India’s Aditya Birla Forges Major Moves In Aluminum And Copper

Despite the current sluggishness in the non-ferrous metals markets, India’s Aditya Birla Group has some pretty big plans for the aluminum and copper sectors. To begin with, the Group’s flagship company, Hindalco, also India’s largest non-ferrous metals producer, has made some headway by raising funds for its biggest greenfield project so far. The Aditya Alumina and Aluminum project in the Indian State of Odisha, seeks to raise approximately US $1.65 billion to compete with other majors in this field, particularly Vedanta.

While Hindalco, a Fortune 500 company, goes about its expansion plans, its subsidiary, Novelis, a global leader in aluminum rolled products and aluminum cans recycling, has also announced massive investments plans worth US $1 billion to mark its presence in growth markets such as Korea, China, Brazil and India.

Novelis also announced that it had completed the sale of three European aluminum foil and packaging plants to Eurofoil, a unit of American Industrial Acquisition Corporation (AIAC). The transaction includes foil rolling operations in Rugles, France; Dudelange, Luxembourg and Berlin in Germany, which will now operate, respectively, as Eurofoil France S.A.S., Eurofoil Luxembourg S.A., and Eurofoil Paper Coating GmbH.

A press statement by Novelis quoting Tadeu Nardocci, senior Vice President of Novelis stated, “Although these plants no longer fit within the Novelis business strategy, they were good operations and I am pleased to see them move forward as part of AIAC. Novelis is focused on growing in the premium markets of beverage cans, automobiles and specialty products, and on expanding its recycling leadership.”

Just a few days prior to this development, Novelis announced that it would shut part of its aluminum foil-making mill in the United Kingdom and relocate it near Nagpur, in central India. The move, the company said, came as a result of the need to weed out non-viable units in the European market, grappling with over-supplies and high energy costs.

The Bridgnorth facility of Novelis employs about 300 people and makes foil packaging products for the food and beverages industry but of late, has come under intense competition from manufacturers in low-cost countries.

Novelis played a major role in driving Hindalco Industries Ltd’s profits last fiscal year. Hindalco announced its earnings for 2011-12 last week. The company reported a 38% jump in its consolidated net profit at US $595 million for the financial year, largely driven by Novelis, and its copper business in India. Novelis reported net sales for FY12 at US $11.1 billion, a 5% increase compared to $10.6 billion reported for the same period a year ago, helped by favorable conversion premiums across all regions and an increase in average aluminum prices.

A press release by Hindalco stated that consolidated revenues at $14.16 billion reflected a growth of 12% year-on-year, due to “better product mix and the depreciating rupee.”

The other factors that had positively impacted the company’s bottom line included a lower effective tax rate and a new cost reduction program.

Novelis’ robust growth, despite lower than expected earnings from its aluminum business in India, still yielded $10.88 billion worth of aluminum business, up 11% over last year.

Copper Markets

Overall, the copper market in India in the last few weeks has turned bearish, with predictions of a coming recovery. Analysts covering copper do not expect prices to decline by more than 4%, from their current low levels.

By Sohrab Darabshaw