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Hindalco to Expand Novelis' US, China Capacities to meet automotive demand

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Source: The Economic Times
Friday, September 08, 2017

 MUMBAI: Aluminium major HindalcoBSE -0.64 % will invest in new capacities for automobile component offerings from its Canadian subsidiary Novelis and expand manufacturing lines to grow its auto shipments to a quarter of the total production capacity. 

Satish Pai, managing director of the Aditya Birla group flagship, said the company is considering expanding Novelis' auto lines in the US and China to tap rising demand for aluminium sheets used for automotive purposes. 

“Auto shipments from Novelis were 18 per cent in 2016, and in the next year or so, around 25 per cent of our shipments will be auto,“ Pai said at the Annual Global Investor Conference here on Tuesday. Novelis, the can and auto sheets maker subsidiary of Hindalco, is gaining confidence from rising demand for automotive aluminium coming from original equipment manufacturers (OEMs) -which are gradually switching to aluminium and steel to make vehicles lighter -and from manufacturers of electric vehicles (EVs). 

“Electric vehicles are going to be a big trend. They are much more aluminium-in tensive than some of the other straightforward con versions for aluminium that we see,“ Pai said at the conference organised by brokerage firm Motilal Oswal Financial Services. 

On the sidelines of the event, Pai told ET that the existing capacities have mostly been a conversion from can to auto. But going forward, there will be no more conversion from can to auto. But going forward, there will be no more conversion from can and new capacities for auto will be put up. 

He clarified that Novelis, which is the world leader in can sheets, will work to retain this position while ramping up its auto capabilities. The Novelis management, at a conference call with analysts in August, had said the company could look at “setting additional finishing lines in North America“, which would roughly involve a capex of $100 million for approximately 100-kilo tonnes. It is expected to announce an investment plan related to the auto segment in the next six months. 
Analysts believe that another reason why the subsidiary is betting big on auto is the higher margins associated with auto products. “Auto sheet margins are much better than other products,“ Goutam Chakraborty, metals analyst with Emkay Global Financial Services, said, adding that Novelis could also be looking at inorganic opportunities for growth as stated by the management, now that the company has the necessary cash flows. 

Novelis, which supplies to automotive brands like Ford, Jaguar Land Rover and Cadillac, achieved record shipment of automotive sheet in 2016-17. In the June quarter of the current fiscal, it increased its year-on-year net sales by 16 per cent to $2.7 billion, of which there was a 16 per cent YoY increase in shipments of higher conversion premium automotive products. 


By JimmiNil

By JimmiNil

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