Why the Alumina (ASX:AWC) share price climbed higher today

The Alumina share price rose today as the company reported its third quarter results. We take a closer look.

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The Alumina Limited (ASX: AWC) share price is trading higher after the company announced a strong quarterly report. It comes as the miner trades close to its 52-week low of $1.30.

On today’s news, the Alumina share price closed 1.77% higher at a price of $1.44.

What Alumina does

Alumina owns 40% each of the Alcoa Worldwide Alumina and Chemicals (AWAC) entities. This forms part of the Alcoa Corp (NYSE: AA) business. The company is engaged in investing in bauxite mining, alumina refining and selected aluminum smelting operations.

Alumina has developed a reputation for being an exceptional dividend distributer. However, with the headwinds brought on by COVID-19, shares in the mining company have been on a downward trend. The company is in the S&P/ASX 200 Index (ASX: XJO) with a market capitalisation of more than $4.1 billion.

Why did the Alumina share price rise?

Alumina’s share price increased on the back of strong quarterly results. The company saw strong growth in its aluminium segment of earnings before interest, taxes, depreciation and amortisation (EBITDA) which was up 35% to a total of $119 million. In contrast, bauxite earnings fell to $124 million, lower due to the appreciation of the Australian dollar.

In terms of the company’s production levels, the results saw little change. Both the mining and refining business saw changes of 0.1 mega tonnes. The refining business increased in volume whereas mining decreased.

Despite the good news for shareholders, net distributions fell. Distributions in Q3 were lower as Q2 had benefitted from the flow-on effect of higher margins earlier in the year. This, combined with Alumina’s payment to the Australian Tax Office, reduced available cash for distribution. As such Alumina’s net distributions were $46.3 million.

What did management say?

Commenting on the results, Alumina Limited CEO Mike Ferraro said:

Building on last quarter’s record daily alumina production, the current AWAC system produced a record total production for the quarter, driven by increased plant stability. The joint venture continues to focus on the safety of AWAC employees and the wider communities.

The alumina price is currently $274/t amid continuing signs of a promising economic recovery in China and higher LME aluminium prices. However, COVID case numbers in many countries have started to increase again and the economic impact of the continuing pandemic remains unclear.

The Alumina share price finished the day 1.77% higher at $1.44. However, the share has had a challenging year to date, falling 38%.

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