Novelis Recovers From Six-month Downturn

Article Excerpt

NOVELIS INC. $25 (Toronto symbol NVL; SI Rating: Average) became a public company in early 2005, after former parent Alcan Inc. spun it off to its own shareholders. It was trading at a new high last August when rising aluminum prices undercut its earnings because of clauses in sales contracts that limited its ability to pass these cost increases along to customers. It later announced that it had discovered some accounting errors. This pair of bad news items brought on a six-month downturn in the stock, which we analyzed here and in our Hotline. Now, however, the accounting errors have proven less worrisome than feared and the company is reworking its sales agreements to let its prices reflect aluminum costs. It has also begun to close or sell unprofitable operations, while making new investments in faster-growing businesses. For example, it will spend $30 million to expand a 68%-owned plant in South Korea. That will help Novelis take advantage of growing Asian…

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