Alcoa reports strong Q2 performance with 11% hike in revenue supported by improved alumina shipments

On Wednesday, July 20, Alcoa Corporation reported an 11 per cent quarter-on-quarter increase in revenue to $3.644 million in its second quarter financial and operational results ended June 30, 2022. In Q1 2022, Alcoa’s revenue was $3.293 million, while in Q1 2021 was $2.833 million. Thus, on a year-on-year calculation, Alcoa’s revenue in 2Q22 was 28.63 per cent higher.

Net income grew sequentially by 17.06 per cent to $549 million, which on a year-on-year calculation stood higher by 77.67 per cent. But adjusted net income recorded a quarter-on-quart fall by 14.04 per cent from $577 million to $496 million but a rise over the year by 76.51 per cent from $281 million.

Adjusted EBITDA excluding special items also registered a Q-o-Q fall of 14.83 per cent from $1,072 million to $913 million in Q2 2022. However, on a year-on-year, it improved by 47.73 per cent from $618 million. The cash balance at the end of the quarter was $1.6 billion.

“We had a strong first half of 2022 with nearly $2 billion in Adjusted EBITDA and cash flows that have enabled more buybacks under our existing stock repurchase program as well as continued quarterly dividend payments,” said Alcoa President and CEO Roy Harvey. “We have returned more than $380 million this year to our investors, and today we announced an additional $500 million authorization for future stock repurchases.

According to Alcoa, the company’s improved revenue in the second quarter was primarily driven by improved shipments in alumina and aluminium. Third-party revenue from alumina recorded a 26 per cent Q-o-Q rise, with the average realized alumina price rising 18 per cent to $442 per tonne. In the aluminium segment, revenue grew by 6 per cent with higher shipments and regional premiums.

Alcoa’s alumina shipments improved by 7 per cent quarter-on-quarter in 2Q2022, while aluminium shipments rose by 9 per cent sequentially. The alumina output was 3.23 million tonnes and aluminium 499,000 tonnes, broadly consistent with the first quarter production.

Alcoa also revealed in its Q2 results that it returned $387 million of capital to shareholders over the past six months (H1 2022). In July 2022, the company plans to repurchase an additional $500 million share.

Alcoa also mentioned that one of its three operating potlines at the Warrick smelter in Indiana was curtailed, caused by operational challenges from workforce shortages in the region. Total smelting capacity at the Alumar smelter in São Luís, Brazil, is scheduled to be operational by the first quarter of 2023.

Outlook for 2022

However, for 2022, Alcoa has decreased its alumina shipment projection to the range between 13.6 and 13.8 million tonnes, a reduction of 0.6 million tonnes from the prior forecast primarily due to the lower shipments in the first half of 2022. Bauxite shipment projection is also reduced to 44 to 45 dry million tonnes. But for the third quarter, higher sequential profitability from bauxite is expected, as refinery demand is most likely to rise.

Net income in the third quarter is expected to face an impact of $20 million due to the Warrick line curtailment.