Alumina (ASX:AWC) share price sinks despite dividend boost

Alumina shares are in the red today as the company released its financial results for the full-year ended 31 December 2021.

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Key points

  • Alumina reported its preliminary full-year results today 
  • Performance was hallmarked by a jump in net profit and dividend, underscored by a strong rally in alumina and aluminium prices 
  • In the last 12 months, the Alumina share price has gained 25% 

Shares in Alumina Limited (ASX: AWC) are edging lower today after the company released its preliminary report and financial results for the full-year ended 31 December 2021.

At the time of writing, the Alumina share price is trading less than 1% in the red at $2.12 apiece.

Alumina share price sinks despite 9% dividend spike

Key takeouts from the company's earnings results today include:

  • Alumina net profit after tax (NPAT) of US$187.6 million up 18% year on year
  • Final dividend 2.8 US cents per share, a 9% increase
  • Alumina prices constrained by higher freight costs but bounced following supply disruptions in second half
  • EBITDA of US$1,146.2 million, an increase of US$250.3 million from the previous corresponding period (pcp)
  • Margin for alumina refineries was US$85 per tonne, an increase of US$16 per tonne compared to the pcp
  • Net cash inflow of US$488.1 million, an increase of US$9.6 million

What else happened for Alumina this period?

Alumina's half was hallmarked by a statutory net profit after tax of US$187.6 million for the full-year 2021 compared to $146.6 million in 2020.

EBITDA was recognised at US$1.14 billion after climbing more than US$250 million during the year, which carried through to free cash flow (before dividends) of $146 million – down 12% on the pcp.

Average realised price of alumina was US$321/tonne and signified a 20% gain from the previous year, whereas the cash cost per tonne of alumina produced gained 19% to $236.

Net debt also closed higher on the pcp at US$56 million. However, this was partially offset by a 6% increase in net receipts from AWAC, also known as Alcoa World Alumina & Chemicals, which is owned 40% by Alumina and 60% by Alcoa Corporation.

Aside from that, the market has been kind to Alumina, seeing as aluminium prices continue to rally in 2022, building on the past two years of returns.

"Primary aluminium prices are at record highs due to stronger demand, supply disruptions and higher energy costs. Alumina prices have also increased and are currently above $420 per tonne", it says.

"In particular, demand for aluminium for electric vehicles and the construction sector continues to grow. As
a participant in the aluminium supply chain, Alumina Limited is well placed to support this growth."

Management commentary

Speaking on the announcement, Alumina's Chief Executive Officer, Mike Ferraro said:

In 2021 AWAC demonstrated resilience in moderate markets of the first half, and took full advantage of opportunities once markets turned positive in the second half. As a result, Alumina Limited has been able to increase dividends to shareholders for 2021 by 9 percent. The realised alumina price for the year was higher but API was still constrained by higher freight costs attributed to global shipping disruptions. Distributions, whilst still above last year, were partially impacted by higher input costs and unplanned outages. AWAC's average cash cost in 2021 was once again in the lowest quartile of the global cost curve and our alumina refining portfolio has the lowest average CO2 emissions intensity amongst major refiners.

What's next for Alumina?

The company is forecasting 12.8 million tonnes of alumina production for the 2022 full year, a small change on this year's result.

With respect to aluminium, the company estimates it will produce 165,000 tonnes of the metal, a 14% jump on the current result.

It also expects sustaining capital expenditures (capex) to circle around US$300 million for the year which is a 73% change whilst it anticipates growth capex to hit approximately $40 million.

Alumina share price snapshot

In the last 12 months, the Alumina share price has gained 25%. It has climbed another 14%.

TradingView Chart

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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