November 11, 2013 / 4:33 PM / in 4 years

Novelis sees better H2 as profit sinks 74 pct year on year

* Earnings hurt by overcapacity in North American can market

* Novelis sees global flat-rolled product demand rising

NEW YORK, Nov 11 (Reuters) - Novelis Corp said on Monday it expects better results in the second half of its fiscal year as it shifts its focus to the automotive sector after reporting a plunge in profits due to the saturated North American beverage can market.

Net income in the first half to end-September sank 74 percent to $37 million compared with the year-earlier period as sales fell 3 percent to $4.84 billion.

Overcapacity in the North American can market hurt year-on-year results, Novelis said. Shipments in the region were down 12 percent from last year and flat sequentially.

"The reallocation of some hot mill capacity towards high-growth, high-margin automotive sheet in this region (....) will help rebalance the North American can market," said President and Chief Executive Phil Martens in a statement.

Many aluminum producers say the metal, which is lightweight, is winning market share from steel in the automotive market.

Stricter fuel emissions rules in major markets mean cars have to become more fuel-efficient and less polluting, which in most cases means they will have to be lighter.

Novelis forecast on Monday annual global flat-rolled product demand will increase to 28 million tonnes by 2020 from 18 million in 2012, with growth from the automotive sector outpacing foil and beverage cans.

Can sales in the United States have slowed for the past three years as consumers ditch sodas for healthier options such as water and iced teas, which are traditionally bottled in plastic or glass.

Last month, Novelis commissioned an expansion of its rolling operations in Oswego, New York, which increased North American capacity for automotive aluminum sheet by 240,000 tonnes per year.

The company has three other automotive facilities in Kingston, Ontario, Canada; Sierre, Switzerland and Nachterstedt, Germany, and is building an auto finishing plant with annual capacity of 120,000 tonnes in Changzhou, China.

The Chinese operation will start commercial production in the middle of next year.

In the second quarter to end-September, Novelis' net income sank to to $23 million from $49 million in the year-earlier period as sales were flat at $2.4 billion compared with both the prior year and prior quarter.

Excluding tax-effected items, second-quarter net income was $37 million, down from $64 million in the prior year.

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