The global expansion drive of Hindalco Industries—the flagship metals business of Aditya Birla Group—picks up steam as the massive debt reduction in the last year has made its balance sheet lighter. The chairman of the group Kumar Mangalam Birla at the annual general meeting (AGM) announced the $3 billion investment programme in the next five years. The investment will be majorly for completing the expansions and integrations at its facilities in the U.S., Brazil and China.
The non-ferrous metal maker is on track to invest $1 billion in India— majorly for Utkal alumina expansion and various downstream projects in aluminium and copper businesses. The commercial production at Utkal is expected to begin by September, said people familiar with the matter.
The gross debt of the company went down by ₹16,345 crore in one year to ₹67,836 crore in June. The net debt is down by ₹10,389 crore to ₹51,913 crore. The net debt to EBITDA has significantly improved to 2.36 times in June, compared to 3.83 times a year back. The company has a strong treasury balance of $872 million in Novelis—the subsidiary headquartered in the U.S.—and Rs 9,425 crore in Hindalco India.
The capital expenditure at Novelis will primarily be deployed for auto-finishing line expansions in the U.S. and China, and for expanding rolling and recycling capacity in Brazil. The recycling, casting and rolling expansion in Pinda, Brazil is on track and it is expected to be commissioned by September. The automotive finishing plants in Kentucky, U.S.A. and Changzhou in China are the other expansion plans identified by the company.
The integration of Aleris—which Novelis acquired for $2.8 billion in April 2020—continues with $100 million cost synergies achieved in the first quarter. The expansion project in Zhenjiang, China—which is part of the integration—is expected to begin this year with capital investments of $375 million over three years. The investments will be for a new cold mill, automotive casting house, recycling capabilities and hot mill upgrade. The synergy benefit from China integration is estimated to be $100 million.
Hindalco is also witnessing strong customer demand for beverage cans, driven by higher at-home consumption and its importance as the sustainable packaging option. So it is looking to expand beverage can making capacity in the next two to three years across all regions.
Novelis has recorded an adjusted EBITDA of $1.7 billion and adjusted EBITDA per tonne of $474 in 2020-21. Hindalco has already invested in reducing energy consumption in aluminium production and achieved a reduction of 17% against the target of 25% by 2025.
