Acquisition costs push Novelis to loss
Novelis, the Canadian aluminium giant that Hindalco had bought earlier this year, has posted a loss of $151 million during the first quarter of FY08, compared with a net income of $6 million in the year-ago period.
By TNN |
MUMBAI: Novelis, the Canadian aluminium giant that Hindalco had bought earlier this year, has posted a loss of $151 million during the first quarter of FY08, compared with a net income of $6 million in the year-ago period. The company has attributed the loss to one-time expenses related to acquisition costs and extreme price volatility in the aluminium industry.
The one-time expenses which are mostly related to change of control — Hindalco completed its $6 billion acquisition of Novelis on May 15 — include $45 million on account of stock compensation, $32 million for sale transaction costs and $19 million due to purchase accounting, said Novelis president Martha Brooks, who is currently in India for the company’s first quarterly results after being bought out by Hindalco.
“Novelis’ business operations continue to prove their global leadership in the marketplace,” said Ms Brooks, adding that the benefits from the acquisition by Hindalco would increase soon.
The Canadian company also said that it wasn’t taking on any more beverage can price ceiling contracts that have had an adverse impact on Novelis in the recent past.
The can contracts — which are now 10% of Novelis’ annual sales compared to 20% earlier — include a ceiling over which metal prices cannot be passed through to customers, even if aluminium metal prices go up. This and Novelis’ falling market share in Europe had led market analysts to criticise Hindalco’s acquisition in January which also prompted investors to sell Hindalco stock.
Shares of Hindalco were down 3.1% at Rs 151.15 on Friday when the broader Sensex fell 1.5%. But the scrip’s fall is in line with the global selloff in metals which have been hit by a credit squeeze after investors fretted about defaults on mortgage payments in the US.
The one-time expenses which are mostly related to change of control — Hindalco completed its $6 billion acquisition of Novelis on May 15 — include $45 million on account of stock compensation, $32 million for sale transaction costs and $19 million due to purchase accounting, said Novelis president Martha Brooks, who is currently in India for the company’s first quarterly results after being bought out by Hindalco.
“Novelis’ business operations continue to prove their global leadership in the marketplace,” said Ms Brooks, adding that the benefits from the acquisition by Hindalco would increase soon.
The Canadian company also said that it wasn’t taking on any more beverage can price ceiling contracts that have had an adverse impact on Novelis in the recent past.
The can contracts — which are now 10% of Novelis’ annual sales compared to 20% earlier — include a ceiling over which metal prices cannot be passed through to customers, even if aluminium metal prices go up. This and Novelis’ falling market share in Europe had led market analysts to criticise Hindalco’s acquisition in January which also prompted investors to sell Hindalco stock.
Shares of Hindalco were down 3.1% at Rs 151.15 on Friday when the broader Sensex fell 1.5%. But the scrip’s fall is in line with the global selloff in metals which have been hit by a credit squeeze after investors fretted about defaults on mortgage payments in the US.
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