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In its Q1CY12 result commentary, Alcoa retained its CY12 global aluminum
demand growth estimate of 7% but reduced deficit estimate from 600kt to
435kt due to increased supply in China. In such a scenario, rebound in
aluminium prices could be limited which is negative for upstream
operations of all Indian aluminium players (Hindalco, NALCO, and Sterlite).
However, Alcoa’s rolled products segment (comparable to Novelis)
delivered strong results with volumes up 11% QoQ and EBITDA/t up USD209
QoQ to an all‐time high. We see possibility of Novelis beating our Q1CY12
EBITDA estimate of USD 270mn. We see Novelis continuing to be a stronger
driver of profits for Hindalco than its Indian operations in FY13.
Aluminum demand to grow 7% in CY12E but deficit expectation lower
Alcoa expects global aluminum demand to grow 7% in CY12E but has slightly downgraded
Chinese aluminium demand growth rate from 12% to 11%. However, it has cut the global
deficit for CY12 from 600kt mentioned in previous quarter to 435kt now due to reduced
deficit in China from 850kt expected earlier to 350kt now. Unlike the previous quarter
wherein Alcoa indicated that aluminium prices would rebound, it is now silent on the
same, which may indicate it is less bullish on the matter.
Rolled products business strong: Volumes up, margin at all‐time high
In the rolled products segment, volumes were up 11% QoQ (from 407kt to 452kt). EBITDA
doubled QoQ to USD 202mn while EBITDA/t was up from USD238 in Q4CY11 to USD447 in
Q1CY12 to its all‐time high. Based on this, Novelis could post a positive surprise for the
March quarter (our EBITDA estimate is USD270mn).
Results above expectations primarily led by productivity gains
Alcoa reported revenue, EBIDTA and PAT (excl one‐offs) of USD6,006mn (consensus
estimate:USD5,769mn), USD624mn (consensus estimate:USD461mn) and USD104mn
(consensus estimate: loss of USD39mn), respectively. It achieved productivity gains of
USD108mn led by process improvement, usage reduction and higher scrap recovery.
Outlook: Robust growth expected in rolled products
Alcoa’s strong outlook for rolled products is driven by auto sector demand in North
America and can sector demand (mainly led by China) growing 34% and 4‐20%
respectively in 2011‐13. Moreover, demand for consumer electronics rolled products is
likely to rise 18% in the same period. Outlook for rolled products is stronger than that for
primary aluminium. Alcoa also believes that China would under‐deliver on the planned
10mt aluminium capacity addition up to 2015 due to energy/sustainability challenges
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In its Q1CY12 result commentary, Alcoa retained its CY12 global aluminum
demand growth estimate of 7% but reduced deficit estimate from 600kt to
435kt due to increased supply in China. In such a scenario, rebound in
aluminium prices could be limited which is negative for upstream
operations of all Indian aluminium players (Hindalco, NALCO, and Sterlite).
However, Alcoa’s rolled products segment (comparable to Novelis)
delivered strong results with volumes up 11% QoQ and EBITDA/t up USD209
QoQ to an all‐time high. We see possibility of Novelis beating our Q1CY12
EBITDA estimate of USD 270mn. We see Novelis continuing to be a stronger
driver of profits for Hindalco than its Indian operations in FY13.
Aluminum demand to grow 7% in CY12E but deficit expectation lower
Alcoa expects global aluminum demand to grow 7% in CY12E but has slightly downgraded
Chinese aluminium demand growth rate from 12% to 11%. However, it has cut the global
deficit for CY12 from 600kt mentioned in previous quarter to 435kt now due to reduced
deficit in China from 850kt expected earlier to 350kt now. Unlike the previous quarter
wherein Alcoa indicated that aluminium prices would rebound, it is now silent on the
same, which may indicate it is less bullish on the matter.
Rolled products business strong: Volumes up, margin at all‐time high
In the rolled products segment, volumes were up 11% QoQ (from 407kt to 452kt). EBITDA
doubled QoQ to USD 202mn while EBITDA/t was up from USD238 in Q4CY11 to USD447 in
Q1CY12 to its all‐time high. Based on this, Novelis could post a positive surprise for the
March quarter (our EBITDA estimate is USD270mn).
Results above expectations primarily led by productivity gains
Alcoa reported revenue, EBIDTA and PAT (excl one‐offs) of USD6,006mn (consensus
estimate:USD5,769mn), USD624mn (consensus estimate:USD461mn) and USD104mn
(consensus estimate: loss of USD39mn), respectively. It achieved productivity gains of
USD108mn led by process improvement, usage reduction and higher scrap recovery.
Outlook: Robust growth expected in rolled products
Alcoa’s strong outlook for rolled products is driven by auto sector demand in North
America and can sector demand (mainly led by China) growing 34% and 4‐20%
respectively in 2011‐13. Moreover, demand for consumer electronics rolled products is
likely to rise 18% in the same period. Outlook for rolled products is stronger than that for
primary aluminium. Alcoa also believes that China would under‐deliver on the planned
10mt aluminium capacity addition up to 2015 due to energy/sustainability challenges
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