Alumina minimises loss with cost cutting

Alumina has narrowed its first-half loss as the company's aggressive cost cutting began to bear fruit, and a higher US currency helped to trim production costs.

Alumina, a refiner of the white granular material used to make aluminum metal, said its net loss in the six months through June was US$2.4 million. A year earlier, it reported a loss of US$3.8 million. Still, Alumina's shares slumped in Sydney after it said the outlook for alumina prices remained weak.

Prices of aluminum--used in products ranging from soft-drink cans to cars--have been weighed down by oversupply as developing countries such as China and Russia boost production. The benchmark aluminum price on the London Metal Exchange is down nearly 10 per cent this year.

"The outlook for aluminium and alumina pricing remains tough, but the recent strengthening of the US dollar against the Australian dollar and Brazilian real provides a welcome tailwind after a long period of sustained weakness," Chief Executive John Bevan said in a statement.

Alumina, which operates its main plants in Australia and Brazil, sells its products in US dollars. That means it benefits from a higher greenback, which has risen 16 per cent against the Australian currency since the start of the year.

Alumina's key asset is a 40 per cent stake in the Alcoa World Alumina and Chemicals venture with Alcoa Inc, the world's largest alumina producer.

Alumina, based in Melbourne, didn't offer an interim dividend, but said a drive to lift profit margins was working. It said cost-cutting and greater efficiencies had led to four consecutive quarters of margin increases at its joint venture.