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Over the last week, leading can makers have reported strong 2010 results and have given a
positive growth outlook for 2011. Cans constitute 54% of Novelis shipments. Novelis will report
3QFY11 earnings on 8 February 2011, which we believe could surprise us on the upside.
Rexam successfully completes Beverage Can contract negotiations
Rexam PLC, the global consumer packaging company and the largest customer of
Novelis (constituted 16% of FY10 volumes), stated that it has completed negotiations for
Beverage Can North America customer contracts. Rexam has said that overall operating profit in
Beverage Can North America in 2011 is expected to remain comparable to that in 2010 as
improved pricing, new customers, continued growth in specialty cans and further cost control
initiatives will offset the impact of lower net 12oz volumes.
Ball Corporation signals positive outlook
Ball Corporation reported CY10 revenues of US$7.63bn, recording a 13.7% growth
yoy. This was driven by the metal beverage packaging (America and Asia) segment which
recorded revenues of US$3.84bn (+33% yoy). EBITDA for the segment grew 41% yoy. Ball in its
outlook for 2011 said " "Ball is well positioned for continued growth in 2011, and we expect the
company's full-year 2011 earnings to exceed those of 2010".
Crown Holdings reports 13% yoy growth in global beverage can volumes
Crown Holdings also reported robust 4QCY10 numbers with global beverage can
volumes increasing 13%. American beverage can segment 4QCY10 sales increased 16%
yoy to US$521m with segment income rising 57%. Its outlook for 2011 is as follows. "We expect a
busy and promising 2011. Our expansion projects are on schedule and budget with three new
plants and four new line additions at existing plants expected to be commercialized during the
year in exciting growth markets around the world. We have also announced four new plants
scheduled to begin production during 2012".
Robust outlook by can makers positive for Novelis
Cans constitute 54% of Novelis shipments and forms the largest customer base. We
believe the positive outlook signaled by the global can makers is positive for Novelis.
Novelis plans to increase its capacity by 600kt by FY14 with 200kt coming from Pinda
expansion in Brazil and the rest through progressive debottlenecking (3-4% pa). We have
currently assumed shipments of 2,939kt, 2,995kt and 3,052kt for FY11, FY12 and FY13
respectively, leaving room for upward revisions.
Brazil to be key growth market
Brazilian total capacity is set to increase from 15bn cans to 22bn cans by 2012 and
Novelis with its Pinda expansion is well poised to benefit from the growth. We note
that the can makers also have significant investments lined up in Brazil. In May 2010, Novelis
signed a multi-year agreement with Rexam, the domestic leader in Brazil, to supply aluminum
sheet for can production. Under this agreement, Novelis will be the sole supplier of can body
sheet for Rexam's ten Brazilian plants (including one to be inaugurated in Pouso Alegre-MG later
this year) and for its facility in Argentina.
We have forecasted Novelis 3QFY11 EBITDA of US$268mn
We have forecast net sales of US$2.55bn (+21%yoy and +1%qoq), Ebitda of
US$268mn (+35%yoy and -8%qoq). We have factored volumes of 710KT (+4%yoy and -4%qoq).
Volumes for the Sep-Dec quarter is generally impacted by seasonality as beverage can sales are
affected by cold weather. Novelis will reported earnings on 8 February 2011, which we believe
could surprise us on the upside, going by results for Crown.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Over the last week, leading can makers have reported strong 2010 results and have given a
positive growth outlook for 2011. Cans constitute 54% of Novelis shipments. Novelis will report
3QFY11 earnings on 8 February 2011, which we believe could surprise us on the upside.
Rexam successfully completes Beverage Can contract negotiations
Rexam PLC, the global consumer packaging company and the largest customer of
Novelis (constituted 16% of FY10 volumes), stated that it has completed negotiations for
Beverage Can North America customer contracts. Rexam has said that overall operating profit in
Beverage Can North America in 2011 is expected to remain comparable to that in 2010 as
improved pricing, new customers, continued growth in specialty cans and further cost control
initiatives will offset the impact of lower net 12oz volumes.
Ball Corporation signals positive outlook
Ball Corporation reported CY10 revenues of US$7.63bn, recording a 13.7% growth
yoy. This was driven by the metal beverage packaging (America and Asia) segment which
recorded revenues of US$3.84bn (+33% yoy). EBITDA for the segment grew 41% yoy. Ball in its
outlook for 2011 said " "Ball is well positioned for continued growth in 2011, and we expect the
company's full-year 2011 earnings to exceed those of 2010".
Crown Holdings reports 13% yoy growth in global beverage can volumes
Crown Holdings also reported robust 4QCY10 numbers with global beverage can
volumes increasing 13%. American beverage can segment 4QCY10 sales increased 16%
yoy to US$521m with segment income rising 57%. Its outlook for 2011 is as follows. "We expect a
busy and promising 2011. Our expansion projects are on schedule and budget with three new
plants and four new line additions at existing plants expected to be commercialized during the
year in exciting growth markets around the world. We have also announced four new plants
scheduled to begin production during 2012".
Robust outlook by can makers positive for Novelis
Cans constitute 54% of Novelis shipments and forms the largest customer base. We
believe the positive outlook signaled by the global can makers is positive for Novelis.
Novelis plans to increase its capacity by 600kt by FY14 with 200kt coming from Pinda
expansion in Brazil and the rest through progressive debottlenecking (3-4% pa). We have
currently assumed shipments of 2,939kt, 2,995kt and 3,052kt for FY11, FY12 and FY13
respectively, leaving room for upward revisions.
Brazil to be key growth market
Brazilian total capacity is set to increase from 15bn cans to 22bn cans by 2012 and
Novelis with its Pinda expansion is well poised to benefit from the growth. We note
that the can makers also have significant investments lined up in Brazil. In May 2010, Novelis
signed a multi-year agreement with Rexam, the domestic leader in Brazil, to supply aluminum
sheet for can production. Under this agreement, Novelis will be the sole supplier of can body
sheet for Rexam's ten Brazilian plants (including one to be inaugurated in Pouso Alegre-MG later
this year) and for its facility in Argentina.
We have forecasted Novelis 3QFY11 EBITDA of US$268mn
We have forecast net sales of US$2.55bn (+21%yoy and +1%qoq), Ebitda of
US$268mn (+35%yoy and -8%qoq). We have factored volumes of 710KT (+4%yoy and -4%qoq).
Volumes for the Sep-Dec quarter is generally impacted by seasonality as beverage can sales are
affected by cold weather. Novelis will reported earnings on 8 February 2011, which we believe
could surprise us on the upside, going by results for Crown.
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