Adbri’s shares nosedive 25% on Alcoa’s decision of lime supply contract termination

Since the time Alcoa declared its decision to not renew a long-standing lime supply contract with Adbri-owned Cockburn Cement, Adbri started seeing a plunge in its shares. According to the report, the company’s share price closed 25 per cent lower on Friday at $2.35. Alcoa’s decision is believed to have stripped $515 million from the value of the company, formerly known as Adelaide Brighton.

Lime is a strategic material needed for alumina refining, and Alcoa had almost 50-year uninterrupted supply relationship with Adbri for sourcing lime.

Also, Alcoa’s decision to terminate the contract is estimated to risk up to 50 jobs, including contractors at Adbri.

The contract used to contribute $70 million to Adbri's annual revenue.  The company said it would not possible to quantify the full financial impact of non-renewal of the contract at this moment.

Adbri’s chief executive Nick Miller said, “We are disappointed with Alcoa’s decision to displace locally manufactured product with imports from multiple sources, particularly considering our almost 50-year uninterrupted supply relationship."

Having said that, he assured to quickly mitigate the impact on local jobs by remaining committed to other customers and continue supporting lime business.

Western Australia premier Mark McGowan also said that he would urge Alcoa to reconsider and support local businesses.

“COVID-19 has caused many problems, however, in times like these we need to be supporting local businesses and working together to get through the pandemic,” commented McGowan.

He said he would be corresponding with Alcoa to discuss the issue further and try to convince them to reconsider the matter.

Adbri is the largest lime producer in Australia, with a production capacity of more than 1 million tonnes.