CHICAGO Novelis Inc.
continues to move forward with expansions to its rolling,
heat-treatment and recycling capabilities worldwide despite
headwinds in Asia and a competitive can market in North
America, company executives said.
By fiscal 2017, the
Atlanta-based aluminum company should have a rolling capacity
of about 3.7 million tonnes, Novelis president and chief
executive officer Philip Martens said May 14 during a
conference call with analysts.
The Atlanta-based companys
expansion of its rolling facility in Pindamonhangaba, Brazil,
is "nearly finished" with customer qualifications and began
shipping coils to customers last month, Martens said. The
expansion will increase the facilitys aluminum sheet
capacity by 50 percent to more than 600,000 tonnes per year (
amm.com, Aug. 14).
Rolling expansions in South
Korea also are expected to start the commissioning process in
mid-summer"a bit earlier than we expected"and to
eventually boost rolling capacity by another 500,000 tonnes,
On the automotive front, Novelis
remains on track with plans to bolster heat-treatment capacity
at its operations in Oswego, N.Y. (
amm.com, May 14).
The company also broke ground in
November on its first automotive heat-treating line in China
and "remains very excited about the automotive opportunity in
the broader Asia region," Martens said. The finishing line in
China should be online by the end of 2014, he noted.
The automotive segment might be
the smallest of the Novelis business units today, but it is
expected to see "explosive growth" going forward, according to
The company expects to see a
compound annual growth rate of 25 percent for automotive
aluminum from 2012 to 2017.
On the can front, Novelis posted
record shipments in South America as the region experienced the
highest levels of can stock demand the company has ever seen,
Martens said, noting that Novelis operations in the
region are performing "very well" and are "running at full
In Brazil, for example, Novelis
is the only integrated can sheet producer, something that
should bode well for the company ahead of the 2014 Fifa World
Cup and 2016 Summer Olympics, he said.
Overall, Novelis expects to see
a compound annual demand growth rate of 4 to 5 percent for
aluminum beverage cans.
The situation in Brazil,
however, is better than what Novelis faces in a "very
competitive" North American can market burdened by excess
capacity, senior vice president and chief financial officer
Steve Fisher said. "As a result of this, we saw some pricing
pressure with the renewal of some existing customer contracts,"
Regionally, Novelis is also
seeing downward pressure on prices in Asia as a result of big
increases in local market premiums that Chinese suppliers
arent subject to, Fisher said. "Therefore, our Chinese
competitors are able to purchase at a significantly lower
price, which has forced us to lower our prices to remain
competitive," he said.
Martens also noted that prices
have been hurt by slower growth in China than had been
Novelis is looking to offset
those headwinds by boosting its use of recycled content at its
operations in Yeongju, South Korea, the executives said. The
company opened Asias largest aluminum beverage can
recycling facility in Yeongju in October (
amm.com, Oct. 24).
Separately, the company broke
ground in November on what it predicts will be the worlds
largest aluminum recycling center in Nachterstedt, Germany (
amm.com, Nov. 27).
Also challenging Novelis are
"higher inventory levels than we would like," Fisher said, not
only because of the commissioning and start-up of facilities
but also because of lower sales and disruption caused by
implementing a new enterprise resource planning (ERP) system in
North America (
amm.com, May 14).
Novelis expects to see continued
"solid demand" in the future from its key markets, Martens
However, while the company
expects better shipments in its next fiscal year, it
doesnt expect that to translate into higher earnings
before interest, taxes, depreciation and amortization (Ebitda),
he said, citing continued pricing pressure in some regions,
start-up costs and inflationary pressures.
Fiscal 2014 is "still another
transitional year" with a significant set of global
investments, Martens said.