Alcan Turns The Corner
Sydney Morning Herald
Wednesday January 19, 1994
Alcan Australia Ltd has returned to profit for the first time since 1989, despite aluminium prices falling to record lows over the past year.
The NSW-based aluminium producer, 73 per cent owned by Alcan Aluminum of Canada, yesterday reported a net bottom-line profit of $772,000 for 1993, compared with a $15.47 million loss for 1992.
The return to positive earnings followed a solid turnaround in the second half when a $3.73 million profit was made compared with a $2.95 million first-half loss.
Alcan attributed the earnings recovery to a strong performance by its downstream fabricating businesses which benefited from reduced costs due to major rationalisation and strong demand from the residential housing market.
The strong demand allowed the company's Kurri Kurri smelter near Newcastle to operate at full capacity over the year, while extra profit was made by sourcing metal on the spot market to supply the strengthening market.
Despite the low aluminium prices, caused by a flood of metal from Russia swamping international markets, the smelter managed a close to break-even performance due to continued cost-cutting and an emphasis on value-added products.
Alcan spokesman Mr Tony Smith said the second half performance was expected to be maintained due to the continuing benefits of rationalisation.
But, the company still expects 1994 to be a demanding year because of the aluminium world-wide oversupply problems.
Moves taken to curb costs included a head office shift from downtown Sydney to the company's main fabricating operations at Granville and an accompanying cut in head office staff.
This reduction, together with rationalisation elsewhere, cut Alcan's workforce by 400 over the year, to 2,520. As a result, the company incurred$6.8 million of redundancy costs, booked as abnormal cost after $5.3 million of similar costs the previous year.
Mr Smith said a recovery in international aluminium prices would enable the Kurri Kurri smelter to move back into profit.
A dividend was again not recommended.
A sustained recovery in the metal's price will to a large extent depend on the outcome of a summit meeting of world aluminium producers which started in Brussels last night .
The meeting was called to investigate ways to curb the supply of metal flowing on to world markets from the Commonwealth of Independent States.
CIS exports to the West, a peacetime by-product of the dismantled Soviet Union's defence industry, rose 25 per cent to 1.6 million tonnes in 1993, up from 274,000 tonnes in 1990.
Industry experts said the industry must cut at least 1.5 million tonnes of production this year, about 10 per cent of the world's production capacity, to combat a crippling overhang.
They said the CIS might agree to cuts, but only if Western producers did the same.
The price of high-grade aluminium rallied by $US11 to $US1,200.50 a tonne on the London Metal Exchange on Monday, in anticipation of a positive outcome for the Brussels meeting.
Alcan's Canadian parent has incurred a smaller loss for the fourth quarter of $US36 million against the previous fourth quarter's $US56 million loss, partly due to the improved performance of its Australian offshoot.
ALCAN AUST LTD (net earnings)
1989 $63.8m profit
1990 $13.3m loss
1991 $28.9m loss
1992 $15.4m loss
1993 $772,000 profit
© 1994 Sydney Morning Herald