The Alumina Limited (ASX: AWC) share price has struggled this year, but could it have better days ahead?
This ASX 200 materials share has slid nearly 24% year to date to the current share price of $1.425. For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has dropped 11% year to date.
So what could be next for Alumina in the future?
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What's the outlook for this ASX 200 materials share?
Alumina invests in alumina and bauxite via its 40% stake in Alcoa World Alumina and Chemicals (AWAC). Pennsylvania-based Alcoa Corp (NYSE: AA) holds the remaining 60% stake. AWAC is the largest alumina company in the western world.
Allan Gray portfolio managing director and chief investment officer Simon Mawhinney believes Alumina is "very attractive" at the current share price, despite energy prices.
Speaking at an investing webinar this week, Mawhinney said: "Alumina typically is effectively hedged for high energy prices… I think it's very attractive at these prices."
On Thursday, Alumina provided an update on Alcoa Corp's quarterly earnings. AWAC's cash margin leaped to $99 per tonne in the second quarter of 2022. This was up from $88 per tonne in the previous quarter. Underpinning this result, was a higher realised price for alumina.
Commenting on the results, CEO Mike Ferraro said:
Net AWAC distributions for the first half of 2022 were $162 million, a $25 million increase over the previous corresponding period.
Alumina Limited has received further net AWAC distributions of $39 million since the end of the second quarter.
Ferraro added the outlook for the alumina market is positive in the medium term, noting growth in aluminum metal consumption amid de-carbonisation is positive for the alumina industry.
However, he said many producers faced cost pressures in the first half due to Europe and China supply disruptions.
This led to higher energy and caustic soda prices. As a result of these energy prices, AWAC will cut production at the San Ciprian refinery in Spain by 15%. This is effective immediately.
Alumina share price snapshot
The Alumina share price has lost nearly 10% in the past year, while it has shed almost 7% in the past month. However, this week, the company's shares have gained 2.5%.
This ASX 200 materials share has a market capitalisation of about $4.1 billion based on the current share price.
