Lending Association

Alumina’s financial tidying before Alcoa takeover

It was a form of financial housekeeping, a tidying up, or an outstanding financial report that showed a lot of red ink for Alumina (ASX:AWC), the company about to be swallowed by its major shareholder, Alcoa, in an all-paper deal worth $A3.3 billion.

Alumina Limited reported a statutory net loss after tax of $US150 million for the year to December, compared to a net profit after tax of $US104 million in 2022. With Alcoa’s tidying-up offer in the wind and a weak result, there’s no final dividend. The financial report will be the final one from Alumina, with the all-share offer certain to go ahead.

“2023 was a difficult year for AWAC, with the business experiencing lower production volumes and higher production costs, combined with a lower realized price for alumina.

“While these results are disappointing, AWAC has recently achieved a number of important milestones. Confirmation of the mine plan approvals in WA restores confidence in near-term operations while AWAC progresses approvals for the next mining areas at Myara North and Holyoake,” AWAC said.

AWAC also announced two significant actions to improve financial performance. Firstly, the decision was made to curtail AWAC’s oldest WA refinery at Kwinana from the second quarter of 2024. This will allow the business to focus on its two tier 1 refineries in Western Australia at Pinjarra and Wagerup.

“Secondly, the decision was made to initiate further action at the partially curtailed San Ciprian refinery in Spain. Together with the ongoing focus on profitability improvement across all aspects of the portfolio, these initiatives provide AWAC with a strong foundation to create a significantly higher quality refinery portfolio,” Alumina said.

“The alumina price was down approximately 5% in 2023 compared with the prior year. However, the alumina market outside China continues to be tightly balanced. This was illustrated recently, with the alumina price increasing to $372/t in mid-January 2024 driven by bauxite supply concerns in Guinea and refinery curtailments in China. This tight balance will be more pronounced following the curtailment of Kwinana during the second quarter of 2024.”

On the non-binding bid from Alcoa, Alumina told shareholders to wait and see. But Alumina’s independent life is all but over.