Analyst Note| Mark Taylor |
No-moat Alumina delivered a 2020 result that reflects its competitive cost position amid declining alumina prices. NPAT of USD 146.6 million fell 31% versus the previous year, as a 5% improvement in unit cash costs to USD 199 per tonne was more than offset by alumina price weakness. This led to alumina EBITDA in the company’s operating joint venture Alcoa World Alumina and Chemicals, or AWAC, declining 45% to USD 69 per tonne. Encouragingly, the average realised alumina price of USD 268 per tonne in 2020 tracked our long-run forecast of USD 270 (in 2020 dollars), and we estimate AWAC generated alumina cash EBITDA margins of about 28%, better than our prior long-term projection of 25%. As such, we’ve raised our estimate for cash margins to 28%. However, we trim our fair value estimate to AUD 1.32 from AUD 1.45 due to appreciation in the Australian dollar since our last update (Alumina reports its financials in U.S. dollars).