Hindalco to sell bauxite mine & alumina plant in Brazil to pay off debts

As a counter effect of the falling commodity price, Hindalco Industries will go ahead with plans to sell its alumina plant and mines in Brazil.

According to an Economics Times report,  Hindalco wants to use the money to pay off loans and focus on the domestic business to be competitive to stiff import from China and Middle East and leverage upon the slowly improving downstream demand.  The sale deal is expected to be in the range of $90 million to $100 million. To survive the volatile commodity market, Metal and commodity companies around the world are selling off assets to refinance old expensive loans and cut costs.

Though Global metal prices have recovered from multi-year lows but demand is still not growing at expected rate and profit margins are very low for the commodity traders as well as producers.

LME Aluminium prices fell 11% to USD 1,571 a tonne during the first quarter of this financial year in comparison to USD 1,769 in 2015.

Hindalco has grown favourably in the face of restrictions on Chinese exports. Shares of Hindalco have jumped 82% in the last one year. It has recovered from the stock losses last year due to slow commodity market regulatory issues in India.

Hindalco has 50 million tonne from the bauxite mines under its mining rights. The alumina refinery in Ouro Preto in Brazil has an annual capacity of 145,000 tonnes. The businesses are looked after by AV Minerals (Netherlands), which is a wholly-owned subsidiary of Hindalco. It was earlier a subsidiary of Novelis which was acquired by Hindalco.

"We are looking at all non-core operations which normally are very small and don't fit in," said company spokesperson.

Though the company did not divulge much on the sales process, after the sale Hindalco will be left with two aluminium facilities in Brazil under the operation of Novelis. Brazil too faced loss in the commodity market due to the crash in commodity prices.

Satish Pai overtook his responsibilities as Managing Director at Hindalco in May. Mr Pai's focus is to cut costs, improve production and drive up profitability at Hindalco, which has been struggling with  lower profit margin and  rising interest costs.

Hindalco’s consolidated debt of INR 67,517.67 crore as on March 31, 2016 should come down after completion of the Brazil deal and it would give a breathing space to the company to concentrate on other important aspects of its growth.

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