Brazil’s worst drought in nearly a century is starting to show its potential damage to corporate results.
Votorantim’s aluminum unit CBA, one of the country’s largest makers of the metal, said Thursday its Ebitda can dwindle by as much as 180-million reais ($34.2-million) in the second half of the year. In the first six months of 2021, the firm reported adjusted earnings before items of about 720-million reais.
The metal sector is an electricity guzzler, and CBA is the first aluminum company to join the government’s new program to voluntarily lower energy use, it said. Because it’s reducing its own consumption, it’s having to purchase power from other sources, which it will do more of, depending on reservoir levels.
The Brazilian aluminum association ABAL, which calculates that the industry’s energy costs tripled between 2001 and 2019, is concerned of potential unplanned power outage. On Wednesday, Alcoa representatives met with the country’s Mines and Energy Minister Bento Albuquerque to discuss the matter.
While CBA is betting on a shortfall of the metal used in everything from beer cans to plane parts, the drought makes it unlikely the country will see enough investments to become a major aluminum exporter again, according to ABAL.