Adbri: Alcoa Exits Lime Contract

We downgrade our stand-alone fair value estimate for no-moat Adbri by 5% to AUD 1.90 per share on the termination of lime supplies to large customer Alcoa from April 2024. We downgrade 2024 lime volume forecasts by about 100,000 metric tons and 155,000 metric tons from 2025. Our 2024 EBITDA forecast is AUD 313 million, from AUD 316 million previously. However, only eight months of this year have been hit. Our EBITDA forecast from 2025-33 averages about 8% lower. The lime business will continue operating at lower capacity, but a high fixed-cost base is likely to weigh on near-term margins. Our midcycle EBITDA margin is 15%, from 16% previously. Our forecasts for other segments are unchanged.