Alcoa Expands Rolling Mill in Brazil - Analyst Blog

Aluminum giant Alcoa Inc. AA declared at the ExpoAlumínio trade show in Sao Paulo that it is investing $40 million in its Itapissuma, Brazil-based rolling mill to expand its specialty foils production capacity for aseptic and flexible packages.

Alcoa already holds a leading position in the Latin American market for its value-added, specialty aluminum foil essential for producing highly differentiated packaging. This endeavor will further enhance its position and cater to the increasing demand for specialty packaging in Brazil, which is anticipated to increase 7% annually in the next 3 years due to population growth and consumer preference.

Aseptic and flexible packaging made with specialty foil is basically built with a mixture of materials, including cardboard type paper, plastics and thin aluminum. These packages are used by prominent food and beverage companies across the globe as they keep liquid food products fresher and suitable for consumption for up to 12 months from manufacture, even if unrefrigerated, while retaining their nutritive value and taste. More than 175 billion of such packages were distributed across the globe in 2013.

Alcoa's Itapissuma packaging facility, located in Pernambuco, Brazil, employs roughly 700 employees. The additional capacity is expected to provide roughly 50 employment opportunities at the facility following the ramp-up of production. Initial activities for the expansion have already started; however, commissioning is expected to start in 2016.

The capital spending for this expansion is part of Alcoa's ongoing portfolio transformation to build out its value-added mid and downstream businesses to capture profitable growth. Alcoa's other value-added businesses in Brazil cater to the demand for oil and gas products, building and construction systems, fasteners, aluminum truck wheels, and forgings and extrusions.

Alcoa, a prominent player in the mining industry along with Aluminum Corporation of China Ltd. ACH, Atlatsa Resources Corp. ATL and BHP Billiton Ltd. BHP, is a world leader in production and management of primary aluminum, fabricated aluminum, and alumina. The company currently retains a Zacks Rank #3 (Hold).