29 JUN, 2012, M V RAMSURYA, ET BUREAU
MUMBAI: The Aditya Birla Group plans to shut part of its aluminum foil making mill in the UK and relocate the plant to its unit near Nagpur. The move is aimed to crack the whip on unviable units in the European market, which are currently grappling with oversupplies and high energy costs.
The Bridgnorth facility of Novelis, which is a subsidiary of group flagship Hindalco Industries, employs about 300 people and makes foil packaging products for the food and beverages industry.
It has been facing problems due to overcapacity in European foils space and increased competition from manufacturers in low-cost countries that has affected its profitability.
Novelis is the world leader in aluminum rolling and produces nearly 20% of the world's flat-rolled aluminum products used in consumer goods, cars and aircraft.
"Every factory has to be profitable and has to justify its existence. There can be no subsidies," said Hindalco managing director Debu Bhattacharya, who is also vice-chairman of Novelis.
He didn't specify on Bridgnorth's financials. Part of the Bridgnorth facility will be relocated to Hindalco's unit at Mouda near Nagpur where foils for packaging for food will be made. This is the second time that Hindalco has shut down a European unit and relocated the plant to India.
In 2011, the company shifted plant and machinery from its beverage can-making facility at Rogerstone in the UK to Hirakud in Orissa. "There are advantages in doing this. I save on time as it takes 2-3 years to build a similar plant in India. I also save on cost. I need cash now. I don't want to spend on equipment right now," said Bhattacharya.
Novelis is the world's largest maker of cans. The move is also similar to costcutting measures adopted by yet another Indian major Tata Steel, which has a large presence in the UK through Corus.
Between 2010 and 2011, the Jamshedpur-based steelmaker mothballed units in the UK, which cut about 1,500 jobs. Although highly unpopular, the measures by Tata Steel and the Aditya Birla Group have been widelybelieved to be necessary as general slowdown has affected European markets and have turned some units unviable.
Global aluminum majors, including Alcoa, have closed down a significant part of their production, almost 12% of the total capacity, due to high energy costs. The closures have already affected supplies with Indian producers commanding a $220 premium over LME prices.
On June 27, Novelis reported strong operating results in FY12 despite tight market conditions globally. Net sales, at $11.10 billion, were a 5% increase compared with $10.60 billion last year, mainly due to higher conversion premiums and an increase in average aluminum prices.
Novelis also showed a record operating profit per tonne of $371. Shipments were, however, lower due to economic slowdown and de-stocking. The group has also outlined large investment plans for Novelis and will put in more than $1 billion to increase presence in growth markets such as Korea, China, Brazil and India.
The company has completed acquisition of 31.30% of the outstanding stake in its Korean subsidiary for $344 million that will raise Novelis' ownership to 99%. In China, Novelis will invest $100 million in a unit to make aluminum sheets for cars.
Parent Hindalco said it has raised Rs 4,500-3,000 crore through a debenture issue in April and an additional Rs 1,500 crore through a similar instrument early this week to fund growth plans.
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