This Newly Independent Giant is a Buy

Article Excerpt

NOVELIS INC. $24 (Toronto symbol NVL; Conservative Growth Portfolio, Manufacturing & Industry sector; SI Rating: Average) is the world’s largest maker of rolled aluminum products, including beverage cans, packaging and automotive parts. The company recently restated its earnings to correct accounting problems related to its spin-off from Alcan. It now earned $1.21 a share (total $90 million) in 2005, up 63.5% from $0.74 a share ($55 million) in 2004 (all amounts except share price in U.S. dollars). Sales rose 7.7%, to $8.4 billion from $7.8 billion. Novelis now buys aluminum to make its products. But 20% of its sales are under contracts that limit its ability to pass along rising aluminum costs to its customers. Novelis is phasing out this practice, a remnant from its days as part of Alcan, and aims to eliminate half of its price-capped contracts by the start of next year. Although Novelis also hedges its exposure to aluminum prices, it now expects to lose money in 2006. That…

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