 "To focus on selling in domestic market to revive profits: Debnarayan Bhattacharya")
With Hindalco Industries' profits having taken a hit in FY15, Managing Director Debnarayan Bhattacharya tells Aditi Divekar about his plans to revive the bottom line by focusing on the domestic market and talks about how Novelis plans to counter competition from China's cheaper products in coming months. Edited excerpts:
Hindalco Industries' bottomline was hit hard in FY15. What steps are you taking to revive your profits?
We will be improving our portfolio to high-end products. We will focus on reducing cost of production by lowering input costs like coal and sell more in the domestic market, where realisation is higher compared to the global market. Since the per capital consumption in the domestic market is far lower compared to developed economies, there is room for increasing consumption in the domestic market. We will lay thrust on value-added products.
We have participated in the auction with an intelligent guess and intelligent understanding of the cost of production of coal. And based on that, we have got the mines. But if the imported coal prices come down going ahead, then the entire equation changes. What I can say is: by participating in the auctions, I have secured the coal supply for myself. I have the guarantee of almost 30 per cent of raw material. This quantum is under my command. Also, we are planning to bid for more coal mines.
Novelis' Chief Executive Officer Phil Martins has left the company abruptly. The reason for termination of his services is not known. Why were his services terminated?
It was a board decision which has been taken. We are looking out for new CEO but I cannot give you a timeline as to when we will be appointing the new CEO.
For Novelis, you are seeing better growth from the emerging markets but with Chinese flooding the markets with cheaper products, don't you see it as a threat for your business in these geographies?
We have invested in mill capacities in South America and Korea, but for auto growth, it is North America and Europe. Yes, China will impact, as they are improving their quality of products on a continuous basis. However, some people will prefer Chinese products if they get at a discounted price. To counter this, we felt that we must ensure our portfolio should be such that we face minimum competition. For this, we are upgrading ourselves for higher-end products such as auto and speciality. Though Chinese will have a major sourcing, we will overcome it with better quality, better cost of production and our brand equity. These are the approaches we are taking to compete with China.
Novelis in its sustainability report has set an ambitious goal of using 80 per cent recycled aluminium inputs in operations by 2020.
It's an aspiration to use 80 per cent recycled aluminium inputs in operations by 2020. It is not a goal. We have used 49 per cent recycled aluminium inputs in FY15 and 53 per cent in Q4 alone. We are certainly investing in recycling but have set no targets to achieve a particular level on a yearly basis. Using more of recycled aluminium inputs will lower cost of production but it depends on various factors. We have to increase the recycled quota in such a way that we do not increase the price of scrap in the market, else the very purpose of buying scrap is defeated. We will be buying scrap as cost effectively as possible.
Hindalco Industries' bottomline was hit hard in FY15. What steps are you taking to revive your profits?
We will be improving our portfolio to high-end products. We will focus on reducing cost of production by lowering input costs like coal and sell more in the domestic market, where realisation is higher compared to the global market. Since the per capital consumption in the domestic market is far lower compared to developed economies, there is room for increasing consumption in the domestic market. We will lay thrust on value-added products.
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You have four coal blocks now, giving some amount of raw material security. Is the worse behind for Hindalco?
We have participated in the auction with an intelligent guess and intelligent understanding of the cost of production of coal. And based on that, we have got the mines. But if the imported coal prices come down going ahead, then the entire equation changes. What I can say is: by participating in the auctions, I have secured the coal supply for myself. I have the guarantee of almost 30 per cent of raw material. This quantum is under my command. Also, we are planning to bid for more coal mines.
Novelis' Chief Executive Officer Phil Martins has left the company abruptly. The reason for termination of his services is not known. Why were his services terminated?
It was a board decision which has been taken. We are looking out for new CEO but I cannot give you a timeline as to when we will be appointing the new CEO.
For Novelis, you are seeing better growth from the emerging markets but with Chinese flooding the markets with cheaper products, don't you see it as a threat for your business in these geographies?
We have invested in mill capacities in South America and Korea, but for auto growth, it is North America and Europe. Yes, China will impact, as they are improving their quality of products on a continuous basis. However, some people will prefer Chinese products if they get at a discounted price. To counter this, we felt that we must ensure our portfolio should be such that we face minimum competition. For this, we are upgrading ourselves for higher-end products such as auto and speciality. Though Chinese will have a major sourcing, we will overcome it with better quality, better cost of production and our brand equity. These are the approaches we are taking to compete with China.
Novelis in its sustainability report has set an ambitious goal of using 80 per cent recycled aluminium inputs in operations by 2020.
It's an aspiration to use 80 per cent recycled aluminium inputs in operations by 2020. It is not a goal. We have used 49 per cent recycled aluminium inputs in FY15 and 53 per cent in Q4 alone. We are certainly investing in recycling but have set no targets to achieve a particular level on a yearly basis. Using more of recycled aluminium inputs will lower cost of production but it depends on various factors. We have to increase the recycled quota in such a way that we do not increase the price of scrap in the market, else the very purpose of buying scrap is defeated. We will be buying scrap as cost effectively as possible.