Why Alumina Limited just tripled its dividend 

Shares in Alumina Limited (ASX: AWC) are trading flat, after the company released its full year result, turning the US$30 million loss reported in FY 2016 into a US$340 million net profit in FY 2017.  

Alumina Limited’s business consists exclusively of a 40% minority interest in the AWAC joint venture, controlled and operated by the American miner Alcoa. AWAC is a global leader in the alumina industry and owns numerous bauxite mines and aluminium refineries both in Australia and overseas. 

The company trades a single commodity, so it’s highly vulnerable to price swings, but conditions were particularly favourable last year. The average realised price of alumina over 2017 was 38% higher than the previous year, while AWAC’s average cost per tonne produced increased only 4%. As a result, AWAC’s net cash inflow grew 170% to over US$1 billion, and EBITDA quadrupled to US$1.6 billion. 

Alumina Limited will reward shareholders with a fully franked dividend of 9.3 USD cents (about 12 AUD cents) per share, 200% higher than last year. 

The company expects stable market conditions over 2018, as environmental reforms and shrinking production of aluminium in China will compensate for the growth of other foreign competitors.   

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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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