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29 June
ATLANTA,
Press Release
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Novelis Inc., a subsidiary of Hindalco Industries Limited, today reported pre-tax income of $67 million for the fourth quarter of fiscal 2009, which ended on March 31, 2009. This compares to pre-tax income of $117 million for the fourth quarter of fiscal 2008. Fourth-quarter results include $145 million of unrealized gains on derivatives, a $122 million gain on a debt exchange transaction and $81 million of restructuring charges. For the fiscal year 2009, the company recorded a net loss of $1.9 billion. The loss includes non-cash, pre-tax charges of $1.5 billion for asset impairments, $519 million of unrealized losses on derivatives which hedge exposure to commodities and foreign currencies, and $95 million of restructuring charges, as well as the non-cash gain on debt exchange of $122 million. For the corresponding period of fiscal 2008, the company reported a net loss of $117 million, including $77 million of expenses associated with the Hindalco transaction, $7 million of restructuring charges and $3 million of unrealized losses on derivatives. "We have taken broad actions in response to the economic downturn," said Philip Martens, President and Chief Operating Officer. "Across the organization we have driven down our operating costs while improving cash management and risk management. For example, by the end of our fiscal year, we had reduced metal inventory levels by 22 percent from the previous year. We estimate the net benefit of these initiatives to be an annualized future savings of $140 million. With these actions, not only are we better able to manage the current difficult market conditions, we are also well positioned to benefit as the global economy recovers." On a pre-tax basis, excluding the impact of impairments, restructuring charges, mark-to-market losses on derivatives and a gain on a debt exchange transaction, the company recorded a loss of $164 million for fiscal 2009. This compares to income of $47 million in the prior-year period, which also excludes $77 million of fees and compensation expense associated with the Hindalco transaction. The $519 million of non-cash unrealized losses on derivatives in the current year compares to a $3 million loss in the prior year. These derivatives are primarily used to hedge exposures to aluminum, mostly related to customer fixed-price contracts, other commodities and currency. The magnitude of the mark-to-market loss on the company’s derivative portfolio primarily reflects the dramatic downward movement in the LME price of aluminum. Rapidly declining aluminum prices during the second half of fiscal 2009 increased the effect of timing differences between our settlement of aluminum forward contracts and the collection of cash from our customers. We expect that all of these outflows will be recovered through customer payments, except for approximately $141 million of cash outflows related to hedges of our exposure to metal price ceilings. Cash taxes paid during fiscal year 2009 were $65 million. Fourth quarter summary Sales declined 32 percent to $1.94 billion as a result of lower volumes and decreased metal prices. Shipments of flat-rolled aluminum products decreased 20 percent versus last year’s fourth quarter to 605 kt. Shipments to automotive, construction and industrial markets were significantly impacted by the economic downturn, while can sheet shipments were flat as compared to the fourth quarter of 2008 and higher on a year-to-date basis. These trends affected all regions except South America where shipments were flat when compared to the prior-year quarter. The lower shipment volumes negatively impacted pre-tax income by $136 million, when compared to the prior-year quarter. About Novelis | |||