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'2014/04/15'에 해당되는 글 3건

  1. 2014.04.15 Business Standard - April 14, 2014
  2. 2014.04.15 Financial Times - March 27, 2014
  3. 2014.04.15 Financial Times - April 3, 2014

Novelis: Debt overshadows profit

Read more on:    Novelis | Hindalco | Acquisition | Lme | Cagr

's  of  in 2007 for around $6 billion has been one of the largest acquisitions in the industry. Hindalco, which had entered into an agreement in February 2007 for acquiring Novelis, completed the acquisition in May the same year, making the combined entity the world's largest rolled-aluminium producer. Clearly, it added significant scale and size to Hindalco's operations that were largely focussed on India.

The acquisition intended towards forward integration has since then been accruing positives despite challeng-ing business environment. Novelis has cushioned downside in earnings during the crisis as Hindalco felt the heat of downturn in the base metal (aluminium and copper) prices. Per tonne aluminium prices on the  (London Metal exchange) that were at $3,000 plus levels in FY08 have slumped to sub $2,000 a tonne levels. The price of copper, too, has been quite volatile and from more than $8,000 a tonne levels in 2008, trades at less than $7,000 a tonne levels now. In the backdrop, while on standalone basis Hindalco has seen its revenues grow at 6.63 per cent  (compounded annual growth rate) during FY08-13, the company's PBIDT (profit before interest depreciation and tax) has contracted at four per cent CAGR while profits have fallen by almost 10 per cent CAGR during the FY08-13 period. However, helped by Novelis' contribution on a consolidated level, the company has managed to see its operating profits in the positive terrain growing 3.86 per cent CAGR with profits growing 6.65 per cent FY08-13.

Moving forward, copper and aluminium prices on the LME are seen falling 3.3 per cent and 1.3 per cent CAGR between FY13-16, as per estimates of analysts at ICICI Securities. Novelis is likely to outperform Hindalco's domestic sales in terms of earnings before interest tax depreciation and amortisation (Ebitda) growth, say analysts. Novelis' Ebitda is estimated to grow by 10.4 per cent CAGR during FY13-16 compared to Hindalco's standalone Ebitda growing 6.28 per cent CAGR during the same period. Hence, the world's largest producer of rolled aluminium and a major recycler of aluminium cans Novelis will continue driving Hindalco consolidated profitability in the coming days, too. However, the high debt (taken to buy Novelis and expand Indian capacities) have played spoilsport and curtailed profit growth at the consolidated level. The debt-equity ratio at 1.6 is still high and needs to be cut to comforting levels. Positively, with developed economies seen growing, expect demand for Novelis' products to remain stable, as the company is also looking at expanding its value-added product portfolio.


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Last updated: March 27, 2014 6:06 pm

LME halts plan to cut metals queues after court ruling

A worker operates an electrolysis furnace, which produces aluminium from raw materials, at the Rusal Krasnoyarsk aluminium smelter in the Siberian city of Krasnoyarsk©Reuters

Rusal Krasnoyarsk aluminium smelter in Siberia

The London Metal Exchange has been forced put on hold a new rule to tackle the long warehouse queues that US politicians and aluminium buyers blame for increasing the price of everything from drink cans to car bodies.

Queues of more than 500 days to take delivery of aluminium from LME warehouses became the focus of a furious debate last year, triggering a series of complaints by metal users, criticism by senators and investigations by US regulators.

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MillerCoors, the brewer, claimed at a Senate hearing that the logjams at LME-registered warehouses owned by Goldman Sachs, Glencore Xstrata and other companies inflated global aluminium costs by billions of dollars – allegations that were fiercely disputed.

Warehouse owners profit from long queues because they earn rent. Owners of the metal also gain, by taking advantage of the aluminium market “contango”, where prices for future delivery exceed current prices, enabling them to sell the metal forward for a small but safe profit.

In an attempt to tackle the logjam, the LME in November announced a new rule that would oblige warehouses with queues longer than 50 days to load more metal out than they bring in.

But the plans, due to take effect at the start of April, were thrown into disarray on Thursday when a UK court said the consultation procedure was “unfair and unlawful”, and set the rule aside.

The case against the LME was brought by Rusal, the world’s largest aluminium producer. The Russian company claimed that its human rights had been breached, and that the LME did not consider all the options to tackle queues.

It said that the new rule would remove support for aluminium prices, which are under pressure due to huge global stockpiles of the metal. At $1,739 a tonne for three-month delivery on the LME, the price is barely half of its pre-financial crisis peak.

Oleg Deripaska, chief executive of Rusal, said: “We welcome this decision by the High Court and look forward to working closely with the LME, and indeed all key stakeholders.”

The court’s decision caught the market by surprise. Analysts say that reform of the LME’s warehouse rules is urgent because the exchange price, used by producers and consumers to hedge and as a benchmark for contracts, had drifted so far from the price for physical delivery of aluminium because of the queues.

The LME said: “We continue to believe that Rusal’s complaint was without merit in its entirety and are currently taking legal advice with regard to our options, including appeal or re-consultation.”

Other reforms to the warehouse system, including enhanced power to tackle artificial queue formation and publication of more data, would proceed as planned, it said.

Novelis, which is the world’s biggest buyer of aluminium and supplies material for Coca-Cola cans, said it was disappointed by the postponement of the warehouse rules.

“The supply chain risk and inflated premiums that the current system allows will continue to impact the overall market and cause real business challenges for aluminium consumers,” said Nick Madden, chief supply chain officer at Novelis.



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Financial Times - April 3, 2014

2014. 4. 15. 19:46
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