This is how Alcoa Corporation’s quarterly result will impact Alumina Limited

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Summary

  • Alcoa Corporation released its first-quarter earnings report with robust figures despite COVID-19 impacts.
  • AWAC is a joint venture between Alcoa Inc. and Alumina Limited
  • Alumina Limited received A$62 million from cashflows generated by AWAC in Q1 2021.

The world's leading aluminum producer, Alcoa Corporation, released its first-quarter earnings report on 15 April 2021. Subsequently, its Alcoa World Alumina and Chemicals (AWAC) joint venture partner, Alumina Limited (ASX:AWC), shed light upon the operational and market matters of the JV.

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Notably, AWAC is a JV between Alcoa Inc. and Alumina Limited formed in 1995. Alumina holds 40 per cent interests in it whereas the remaining 60 per cent is held by Alcoa.

What has Alumina announced?

Alumina Limited received A$62 million from the significant cashflows generated by AWAC in Q1 2021. AWAC’s average realised price was A$26 per tonne higher in this quarter due to increased alumina price. However, the operational cost of AWAC was also higher due to the strengthening of the Australian dollar and unavailability of Australian crushers amid seasonal maintenance.

Good Read: Alcoa's Portland Smelter Gets New Lease of Life with Power Deals, Government Aid

Source: Company announcement, 16 April 2021

A spike in Handysize freight costs in February 2021 was a difficult situation. It had a negative impact on Chinese imports, which affected the API in recent weeks. However, since late March 2021, the freight charges have started to decline, which may further boost the API.

Alcoa’s Quarterly Results

The US’s biggest Aluminum producer has reported a robust quarterly report despite the ongoing challenges and impacts of COVID-19. A revenue of US$2,870 was reported in Q1 2021, the highest since 2018. The increase in revenue is primarily driven by higher aluminum prices and strong shipments.

Must Read: Alcoa's Portland aluminium smelter receives $76.8 m Federal Government support

  • The aluminum producer generated US$175 million towards net income and adjusted net income of US$150 million, registering a terrific increase of 206 per cent.
  • THE adjusted EBITDA increased to US$521 million, with a magnificent gain of 44 per cent.
  • A 7 per cent sequential gain in third-party alumina shipments was recorded.
  • 13 per cent sequential gain in third-party aluminum shipments was also recorded.
  • Cash in hand at the end of the quarter amounted to US$2.5 billion.
  • Free cash flow was negative US$69 million.
  • Debt increased to US$500 million in March 2021.
  • Additionally, the company reported a working capital for 25 days.

Aluminum Market Overview

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Shares of The Pittsburgh-based company have climbed around six times from the lows of last year. The stock prices are primarily driven by strong demands and growing expectations that China will limit its supply amid its commitment to curb carbon emission. The country has shut down 34 ferroalloy companies in Inner Mongolia, curbing around 100,000 tonnes of annual aluminum production, creating a market deficit.

Interesting Read: US’s anti-dumping tariffs erodes aluminium trade

ASX listed aluminum companies, including Capral Limited (ASX:CCA), Metro Mining (ASX:MMI), Altech Chemicals (ASX:ATC), Australian Bauxite Limited (ASX:ABX) will be under the watchlist of investors amid the ongoing aluminum price rally.


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