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Alumina Ltd outlook bright after $26m loss

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Alumina (ASX: AWC) posted a full-year loss yesterday but said the outlook for aluminum markets in 2010 was improving and underlined its more buoyant view by reinstating dividend payments.

The company posted a net loss for the year ending December 31 of $26 million, down from a profit of $168m in the previous year.

The aluminum industry has been hit hard by the global downturn as demand and prices have sagged, and Alumina and its joint venture partner, Alcoa, have been forced to make deep cuts to higher-cost production in an attempt to preserve margins.

Chief executive John Bevan said the 2009 results showed the severity of the impact of the downturn but aluminum prices were now 55 per cent higher than they were at the beginning of last year. "The outlook for improved returns for shareholders has strengthened," he said.

Alumina posted an underlying loss of $2m, down from underlying earnings of $202m in 2008. This appeared well below market consensus for underlying earnings of about $36m but Macquarie analysts said that once non-cash items were stripped out, underlying earnings were closer to consensus at about $30m. The underlying loss included a $33m charge for adjustments arising from the recognition of differences between the US GAAP and IFRS accounting standards in their treatment of acquisitions, inventory movements and asset retirement obligations.

The Melbourne miner, which owns stakes in bauxite mines, alumina refineries and aluminum smelters through its 40 per cent stake in the Alcoa World Alumina & Chemicals joint venture with Alcoa, posted a final dividend of 2c.

JPMorgan analyst David George said few market watchers had been forecasting a final dividend so the reinstatement of a payment was a signal of the company's confidence.

Mr Bevan said AWAC's bauxite and alumina operations had remained profitable throughout the downturn and, while its aluminum smelters had run at a loss, they had returned to profitability in the fourth quarter of 2009. He said aluminum demand was now recovering and Alumina expected it to be about 10 per cent higher in 2010 than it was in 2009.

Alumina had net debt of $342m at year's end, giving it gearing of 9 per cent.

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Quick facts: Alumina Limited

Price: 2.3 AUD

ASX:AWC
Market: ASX
Market Cap: $6.62 billion
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