Higher alumina prices could dent Century Aluminum’s Q4 2016 results

Century Aluminum is projected to post profits in its fourth quarter of 2016 fiscal year. According to the consensus estimates compiled by Thompson Reuters, analysts expect the North American primary aluminium producer to post adjusted earnings before interest, tax, deductions and amortization (EBITDA) of US$10.4 million in Q4 2016. However, with alumina prices escalating, it is likely that Century’s profitability will be hurt moderately, observe analysts.

Century Aluminum’s projected EBITDA will rise from the last quarter’s (Q3 2016) loss of US$5 million and up from -US$10 million in the corresponding period previous year. The rise in profitability is likely to get a logical boost from aluminium prices which have improved significantly in Q4 2016.

However, input costs, especially alumina prices have also risen significantly in the quarter under review. Companies such as Norsk Hydro, Alcoa, and Rio Tinto- those who have integrated alumina refining operations have benefited from this price rise, but since Century Aluminum sources alumina from outside parties, its cost of production has escalated sharply. This increase in CoP is likely to impact on the profitability of the aluminium producer in the last quarter of the current fiscal.

{googleAdsense}

Century Aluminum has been facing strong headwinds over the last one year. Higher alumina prices had negatively impacted its Q3 2016 earnings. Analysts are of the opinion that higher input costs will somewhat offset positive impact of higher aluminium prices on its Q4 2016 earnings as well.