Alumina share price slides despite profit surging 128%

What did Alumina report today? Let's take a look.

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Key points

  • The Alumina share price is in the red this morning
  • The company reported a 128% lift in profit in its half-year results
  • Alumina lifted its dividend by 24% 

The Alumina Limited (ASX: AWC) share price is in the red today after the company announced its 2022 half-year results.

The alumina and aluminium producer's share price jumped to $1.53 soon after market open but is currently down 0.33% at $1.50. For comparison, the S&P/ASX 200 Index (ASX: XJO) is down 0.34% today.

Alumina has a 40% stake in Alcoa World Alumina and Chemicals (AWAC). AWAC has operations in Australia, Brazil, Spain, Saudi Arabia and Guinea, along with a 55% stake in the Portland aluminum smelter in Victoria.

Let's take a look at what Alumina reported to the market today.

Alumina share price edges lower amid soaring profit

Highlights of Alumina's half-year results include:

  • Net profit after tax (NPAT) of 167.9 million, a 128% lift on the $73.6 million reported in H121
  • Net receipts from AWAC lifted 18% to US$162 million
  • Free cash flow available for dividends lifted 25% to US$122.6 million
  • Net cash of 19.3 million at 30 June compared to a net debt of $5.7 million in 2021
  • Interim dividend lifted 24% to US 4.2 US cents per share

What else did the company report?

Underpinning the result was a 57% increase in the alumina refining margin. The margin for alumina refineries lifted from US$60 per tonne in the prior corresponding period (pcp) to US$94 per tonne.

This was driven by higher alumina prices amid "global supply disruptions". The average realised price of alumina lifted 37% on the pcp to US$398 per tonne.

However, cash costs of alumina production also jumped 32% to $304 million per tonne.

Total AWAC refinery production dropped in the first half to 6.1 million tonnes.

AWAC's earnings before interest, tax, depreciation, and amortisation (EBITDA) lifted 80% on the pcp to US$836.1 million, while net profit after tax lifted 118% to US$438.9 million. AWAC reported a net cash inflow of $378.5 million, a 70% boost on the first half of 2021.

Management commentary

Speaking about the results, Alumina CEO Mike Ferraro said:

The increased margins from AWAC's alumina refineries and the Portland smelter flowed through to net distributions from AWAC, which at $162 million were 18 per cent higher than the corresponding period last year.

As a result, Alumina has been able to increase the interim dividend to shareholders for 2022 by 24 per cent.

Alumina's dividend yield has averaged 7.4 per cent over the last 5 years, which consistently places Alumina as one of the top performers amongst its industry peers.

What's ahead

Alumina said global aluminum demand is predicted to grow by 1.1% in 2022.

The company is optimistic about the medium-term outlook for aluminum. Ferraro noted that aluminum will become "even more critical" as the world transitions to a low carbon economy.

He said this demand will flow through to Alumina, adding: "As a significant participant in the aluminium supply chain, AWAC and Alumina are well placed to benefit from this growth."

Meanwhile, uncertainties remain for global alumina production in the second half of 2022. Production outside China fell 4% in the first half of 2022 amid supply disruptions in Europe and Australia. High energy costs in the second half of 2022 could continue to impact alumina production. Alumina production outside China could drop by 3% in 2022.

AWAC is forecast to produce 12.1 to 12.2 million tonnes of alumina overall in 2022, along with 160,000 tonnes of aluminum.

Alumina share price snapshot

The Alumina share price has fallen 20% in the year to date, while it has lost 10% in the past year.

However, in the past month, Alumina shares have climbed 3%.

For perspective, the benchmark ASX 200 index has lost 6% in the past year.

Motley Fool contributor Monica O'Shea 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 Scott Phillips.

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