Alumina reviews pre-tax settlement charge booked by Alcoa

Alumina Limited is reviewing a $US45 million pre-tax settlement charge booked by its joint venture partner Alcoa in relation to a Bahrain bribery case.

The Australian-listed company, commenting today after Alcoa's quarterly earnings release, said that it was evaluating the basis for the $US45m charge and its attribution to Alcoa World Alumina. Alumina added that it was engaged in discussions with Alcoa over the charge.

Alumina owns a 40 per cent stake in the Alcoa World Alumina and Chemicals joint venture, which is its only asset, while Alcoa holds the remaining 60 per cent.

Alcoa outlined in its quarterly results, released in the US overnight, that it proposed to settle the civil suit with Aluminium Bahrain by offering a cash payment of $US45m. It also estimated an additional possible charge of up to $US75m to settle the suit.

The civil case, dating back to 2008, saw the company, controlled by the Gulf state of Bahrain, accuse the US aluminium giant of a 15-year conspiracy involving overcharging, fraud and bribery.

A suit in federal court in Pittsburgh by Aluminium Bahrain BSC, or Alba, alleged that Alcoa steered payments for alumina - which is used to produce aluminium - to a group of tiny companies abroad, in order to pay kickbacks to a Bahraini “senior government official''.

The Bahraini firm alleged that Alcoa had overcharged it for alumina.

Alcoa, an industrial bellwether that unofficially kicks off the US earnings season, posted a loss of $US2 million, or less than a US penny a share, compared with a year-earlier profit of $US322 million, or 28 US cents a share.

Excluding restructuring charges and other special items, earnings from continuing operations in the latest period were 6 US cents a share, down from 32 US cents.

In the latest quarter, Alcoa's average realised price for aluminium fell 18 per cent from a year earlier and was down 4.3 per cent from the prior quarter. Shipments of aluminium products increased 2.9 per cent.

"Alcoa maintained revenue strength and solid liquidity by driving high profitability in our mid and downstream businesses and by reducing costs and improving performance in our upstream businesses," said chairman and chief executive Klaus Kleinfeld.

The company's results have been hurt in recent periods by a decline in aluminium prices - a result of weak demand in Europe, global uncertainties and excessive production - and higher raw-material costs. Alcoa has said it would contend with sluggish aluminium prices by cutting costs, limiting production and relying more on high-margin end products less vulnerable to slumping metal prices, such as bolts and wheels for cars and airplanes.

In the latest period, total costs and expenses slipped 1.6 per cent. Revenue slid 9.4 per cent to $US5.96 billion.

Analysts surveyed by Thomson Reuters predicted a per-share profit of 5 US cents and revenue of $US5.81 billion. Shares were up four cents at $US8.80 after hours in the US. Through the close, the stock has fallen 47 per cent over the past 12 months.