* Sees 34 pct flat-rolled demand growth over next 5 years
* Aluminum shipments constrained by its own capacity
* Capital spending refocused on greater plant efficiency
By Carole Vaporean
NEW YORK, Aug 10 U.S. aluminum producer
Novelis Inc [NVLX.UL] said on Tuesday it sees current strong
demand for flat-rolled aluminum products continuing into its
fiscal second quarter and beyond, and that its own shipments
are limited by its capacity.
The company, based in Atlanta but acquired by Hindalco
Industries (HALC.BO) in 2007 after a spin-off from Alcan Inc,
projected 34 percent demand growth in the flat-rolled aluminum
segment over the next five years.
The parent reported earnings last week. [ID:nSGE6720H6]
Novelis executives spoke to analysts after reporting 15
percent increase in shipments to 746,000 tonnes, a 29 percent
gain in net sales to $2.5 billion, and net income of $50
million for its fiscal 2011 first quarter ended June 30.
"We saw stronger than expected demand in all four regions.
As a result of the increased volume globally we recorded record
results," said President and Chief Operating Officer Philip
Novelis is the world's leading aluminum rolled products
producer based on shipments.
"Going forward, we expect continued strong demand across
all geographic regions. Demand in the first quarter exceeded
our expectations and we expect that to continue for the
remainder of the year," said Martens.
"This is a growth industry and this rapid growth is coming
primarily from three regions -- broader Asia, the Middle East
and Africa, and South America," he said.
North America was the last region to pick up, he said, but
demand increased rapidly during June, driven primarily by the
automotive and electronics segments.
"I think (Novelis) will see increases in shipments in North
America going forward, mainly because we will be running full
out," said Martens.
The recent increased demand Novelis has seen from the
automotive sector came from "the product mix from the original
equipment manufacturers that has our product on it. And we do
expect that to continue through the year."
Martens added that while there were swings in demand,
Novelis' first quarter was "relatively strong throughout."
In Europe, Novelis saw significant increases in sales to
its main automotive customers there -- Audi, Jaguar, Landrover,
and BMW -- which have largely been shipping into Asia.
"There seems to be very strong and stable demand through
European customers," Martens said.
The aluminum producer sees strong global demand in
automotive and electronics markets driven mainly by growth in
North America, Asia and South America.
While Novelis remains constrained by its capacity, it will
focus capital spending efforts on "de-bottlenecking and
efficiency gains," with $250 million planned for this fiscal
year, compared with $101 million in fiscal 2010.
"As a result of this strong demand recovery, we are now
operating at capacity. In all of our regions, our utilization
rates are at all-time historically high levels," said Steve
Fisher, chief financial officer.
"While we expect strong demand to continue into the second
quarter, we are limited until we get additional capacity online
from future expansion projects," he added.
In South America, Novelis plans to spend about $300 million
over 2-1/2 years to increase capacity there by 50 percent.
Martens said its development plans are on track and the
aluminum maker will break new ground in the next few weeks.
In Asia, the company sees a growing population, increasing
wealth and urbanization driving "explosive" demand growth.
"This is clearly an important market for us and one that
will serve as an engine for future growth," Martens said,
adding that it is exploring ways to increase capacity in Asia.
(Reporting by Carole Vaporean; Editing by Bernard Orr)