Global aluminium canstock supplier Novelis is tapping into growing demand for aluminium beverage cans as brands switch from PET and glass packaging in response to consumer demand for more sustainable packaging.
Novelis will meet this demand by sweating its existing assets and bringing on more capacity in Brazil over the next year or so, said its chief executive Steve Fisher.
Fisher was speaking to analysts on Tuesday (11 February) as the Atlanta, US-based company revealed its third quarter (Q3) results for the 2020 fiscal year. He reported strong demand for aluminium beverage stock for the quarter, which he expected to continue this year.
Fisher predicted growth of 2-3 per cent in demand for beverage canstock in North America over the coming year, with 3-4 per cent growth expected in Europe and about 4 per cent apiece in Brazil and Asia, which he described as “a very good trend there in the beverage cans”.
During the conference call, Fisher said: “With aluminium the most sustainable material for beverages, demand for infinitely recyclable aluminium remains strong. Growth in emerging economies, packaging mix shift from other materials like glass, steel and PET into aluminium and new beverage introductions, such as energy drinks, canned cocktails, spiked seltzers and sparkling waters all support demand levels.
“We are optimistic further growth is possible as consumer preference for sustainable packaging continues to rise and we will continue to watch for signals of a secular shift.”
Introducing the Q3 results, Fisher said: “Novelis delivered another set of very strong financial and operational results for [Q3]; the product of excellent operational performance across the business. On a trailing 12-month basis ended 31 December, shipments have grown to over 3.3m tonnes, while adjusted ebitda has reached US$1.45bn.”
The company reported adjusted earnings before interest, tax, depreciation and amortisation (ebitda) of US$343 million for Q3, up 7 per cent year-on-year, on net sales of $2.7 billion, down 10 per cent year-on-year. However, Fisher emphasised that Q3 is historically a period of weaker demand within the sector.
The strong results were primarily driven by portfolio optimisation efforts, operating cost efficiencies, and favourable foreign exchange, partially offset by less favourable recycling benefits due to lower aluminium prices, he said.
Fisher added that the company’s previously reported expansion projects, which include the rolling and recycling capacity expansion under way at Novelis’ Pindamonhangaba plant, located between São Paulo and Rio de Janeiro in Brazil, remained on track and on budget.
In response to questions from analysts, he said: “We also see a lot of opportunity now in the packaging sector as a result of the growth rate we have seen in beverage can as well as what we believe is continued consumer preferences for sustainable packaging material, which aluminium is the most sustainable.
“As those trends unfold, we think there are going to be some opportunities there. We will take advantage of it in the near-term with our expansion in Brazil, but also continue to do what we have been doing for the last several years of getting more and more out of the assets we have so we can serve our customers in the near- and long-term.
“Over this past year we have seen growth [in beverage can demand] in all regions that we are in – North America, Europe, South America and Asia. In North America we saw year-on-year growth of 5 per cent, driven by almost a 10 per cent growth in alcoholic beverages.” He reported similar trends in Europe and Brazil, with shifts from steel and glass respectively towards aluminium cans.