Novelis to Restate

The decision to restate and delay arose from management's review of reserves and contingencies in South America.
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Updated from 1:11 p.m.

Novelis

(NVL)

plunged 14% after saying it would restate previous 2005 quarters to review its accounting.

The Atlanta-based aluminum roller also delayed its third-quarter earnings release and extended by a month the deadline on a $1.4 billion debt swap.

The decision to restate and delay arose from management's review of reserves and contingencies in South America. Novelis said its audit committee decided to engage independent outside advisers to conduct a full review of matters relating to reserves and contingencies as well as adjustments made to arrive at its Jan. 6, 2005, opening balance sheet. That was the day Novelis was spun off from Canada's

Alcan

(AL) - Get Report

.

Alcan said Monday afternoon that it "does not expect any of its previously reported consolidated financial statements to be affected by the review which Novelis Inc. has announced it will conduct respecting Novelis' own financial reporting."

Novelis said second-quarter restated earnings are expected principally to reflect the reversal of a $5 million pretax contingency related to Brazilian litigation matters. The first-quarter earnings are expected to be restated principally to reflect additional income taxes of approximately $4 million in Canada.

Preliminary unaudited third-quarter total regional income results will be $145 million to $155 million, subject to completion of the review. While results were hurt by energy and freight costs as well as currency translation, the overall metal impact was positive as compared to the same quarter in 2004. Rolled product shipments were essentially flat in the quarter compared to the third quarter 2004. Cash flows continued to be strong, resulting in $96 million of debt reduction in the quarter, Novelis says.

Novelis dropped $2.69 to $16.76.