Novelis First Quarter Pre-Tax Income of $273 Million Shows Significant Improvement over Previous Quarter

Novelis Inc., a subsidiary of Hindalco Industries Limited, today reported pre-tax income of $273 million for the first quarter of fiscal 2010, which ended June 30, 2009. This represents a $211 million increase as compared to pre-tax income of $62 million for the fourth quarter of fiscal 2009. Net income attributable to the company’s common shareholder was $143 million for the first quarter, a $159 million increase over the $16 million loss recorded in the previous quarter.

Sales in the first quarter were $1.96 billion, a one percent increase from the fourth quarter of fiscal 2009, but a 37 percent decrease from the $3.10 billion of sales in the first quarter of fiscal 2009 as a result of the impact of lower metal prices and demand reductions. The average price of aluminum on the London Metal Exchange in the first quarter of fiscal 2010 was $1,488 per metric ton, a 9 percent increase from the fourth quarter of fiscal 2009, but a 49 percent decrease from the first quarter of fiscal 2009.

Shipments of flat-rolled aluminum products of 650 kilotonnes represent a 7 percent increase from the fourth quarter with volume increases in Asia and North America. Signs of economic recovery were evident in Asia where shipments were up more than 50 percent. Shipments in Europe were essentially flat quarter-over-quarter, while South America experienced a slight decline.

First-quarter results include $299 million of non-cash unrealized gains on derivatives as compared to $145 million of gains in the fourth quarter of fiscal 2009. These derivatives are primarily used to hedge exposures to aluminum, mostly related to customer fixed-price contracts, other commodities and currency.

On a pre-tax basis, excluding the impact of non-cash unrealized gains on derivatives, a $6 million gain on a tax litigation settlement in Brazil and $3 million of restructuring charges, the company recorded a loss of $29 million for the first quarter of fiscal 2010. This compares to a loss of $124 million for the fourth quarter of fiscal 2009, which also excluded non-cash unrealized gains on derivatives, a $122 million gain on a debt exchange transaction and $81 million of restructuring charges.

Other significant operational factors that created variances between the first quarter of fiscal 2010 and the fourth quarter of fiscal 2009 include:

A $56 million reduction in conversion costs, resulting from cost deflation and the company’s own cost reductions and restructuring initiatives. Conversion costs include direct and indirect labor, energy, freight, scrap usage, alloys and hardeners, coatings, alumina and melt loss.

A $17 million benefit from the volume increase discussed above.

Foreign exchange gains of $24 million related largely to the weakening of the U.S. dollar in Europe and Asia.

These favorable variances were partially offset by $25 million in unfavorable metal price lag, net of realized derivatives instruments.

Novelis received a net $7 million in income tax refunds during the first quarter of fiscal 2010.

Novelis' liquidity position improved during the current quarter, driven by net cash provided by operating activities of $258 million, which was largely offset by $223 million of cash outflows to settle derivative instruments.

"We are pleased with the improvement in our financial performance, aided by our cost reduction initiatives which have begun flowing through to the bottom line," said Phil Martens, President and Chief Operating Officer. "We welcome the growing signs of stability in the economy, but, with the outlook remaining uncertain, our priorities will continue to be cost reduction, cash management and liquidity improvement. Additionally, we will continue to focus on our core strengths and, in this regard, we are currently evaluating all non-core activities."

"In addition," continued Martens, "we have begun to implement a realignment of key functions within Novelis to achieve greater consistency in programs and practices across our global organization, consistent with other world-class international companies. The result will be a more effective management team and an even stronger, more competitive company."

Novelis will discuss its results via a live web and audio conference for investors at 10:00 a.m. EDT on Monday, Aug. 3, 2009. Access information was previously announced in a press release and can be found at www.novelis.com.

About Novelis

Novelis Inc. is the global leader in aluminum rolled products and aluminum can recycling. The company operates in 11 countries, has approximately 12,300 employees and reported revenue of $10.2 billion in fiscal year 2009. 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, one of Asia’s largest integrated producers of aluminum and a leading copper producer. Hindalco is a flagship company of the Aditya Birla Group, a multinational conglomerate based in Mumbai, India. For more information, please visit www.novelis.com.