NALCO Profits and Plans $8 Billion Expansion Through Indian and International Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--National Aluminium Company Limited (BSE:532234) (Nalco) (Bhubaneshwar, Orissa), a state-owned manufacturer of aluminum products, has plans to invest more than $8 billion on domestic and international projects over the next five years to position itself as a leading global player. The expansion plans include smelter and power projects in Indonesia, South Africa and Iran.

Nalco, the second largest aluminum producer in India, will invest $3.5 billion in Indonesia to set up an aluminum smelter and a 1,250-megawatt captive power plant. The smelter will have a capacity of 500,000 tons. The company has received all approvals and clearances from Indonesia's government. With the feasibility study phase over, the company now plans to hire an external consultant to draft a detailed project report.

Nalco, through a joint venture with an Iranian company, is in the process of setting up a smelter in Iran that will have a capacity of 310,000 tons per year. The project is expected to cost nearly $1 billion.

The "navratna" public sector enterprise will embark on a growth path within the country with planned greenfield projects in Andhra Pradesh and Orissa. The aluminum major plans to set up a bauxite mine and refinery complex in Andhra Pradesh at an investment of $1.5 billion. The mine is estimated to have a mining capacity of 4.2 million tons per year and a refining capacity of 1.4 million tons per year.

In Orissa, a smelter and power facility is coming up in Jharsuguda district at an investment of over $3.3 billion. In a joint venture with Industrial Infrastructure Development Corporation of Orissa (Bhubaneshwar), Nalco plans to set up an aluminum park in Angol.

The second phase of brownfield expansion projects within the country is expected to be completed by the end of this year. This phase attracted an investment of $1 billion.

Nalco currently produces about 350,000 tons of aluminum and 1.6 million tons per year of alumina. In the next six months, the company plans to augment its capacity to produce 460,000 tons of aluminum and 2.1 million tons per year of alumina. The company's smelters are fully utilized, with the one in Angul attaining 104.48% capacity utilization. The Angul smelter produced 360,457 tons of aluminum cast metal in 2007-08, compared with 358,734 tons in the previous fiscal year.

Despite the global economic meltdown and rapid decline in metal and alumina prices since September, Nalco's profits and sales have seen a marginal increase. The company recorded a net profit of $198 million and sales turnover of $670 million in the first half of the 2008-09 fiscal year. Net profit and sales turnover in the same period last year were $180 million and $555 million, respectively. Alumina sales during the first half of the fiscal year rose to 443,479 tons from 424,615 tons during the same period of the previous fiscal year. Metal sales slumped to 172,688 million tons this fiscal year, compared with 172,903 million tons during the same period last fiscal year. The decrease in metal sales was due to a coal shortage at the captive power plant in Mahanadi Coalfields Limited. Nalco had to import at a higher price to compensate for the shortage in coal, which, in turn, affected its profit margins.

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