Alumina Limited (ASX: AWC) is a leading bauxite mining company with additional investments in alumina refining and aluminium smelting around the world, the Company owns a 40% share in Alcoa World Alumina and Chemicals (AWAC) that is the western world’s largest alumina producer. AWC is able to mine bauxite and refine it into aluminium products through its own supply chain giving the Company competitive advantage in international markets.
What are the HY19 results for AWC?
- Statutory NPAT for HY19 US$210m down 26% from HY18
- AWAC EBITDA fell by 21% to US$949m
- Average price of alumina per tonne fell 12% to US$375
- Cash cost of alumina per tonne fell 3% to US$218
- Interim dividend of 4.4 cents per share, following a final FY18 dividend of 14.1 cents per share.
What are the key drivers of this result?
Alumina has reported the significant decline in profit and earnings over the first half of FY19, a result of softening market conditions in the western world as well as an increase in supply reducing the price of alumina per tonne. The company is expecting an alumina surplus to continue for the rest of FY19. AWC has also insisted the Company’s wide-ranging access to low cost production of bauxite and alumina will allow it to continue to drive down its costs and improve margins despite a decline in the price of alumina.
What is the future outlook for AWC?
The Company is expecting continued reduction in demand for the remainder of FY19 as Chinese production of alumina increases and demand slows. However, the medium term provides better prospects for AWC with expected imports of bauxite and alumina to rise substantially as aluminium products remain key to automotive manufacturing as well as infrastructure and other industries. The first half of 2019 saw Chinese bauxite imports rise to 54m tonnes from a FY18 total of 83m tonnes, indicative of the increasing demand expected from China.
How has the market reacted?
The market has responded negatively to the reported decline in NPAT with the share price falling 1.6% to a price of $2.14.
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