--Alumina is conservative on cash management and won't pay
dividend
--Swings to net loss of US$14.6 million from last year's US$67.7
million profit
--CEO is encouraged by strong physical demand for aluminum
(Adds detail throughout)
By Robb M. Stewart
MELBOURNE--Alumina Ltd. (AWC) said Thursday it won't pass on to
shareholders any of the reduced dividend paid to it by venture
partner Alcoa Inc. (AA) as it takes a more conservative approach to
managing cash after swinging to a first-half loss thanks to weaker
prices.
Melbourne-based Alumina--essentially a holding company with a
40% stake in the world's biggest alumina business with majority
owner Alcoa--warned that the near-term outlook for its markets
remains volatile in spite of encouraging signals on demand and
pricing.
"It was a tough half," Chief Executive John Bevan said.
Alumina reported a net loss of US$14.6 million compared with a
profit of US$67.7 million, although revenue from continuing
operations was unchanged at US$100,000, the company said.
It received US$70.4 million in dividends and distributions from
its joint venture, in line with the previous six-month period but
down from US$170 million the year before.
"Given the current volatility in external markets, the company's
cash flows and balance sheet are being conservatively managed," Mr.
Bevan said, adding no interim dividend would be paid out.
Alumina paid a dividend of 3 cents a share for the first half of
2011 and the same for the second half of the year.
Aluminum prices have been hard hit by a surplus of the metal and
production capacity as well as demand worries amid the euro-zone
debt crisis. Economic cooling in China is a concern, too. Alumina
said the price it realized on first-half alumina sales was down 11%
on the year.
Struggling against depressed prices, Anglo-Australian mining
company Rio Tinto PLC (RIO) continues to seek an exit from a basket
of poorer-performing aluminum businesses in several countries while
Norsk Hydro ASA (NHY.OS) in May said it will close its Kurri Kurri
aluminum plant in Australia after failing to turn about the
struggling operation. Alcoa's Point Henry smelter near Melbourne
secured a two-year reprieve in June after the aluminum giant said
it will cut costs and accept a government bailout in an effort to
minimize long-running losses.
The Alcoa World Alumina & Chemicals venture produced 7.8
million metric tons of alumina in the first half, in line with a
year earlier, and 178,000 tons of aluminum against 177,000 tons
last year. Alumina said it expects to produce 360,000 tons of
aluminum this year, although alumina output will be adjusted to
meet demand and is now forecast at 15.5 million tons rather than
the 15.9 million predicted in February.
Mr. Bevan said that Chinese demand for bauxite and alumina is
growing, while physical demand for aluminum remains strong. "Some
positive catalysts for improved alumina pricing are emerging."
The venture increasingly bases sales on spot-market prices for
alumina rather than on LME aluminum-linked prices. Alumina said
about 40% of sales will be based on market prices by the end of the
year from more than a third in the first half of the year.
Write to Robb M. Stewart at robb.stewart@wsj.com
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