Asia’s largest integrated aluminium complex, National Aluminium Company (Nalco) hopes to have a double EBITDA margin in FY19. According to Tapan Kumar Chand, CMD of Nalco, EBITDA margin is expected to increase from 20 per cent at the end of Q3 FY 19 to 40 per cent by the end of FY19 backed by the soaring demand and prices of both alumina and aluminium.
“Prices of alumina and aluminium have been firming up, if this trend is maintained, then we expect our margins to double by the end of FY19,” Chand told on the sidelines of The People Management Conclave, organised by the Bengal Chamber of Commerce and Industry.
Aluminium prices, which were always on the uptrend since August 2017 owing to the global deficit in production, are continuing to grow even higher in the recent time on the back of US sanctions against Rusal. Aluminium prices on the London Metal Exchange (LME) are currently ruling around US$2250 per tonne, up from US$1900 per tonne in April 2017.
Jayanta Roy, Senior Vice-President of ICRA is of opinion that capacity cutbacks in China, resulting in a deficit in the global aluminium market has also caused a rise in aluminium prices. He says, “Despite the recent relaxation on Rusal, the deficit in global aluminium industry is likely to give a cushion to prices.”
Alumina prices are also on the rising spree, touching a record high of US$718 per tonne compared to US$310 per tonne in the contemporary period of previous year.
According to Chand, every US$20 per tonne increase in alumina price and US$40 per tonne in aluminium price give Nalco an additional EBITDA of INR 290 crore.
A pick-up in demand following a growth in construction, infrastructure, and automobile sectors will also aid in shoring up the company’s margins.
Roy says, “Nalco’s profitability and overall cash flows are likely to improve significantly this year if the pricing environment remains as expected.”
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