Alcoa Interim Profit Up Despite Aluminium Glut
Sydney Morning Herald
Monday July 12, 1993
Alcoa of Australia Ltd has defied the trend of falling earnings from aluminium by posting an increased operating profit for the first six months of this year.
The big aluminium producer, 48.3 per cent-owned by Western Mining Corp Holdings Ltd and 51 per cent by Aluminum Co of America, yesterday reported a net profit before abnormal items of $198.8 million for the June half.
Excluding the effect of the reduction in the corporate tax rate to 33 per cent from 39 per cent, net profit was $180.4 million, which was $43.7 million ahead of earnings for the previous year. Although far below the super profits of four years ago, Alcoa managed to more than keep its head above water over a period when most aluminium producers have been struggling to pare back losses to sustainable levels.
The diversity of the company has been a key factor. Record bauxite mining in Western Australia and associated low-cost alumina production, which supplies about 18 per cent of the Western world's needs, have kept the company profitable.
Despite the tough market, sales revenue for the first half grew by 4.8 per cent, or $49 million, to $1.06 billion, primarily because of increased export sales of alumina. Export revenue for the half was up by 6 per cent at $907.6 million.
The big impact was the $300 million expansion of the Wagerup alumina refinery in the west, completed in December, which increased the refinery's annual capacity by 630,000 tonnes to 1.5 million tonnes. A weaker Australian dollar over the period also helped to boost export revenue while interest income again outstripped borrowing costs.
With the inclusion of a $59.7 million abnormal gain, net profit after tax was $258.4 million.
This translated into an annualised return on shareholders' funds of 20.4 per cent compared with 13.4 per cent in 1992.
Last week, Alcoa announced that it would lift the dividend payout for the June quarter to $100 million, compared with $80 million in the March quarter. This restored the quarterly payout to the level at which shareholders were accustomed in the boom period of the late 1980s.
But the company warned that times were far from easy and all operations were being kept under review.
Aluminium prices remain in the doldrums, largely due to a flood of metal on the market.
© 1993 Sydney Morning Herald
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