First Aluminium to acquire $2m machinery to boost production

First Aluminium plc is set to acquire $2 million machinery to improve production of aluminium products and packaging tubes for the health and cosmetics industry.

“We are bringing in new machines that will cost us $2 million. Currently, if you include the cheap Chinese products, then we have about 20 percent of the market,’’ said Robin Neville, managing director, First Aluminium plc, in an exclusive interview with Real Sector Watch.

First Aluminium is engaged in the manufacture of aluminium coils, roofing sheets, packaging and seamless tubes. As one of the very few vertically integrated aluminium companies in Nigeria, the firm controls the whole process from the chemical composition of the aluminium alloy to the installation of the roof.

Despite being a premier aluminium company, First Aluminium is plagued by a number of problems, notably high energy cost. The firm closed down its rolling mills operations in December 2012, leading eventually to the laying off of 200 employees.

“We had a situation before we closed down. Gas was cut off for six weeks. That was the case in 2011. By stopping the rolling side of business, cost has been reduced by 75 percent. You see, 22.7 percent of our cost goes to power,’’ Neville said.

First Aluminium’s cost-to-sales margin was as high as 90.38 percent in the review period. What this means is that for every N1 of turnover generated by the company, 90k goes into production cost, say analysts.

Apart from high energy cost, the company suffers from high labour cost, resulting from poor service quality prevalent in the country’s labour market. More so, unbridled imports of cheap and poor quality aluminium products are also a clog in the wheel of the firm’s wheel of progress. Market analysts say this makes local producers who incur huge production costs uncompetitive.

“Here you have importers who are suggesting lower and lower quality because what is in the minds of consumers is price. But this is reverse economics. You buy cheaper and within a very short time, you go and buy the same product again,’’ he added.

In spite of pressure in the industry to reduce standards (to 0.30mm) so as to compete favourably, the company still maintains the minimum norm set by the Standards Organisation of Nigeria (SON) for roofing sheets, which is 0.40mm, Neville said.