shipments (kt)(A)          Successor    Predecessor     Combined
      Rolled products(B)                  1,886            348        2,234
      Ingot products(C)                     108             15          123
      Total shipments                     1,994            363        2,357

    (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 Nine Months
                                         Through       Through       Ended
                                      December 31,     May 15,   December 31,
                                           2007           2007          2007

    Combined Results of
     Operations
     ($ in millions)
                                        Successor    Predecessor     Combined
    Net sales                            $7,103         $1,281       $8,384
    Cost of goods sold
     (exclusive of
     depreciation and
     amortization shown
     below)                               6,466          1,205        7,671
    Selling, general and
     administrative
     expenses                               229             95          324
    Depreciation and
     amortization                           260             28          288
    Research and
     development expenses                    34              6           40
    Interest expense and
     amortization of debt
     issuance costs - net                   128             26          154
    (Gain) loss on change
     in fair value of
     derivative instruments
     - net                                   72            (20)          52
    Equity in net (income)
     loss of non-consolidated
     affiliates                               9             (1)           8
    Sale transaction fees                     -             32           32
    Other (income) expenses
     - net                                   (7)             4           (3)
                                          7,191          1,375        8,566
    Loss before provision
     for taxes and minority
     interests' share                       (88)           (94)        (182)
    Provision for taxes                       4              4            8
    Loss before minority
     interests' share                       (92)           (98)        (190)
    Minority interests'
     share                                    2              1            3
    Net loss                               $(90)          $(97)       $(187)
    

    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. 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: Media, Charles Belbin, +1-404-814-4260, 
charles.belbin@novelis.com, or Investors, Robert M. Patterson, 
+1-404-814-4295, bob.patterson@novelis.com, both of Novelis Inc. Web Site:
http://www.novelis.com

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