Hindalco unit Novelis' Q1 pretax loss widens on acquisition-related expenses

US-based aluminium major Novelis Inc, which was recently bought by India's Hindalco Industries Ltd, said its first-quarter pretax loss widened sharply -- hit by a number of non-recurring expenses related to the acquisition. Novelis reported a pretax loss of 114 mln usd for the quarter ended June 30 compared with 10 mln usd the year earlier, even as sales rose to 2.83 bln usd from 2.56 bln. The loss included 115 mln usd towards the non-recurring acquisition expenses. Other purchase accounting effects include higher depreciation and amortization expenses, and unfavourable contract accretion resulting from adjusting the company's assets and liabilities to fair value at the date of acquisition, it added. The net impact of all purchase accounting-related items was an expense of 19 mln usd for the quarter, which hit pretax earnings. Further, due to rising metal prices, Novelis' results for the same quarter last year included a benefit from metal price lag of 77 mln usd that did not occur in this year's first quarter. Metal price lag is a timing difference on the pass-through to customers of changing aluminium prices. After consideration of these factors, the pretax loss is 18 mln usd for the first quarter of fiscal year 2008, compared with a loss of 87 mln for the comparable prior year period, demonstrating an underlying operational improvement, Novelis said. It attributed this underlying improvement to a better product mix and price increases, among other factors. 'Since the acquisition, Novelis has completed the restructuring of its debt with more favourable terms and has achieved a stronger financial position,' said Steve Fisher, chief financial officer of Novelis. 'And, we were able to keep our public bonds in place and avoided paying consent fees or any meaningful premiums on the bonds,' he added. The company changed its fiscal year end from December 31 to March 31 after it was bought by Hindalco in May 2007.