Monday, May 28, 2012

>HINDALCO INDUSTRIES: Intention to withdraw from the Evermore recycling JV (55.8% stake) with Alcoa

  4Q adj. EBITDA/t down 10% yoy — Novelis’ adj. EBITDA fell 17% yoy to $233m (Citi est $256m) largely due to an 8% yoy fall in volumes on destocking (weakness in electronics business) and higher operating costs. EBITDA/t was $316 vs. $350 last year and $312 in 3QFY12 (seasonally weak). FY12 adj EBITDA/t was $353 (+2% yoy). Management has indicated that demand should grow and expects FY13 adj EBITDA to be higher than $1.05bn reported in FY12. Novelis’ focus on technically complex products, strong customer relationships and pass through model should result in steady earnings in forthcoming quarters.

  Demand muted in 4Q; 1Q to be better — 4Q volumes fell 8% yoy at 738kt due to inventory destocking. Total volumes in FY12 were 2.98mt (-4% yoy) due to falling demand in cans (-1%), light gauge and industrial products; auto demand improved. FY12 trends: 1) Shipments fell 4% yoy in N. America (36% of volumes) on lower can demand − market softness and contract transitions partially offset by higher auto volumes; 2) Europe (32%) shipments fell 3% due to lower demand for industrial/light gauge/foil while can/auto segments improved. Sale of non-core operations and focus on recycling should help going forward. 3) Shipments from Asia (17%) fell 8% due to global uncertainty and fall in electronic products (export
slowdown); can volumes were flat. 4) S. America (14%) volumes were flat.

  Restructuring — Continuing its restructuring, Novelis has announced: (1) Intention to withdraw from the Evermore recycling JV (55.8% stake) with Alcoa; (2) Closure of its Saguenay plant in Canada effective Aug 12; (3) Divesture of three foil mills in Europe by mid-2012; (4) Novelis now owns 99% in Novelis Korea after it acquire 31.2% for $343m in 3QFY12.

  Recycling capacity — Novelis has increased recycling content in products from 33% in FY11 to 39% in FY12. Its target is to reach 50% recycling by 2015. To this end Novelis: (1) has commissioned a new recycling center at Alunorf in Europe in Mar 12; (2) plans to invest $250m in Germany for a 400kt recycling facility; (3) plans to expand recycling capacity in Brazil and South Korea.

  Expansions — Expansion plans include taking Novelis’ effective capacity from 3.3mt to ~4mt by FY16: (1) ~220kt by end CY12 in Brazil to 600kt; (2) ~350kt by end CY13 to take capacity to ~1,000kt in South Korea; (3) ~200kt by mid CY13 at Oswego, NY; (4) ~120kt automotive sheet plant in China by end-CY14. Capex is estimated at $650-700m in FY13 vs $516m in FY12.

To read report in detail: HINDALCO INDUSTRIES