Hindalco counting on Brazil World Cup to boost sales

Hindalco Industries Ltd. (HNDL), the world’s biggest supplier of aluminum for cans, is counting on next year’s soccer World Cup and the 2016 summer Olympics in Brazil to buoy demand amid sagging sales at home in India.

Novelis Inc., a unit of the company controlled by billionaire Kumar Mangalam Birla, has spent about $340 million in the South American country to expand recycling and rolled aluminum capacities, Vice Chairman Debnarayan Bhattacharya said in an interview. Novelis, which supplies to the world’s biggest drinks-can maker Rexam (REX) Plc, and to Coca-Cola Co. and Anheuser-Busch InBev NV (ABI), started its new capacity in Brazil last month.

Struggling with falling prices caused by a global surplus of the metal and Indian sales that fell to a two-year low in the quarter to June 30, Hindalco is looking at events like the FIFA World Cup that attract visitors from around the world and drive consumption of soft drinks and beer.

Novelis on July 30 opened its expanded aluminum rolling operations in Pindamonhangaba, Sao Paulo. The expansion increases production capacity at the plant by more than 50 percent to over 600,000 metric tons of aluminum sheet a year in the largest capital expansion by the company in the continent in the past decade.

London-listed Rexam raised its capacity at Brazil’s Belem unit early this year to make 800 million more cans. Brazil is the largest beverage can market in the region, it said on its website. The FIFA Confederations Cup in 2013, the FIFA World Cup in 2014 and the Olympics in 2016 are all set to simulate further beverage can consumption, it said.

Hindalco’s sales in India declined in four of the past five quarters while net profit has dropped in six of seven, according to data compiled by Bloomberg.

Each year, more than 280 billion beverage cans are manufactured worldwide, and more than 85 percent of them are made from aluminum, according to Novelis’ website. The company is the largest recycler of the light-weight metal, including around 40 billion cans annually. The 2010 World Cup in South Africa attracted 309,000 visitors during the tournament, with fans spending 3.6 billion rand ($360 million) on hotels, while the London Olympics of 2012 provided a 9.9 billion-pound ($15.5 billion) boost to business in the year since they were held, according to estimates from the U.K. government last month.

“The second half of the fiscal year in Brazil is expected to be very strong and our available capacity in the region is already fully contracted in the third and fourth quarters,” Martens said. “There is a strong market demand in South America in the near term, mostly driven by the World Cup.”