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AWC

Alumina Limited Report HY19 Results

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

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.

Alumina-Limited-AWC-Stock-Price

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.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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