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Novelis Invests To Piggy-back On Auto Growth

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Atlanta-based Novelis, a subsidiary of the Aditya Birla group company Hindalco Industries, plans to de-risk its portfolio by reducing the overdependence on beverage can-body making. The strategy is to increase the share of automotive-aluminum to 25 per cent by 2020 from 9 per cent at present. The company has invested $2 billion in the last three years to expand its capacities, globally.

Novelis is the lead supplier of aluminum for Ford’s new F-150 pickup van, which would have 70 per cent aluminum component for reducing weight and increasing fuel efficiency. For regular supply to Ford, the company is finalising the commissioning of two automotive sheet finishing lines at its New York facility. This will result in production of about 0.24 million tonne of additional automotive finishing capacity annually. With this, the company’s automotive shipment levels in North America will increase in the second half of fiscal 2015.

Novelis is building its automotive-aluminum capacity on the basis of a study by aluminum industry consultant Ducker Worldwide -- which predicts that seven out of 10 new pickup trucks produced in North America will be aluminum bodied in future.

Globally, the company is ramping up its automotive-aluminum capacity. It has started construction of its third automotive finishing line at the New York facility and a second automotive finishing line at Nachterstedt in Germany. These projects are expected to begin commissioning by late 2015 and will add about 0.12 MT of capacity each. It began commissioning the new automotive sheet finishing plant in Changzhou, China in July 2014, which will result in about 0.12 MT of additional finishing capacity. With these expansions, the company’s global automotive sheet production capacity will more than triple to 0.9 MT per year.

Novelis, the leader in sheet aluminum, of which about 80 per cent is used for soft-drink cans, spends 40 per cent of its research and development fund to automotive projects because of the industry’s rapid growth. Novelis built the body side for the Range Rover.

The company reported a profit of $35 million in the three months ended June 30, an increase of $21 million compared to $14 million in the same period earlier. The capital expenditures have declined after its spent of $138 million globally for the three months ended June 30, 2014 compared to $181 million in the same period in prior year.

Write to Nevin at Nevin@businessworld.in