Mar 17, 2009|
Nalco v/s Alcoa
When we think of size in the aluminium industry, the first name that would come to our mind would be the international aluminium major, Alcoa. However, if one considers some of the lowest cost producers of alumina in the world, Nalco cannot be missed out. In this article, we take a look at how these two companies compare on various parameters during last five year period between FY04/CY04 and FY08/CY08.
Alcoa was formed in 1888 and is based in Pittsburgh, Pennsylvania. It is the world's leading producer of primary aluminum, fabricated aluminum, and alumina and is active in all major aspects of the industry. It serves the aerospace, automotive, packaging, building and construction, commercial transportation, and industrial markets, bringing design, engineering, production, and other capabilities of Alcoa's businesses as a single solution to customers. The Company has 87,000 employees in 35 countries. The company has operations in Asia, Australia, Europe, South America, and the United States. North America and Europe contributed around 54% and 26% of sales respectively during CY08.
National Aluminium Company (Nalco), a public sector enterprise, is India's largest producer of alumina and one of the leading producers of aluminium. It has a bauxite mining capacity of 4.8 MTPA with resources to the tune of 310 MT. Its alumina and aluminium capacities currently stand at 1.6 m tonnes per annum (MTPA) and 345,000 tonnes per annum respectively. It is the largest integrated aluminium company in the country and has the distinction of being one of the lowest cost producers of alumina in the world. It's presence across the value chain with operations in mining, refining and smelting along with access to high quality bauxite and captive power plants works as its advantages. It has a high presence in the exports markets, which contributes nearly 40% to its gross sales.
* Period considered is between CY04/FY04 and CY08/FY08
|Production (CY08/FY08) (000' tonnes)
|Growth & Margins* ( 5 year avg)
|Sales growth (CAGR)
|Avg. Net profit margin
|Leverage & Efficiency * (5 year avg)
Source:Reuters, Google Finance, CMIE.
As can be seen from the above table, Nalco's alumina production is merely 8% of Alcoa, Similarly its alumina capacity is 10% of Alcoa. This shows the extent to which Alcoa is bigger than Nalco. However, if one compares the sales growth of both the companies, Nalco is far ahead of its global peer. Nalco's revenues grew at a CAGR of 12.1%, while Alcoa's grew at a CAGR of 5.2%. It should be noted that the industry growth rate during the same period stood at 4.1%.
On the operating front, Nalco's average operating margins stood at around 54%. This can be owed to the fact that it is one of the lowest cost alumina producer in the world which is mainly on account of cheap labor availability and control over the value chain. Whereas Aloca's average margins during the period under consideration stood at around 16%. This is mainly on account of its diversified product portfolio and geographical presence. Furthermore, Aloca has most of its operations in the developed countries, wherein the cost of labor and other resources is comparatively higher.
The average net profit margins of Nalco stood at a 29%, while that of Alcoa at around 7% during the period under consideration. This can be gauged by the fact that Nalco's operating margins are higher as compared to Alcoa. Moreover, Nalco is a debt free company whereas Alcoa's debt to equity ratio stands at 0.9. The asset turnover ratio of Nalco and Alcoa stood at the same level 0.7, while return on networth stood at around 27% and 11% respectively during the period under consideration. Thus, Nalco beats its global peer on the leverage and RONW front also.
However, it will be surprising to note that though Nalco is more efficient than its global counterpart Alcoa on most of the parameters, as far as valuations are concerned Alcoa receives a premium over Nalco.
More Views on News
Feb 22, 2017
Hindalco Industries has reported a 14.5% YoY increase in the topline while the bottomline came at Rs 3.2 billion.
Dec 21, 2016
SAIL has reported a 21.4% YoY increase in the topline while the bottomline reported a loss of Rs 7.31 billion.
Dec 19, 2016
Tata Steel has reported a 0.1% increase in the topline while the bottomline was in red in 2QFY17.
Nov 30, 2016
Hindalco Industries has reported a 1.1% YoY increase in the topline while the bottomline has accelerated by 255.4% YoY.
Oct 25, 2016
Hindustan Zinc has reported an 11% decline in the topline while the bottomline has declined by 15.4%.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 4, 2017
The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407