Alumina profit surges in FY

Alumina Ltd has warned its outlook for 2012 is volatile, despite posting a big jump in annual profit for 2011.

The near fourfold surge in profit comes on the back of higher production, along with stronger alumina and aluminium prices.

For the full year to December 31, Alumina posted a net profit of $US127 million ($A118.7 million), 266 per cent higher than the previous corresponding period.

The group will pay a final dividend of three US cents per share, fully franked, taking the total dividend to six US cents.

Alumina chief executive officer John Bevan said the company was cautious about the outlook for the year ahead.

"Towards the end of 2011, conditions deteriorated with significantly reduced aluminium and alumina prices and the Australian dollar remaining at high levels against the US dollar," he said in a statement provided to the Australian Securities Exchange.

“We are cautious on the outlook for 2012. This reflects volatile pricing conditions coupled with a strong Australian dollar and high input costs."

Underlying earnings rose 55 per cent to $US128 million ($A120.10 million), marginally ahead of Morningstar analysts' $US113 million ($A106.02 million) forecast.

Mr Bevan said production reached record highs last year as prices increased.

"The initial conversion of some of the alumina pricing to an index/spot basis saw margins expand," Mr Bevan said in a statement on Thursday.

Morningstar analyst Mark Taylor said 40 per cent of the company's pricing would be based on index or spot by the end of the 2012 financial year.

"This is key to the thesis that margins will gradually move upstream to the bauxite and alumina producers," Mr Taylor said, adding that Alumina would be a key beneficiary.

Higher profits enabled the company's board to maintain its dividend at six cents per share, a level that was in line with Morningstar's expectations.

Mr Bevan said that despite the cautious outlook, the underlying long-term fundamentals of the business remained positive.

He said Brazilian operations performed well last year, with the newly-commissioned Juruti mine producing above its initial capacity, while the Alumar refinery operated at expanded nameplate capacity.

Costs at its two Australian smelters were affected by increased alumina and coke prices, and the rising Australian dollar.

Alumina's joint venture partner Alcoa last week announced it would review the future of its Point Henry aluminium smelter in Geelong, Victoria in the face of continuing difficult global economic conditions for the smelting industry. Alumina denies carbon tax to blame for stalled expansion

Meanwhile, Alumina rejected claims that the carbon tax is the main factor behind the stalled expansion of the Wagerup alumina refinery in Western Australia, saying there are other compelling reasons not to proceed in the near future.

The state's Environmental Protection Authority on Monday granted AWAC, the Alcoa and Alumina joint venture company, an extension until September 2016 to substantially commence the expansion to 4.7 million tonnes per annum, a plan that was first given environmental approval in 2006.

The Australian newspaper this week reported an Alcoa spokeswoman as saying the company would not revisit the expansion until it had a clearer picture of the full impact of the carbon tax, due to start on July 1.

The media report also cited the need to secure energy supplies, which Alumina chief executive John Bevan concurred with on Thursday.

But, Mr Bevan said, it was "not the case" that the carbon tax was the key reason the project was not yet going ahead.

"The capital cost of building in WA is high, as seen with BHP's Worsley," Mr Bevan told a conference call for analysts.

The cost of expanding BHP Billiton's Worsley alumina refinery in WA has blown out substantially due to factors including inflationary pressures and the stronger Australian dollar, prompting analysts to recently speculate the asset may be sold by the mining giant.

And news from the smelting space keeps getting grimmer.

Alcoa last week announced that AWAC could close one of its two Australian aluminium smelters, Point Henry in Victoria, in the face of continuing difficult global economic conditions for the industry.

The company warned in January that it planned to close or curtail about 12 per cent of its global smelting capacity to improve its competitiveness amid falling aluminium prices and escalating raw materials costs.

The Point Henry announcement triggered a parliamentary furore, with federal opposition leader Tony Abbott blaming the possible closure on the government's carbon tax.

Prime Minister Julia Gillard labelled his comments a disgrace given that 600 jobs at the smelter hung in the balance.

"It (the potential Point Henry closure) is really not firm at this stage," Mr Bevan said on Thursday.

In delivering a near fourfold surge in full-year net profit on Thursday, Alumina said costs at Point Henry and its other aluminium smelter in Portland, Victoria, were last year pushed up by increased alumina and coke prices, and the rising Australian dollar.

Mr Bevan said Alcoa's global curtailments would occur in the next four or five months.

Shares in Alumina closed 1.29 per cent higher at $1.17.