10 JULY 2014www.mywealth.commbank.com.au
Alumina shares react to Alcoa result
Edited by : AL CIRCLE
2 min read
Shares in bauxite miner and aluminium smelter Alumina (AWC) have dropped this morning after the company’s chief executive said conditions declined in the second quarter, despite US joint venture partner Alcoa posting an earnings boost.
Shares in Alumina finished yesterday 1.41% higher at $1.44 after reaching an intra-day high of $1.47.
The share price had been rising this year following the introduction of a mineral export ban by Indonesia in January which included bauxite bound for the world’s aluminium industry.
Indonesia’s presidential election, which could potentially spark a review of the ban, is taking place today, although one of the front runners, Joko Widodo, has previously stated he intends to keep the ban.
Alumina segment still faces headwinds
Alcoa’s positive earnings result was largely attributed to its swing towards higher margin, value-add materials with a deal signed this year for the acquisition of jet-engine parts maker Firth Rixson strengthening the company’s aerospace portfolio.
However, a higher realised aluminium price, driven by higher London Metal Exchange (LME) pricing and regional premiums, helped the company’s primary metals business despite being impacted by a less favourable exchange rate.
The Alumina segment, however, saw after tax operating income decline on unfavourable foreign exchange rates and lower Alumina Price Index pricing.
In commenting on Alcoa’s result, AWC chief executive Peter Wasow noted: “Margins for the alumina segment declined over the second quarter from the first quarter predominately due to a higher Australian dollar and Brazilian Real, the timing of maintenance, and higher oil costs.
“Industry conditions remained challenging due to long refining positions in the Atlantic region and China as smelter curtailments in those areas reduced demand.”
Alumina Limited has a 40% stake in Alcoa World Alumina & Chemicals (AWAC) – the world’s largest alumina business. Alcoa owns the remaining 60% of AWAC.
AWAC’s production of alumina was 3.9 million tonnes in the second quarter, compared with 4m tonnes in the first quarter this year.
Shares in Alumina finished yesterday 1.41% higher at $1.44 after reaching an intra-day high of $1.47.
The share price had been rising this year following the introduction of a mineral export ban by Indonesia in January which included bauxite bound for the world’s aluminium industry.
Indonesia’s presidential election, which could potentially spark a review of the ban, is taking place today, although one of the front runners, Joko Widodo, has previously stated he intends to keep the ban.
Alumina segment still faces headwinds
Alcoa’s positive earnings result was largely attributed to its swing towards higher margin, value-add materials with a deal signed this year for the acquisition of jet-engine parts maker Firth Rixson strengthening the company’s aerospace portfolio.
However, a higher realised aluminium price, driven by higher London Metal Exchange (LME) pricing and regional premiums, helped the company’s primary metals business despite being impacted by a less favourable exchange rate.
The Alumina segment, however, saw after tax operating income decline on unfavourable foreign exchange rates and lower Alumina Price Index pricing.
In commenting on Alcoa’s result, AWC chief executive Peter Wasow noted: “Margins for the alumina segment declined over the second quarter from the first quarter predominately due to a higher Australian dollar and Brazilian Real, the timing of maintenance, and higher oil costs.
“Industry conditions remained challenging due to long refining positions in the Atlantic region and China as smelter curtailments in those areas reduced demand.”
Alumina Limited has a 40% stake in Alcoa World Alumina & Chemicals (AWAC) – the world’s largest alumina business. Alcoa owns the remaining 60% of AWAC.
AWAC’s production of alumina was 3.9 million tonnes in the second quarter, compared with 4m tonnes in the first quarter this year.
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