The Alumina Limited (ASX: AWC) share price is in the red in early trade and will be on watch today after the company released its results for the half-year ending June 20, 2019 (HY19) this morning.
Alumina operates a 40% stake of the joint venture Alcoa World Alumina and Chemicals (AWAC) with US-based Alcoa. AWC shares closed yesterday at $2.18, not far from its 52-week low of $2.12
What did Alumina report?
For HY19 the company reported the following (dollar amounts are in US dollars)
- Total revenue of $2.807 billion – down 11.99% from HY18's $3.19 billion (AWAC)
- Earnings (EBITDA) of $949.9 million – down 21% from HY18's $1.21 billion (AWAC)
- Net Profit After Tax (NPAT) of $210.9 million – down 26% from HY18's $286.4 million
- NPAT (excluding significant items) of $219.5 million – down from HY18's $305.8 million
- Free cash flow of $256.9 million – down 4% from HY18's $267.9 million
- An Interim dividend of 4.4 US cents – down 49% from HY18's Interim dividend of 8.6 US cents.
- Average realised price of alumina of $375 per tonne – down 12% from HY18's $424 per tonne
- Cost per tonne of alumina produced of $218 – down 3% from HY18's $224 per tonne
- Basic earnings per share of 7.3 US cents – down 26.3% from HY18's 9.9 US cents
The falling price of alumina has had a large impact on the earnings of the company. The record-high prices of 2018 have not been sustained and this has resulted in the large decreases in year-on-year earnings, revenue and profits. Even though Alumina's realised price per tonne had fallen 12% to US $375, this remains above the HY17 price of $315 and significantly above HY16's $234.
Meanwhile, production rates of alumina have increased by 4.19% to 19.9mt from HY18's 19.1mt.
Outlook for Alumina
The company notes that it holds a competitive advantage in alumina production with its average cost per tonne of $218 – this compares favourably to the average cost of production in China of $307 per tonne. Factors affecting the outlook for Alumina are primarily the Sino-US trade war as well as lower global demand outside China – together placing downward pressure on global prices of both aluminium and alumina.
