Introduction:
Novelis Inc is one of the largest Flat Rolled Product (FRP) producers Globally in the Aluminium Industry; Hindalco Industries Limited acquired Novelis back in 2007 being one of the largest acquisitions in Corporate India’s part of Aditya Birla Group a multinational conglomerate headquartered in Mumbai, India.
Novelis predominantly focuses in the Can sheet business which forms 60 % of its Shipments followed by Automotive with 20 % and balance being the speciality segment.
In July 2018, Novelis & Aleris signed a definitive agreement of USD 2.58 billion; the deal is expected to be closed in the next 9-15 months.
Post the acquisition of Aleris; the expected value added capacity of FRP shall be over 4.7 Million tons; as a result the consolidated unit will be the single largest FRP Downstream producer in the world and market leader in many countries across various product categories within FRP.
Overview of Aleris Corporation:
Aleris is a Global supplier Headquartered in Cleveland, Ohio; it focuses mainly on Aerospace, Automotive & Speciality products (Marine & Electronics) with shipments of over 800 KT and revenue of approx. USD 3 Billion with 13 factories Globally spread across 3 continents. Aleris has completed its investment cycle phase and plants have started commercial production for their new or expanded facilities:
- Auto body Sheet in North America: 425 Million n Lewisport, multi-year long term contracts and commercial shipments started.
- Auto body Sheet in EU: 85 Million in Duffel, Long term contracts with Auto OEM’s
- Aerospace: 350 Million in Zhenjiang, long term contracts with OEM’s, prequalification in place for Western clients.
Synergies for Growth Prospects:
- Access to Global Aerospace Clients: Novelis as a group gains access into the niche aerospace market with technological capabilities in manufacturing and research & development in Aleris facility in Koblenz, Germany; it enhances its value addition growth prospects to further strengthen its presence among blue chip clients such as Airbus, Boeing, Bombardier, Denso, Dana, Comac etc with which Aleris has secured long term contracts.
- China Auto Sheet Business: Aleris also has operations in Asia which will be a consolidated entity once the acquision is fully in place; this also strengthens the ability to serve the automotive demand especially for Auto Sheets at a higher scale, In China, Aleris’ recently commissioned Zhenjiang facility situated in proximity to Novelis facility in Changzhou which announced to double its capacity to 200 KT per year.
- Strengthening its position in US Market: Novelis-Aleris can further strengthen its presence in the FRP segment in US with a cost effective business and streamlined business, access to a larger customer base etc. In the speciality Electronics segment Aleris has plants in Lincolnshire, Lewis port, Uhrichsville, Clayton which will give access to Novelis and make them the largest producer for FRP Electronics in the North America Region; this shall ensure Novelis-Aleris to be a strong competitor alongside with Arconic (Alcoa)
- Marine Plates Business (Speciality): Novelis capitalizes on its Marine plates business which it currently focuses in North America which has applications in Cruise ships, Boats, LNG carriers etc; Novelis gains access to the European customer base of stockiest and direct customers with plants of Aleris in Belgium (Duffel) & Germany (Koblenz).
- Increase in market share in EU region for Electronics (Speciality): Novelis operates out of US & Brazil in the Electronics segments for FRP in electronics in applications such as PCB, Enclosures, Capacitators, Batteries, Computers etc, having access to Aleris in Europe it can further increase its market share in the EU region, Aleris has a base in Duffel – Belgium with access to large scale contract manufacturers such as Asteelflash, Jabil Circuit, Kemet, Neways Electronics, Vishay, Zollner Electronik etc.
Conclusion:
- Aleris with over 1 Million tons of Shipments shall boost the presence in speciality segments such as Aerospace, Electronics, Marine and Automotive in the volumes driven segment.
- Aleris is poised for transformational growth which means its Capitalized equipments will start returning revenues and return in the form of profits to the group.
- Novelis and Aleris as one entity shall have easy access and flexibility for Metal & Non Metal procurement, Scrap synergies as a group will be a key benefit followed by Operational efficiencies and supply chain benefits which shall ensure sustained cost savings and increase in EBITA margins for the future.
- As a Novelis Aleris entity it will strengthen the ability to compete against steel by gaining a greater platform for production.
Brief About Frost & Sullivan
Frost & Sullivan is a leading global strategy consulting company, headquartered in the United States. Established in 1961, in New York City, the company today has 45 offices across the globe. In India, we work across 6 offices across Chennai, Bangalore, Pune, Mumbai, Kolkata, New Delhi and Gurgaon.
The company has a domain knowledge approach to strategy consulting and has been working closely with Global metal clients, to develop their long term strategy and identify specific areas of business opportunity.
Frost & Sullivan Metals & Minerals Practice:
A dedicated team for Metals & Minerals, along with our experience in executing projects across the globe help us in bringing value to our clients through each of our engagement. Project execution team comprises of experts from Metals (Steel, Aluminium, Copper, Minerals etc.) Industry along with skilled research professionals to provide the best insights through interpretation of market information.
The Frost & Sullivan Aluminium & Non Ferrous Practice has experience in handling Global markets working with Fortune 500 clients across Europe, North America, APAC, Middle East & Africa in Recycling, Flat Rolled Product, Upstream Primary Smelters, Extrusion, Casting etc
