Alumina investors get happy surprise
ALUMINA has lived up to the faith of its shareholders by holding its interim dividend at 12 a share. This is despite its scramble to find $500million to meet its share of capital expenditure cost blow-outs at Alcoa-managed bauxite/alumina growth projects in Brazil.
ALUMINA has lived up to the faith of its shareholders by holding its interim dividend at 12 a share. This is despite its scramble to find $500million to meet its share of capital expenditure cost blow-outs at Alcoa-managed bauxite/alumina growth projects in Brazil.Many in the market had assumed the dividend would either go or be slashed after last week's revelation that Alumina's funding share of the Brazilian projects was now $1.48billion, up from the previously advised $1 billion.At the time, Alumina said it would hold a review to find the "most appropriate form of funding" for its share of the increase.Chief financial officer Ken Dean said yesterday the group was continuing to look at all debt and equity (a rights issue) options."Until we complete that, really all options are still on the table," he said.Chief executive John Bevan said that the short-term funding needs for Brazil should "not cloud the fact that this business will continue to generate significant amounts of cash over the cycle and that we think our dividend policy is appropriate".The market pushed Alumina shares 28, or 6.4%, higher to $4.65 even if the group's profit for the first (June) half was down from $284 million to $44 million.On an underlying basis (it adds back $108 million for non-cash charges for revaluation of embedded derivatives and retirement benefit obligations), profit was $152 million, down from $271 million in the previous corresponding period.Aluminium prices were higher in the latest half, but Alumina's revenue was squeezed by the dollar's rise and cost pressures, particularly energy costs.The steady interim dividend of 12 a share is fully franked and payable on October 14. Based on alumina's underlying profit, the dividend is covered by 13.3 earnings per share.Like Rio Tinto, which is fighting off BHP in a $170 billion takeover battle, Alumina is upbeat on aluminium.Mr Bevan said the company believed global aluminium consumption would continue to grow strongly, at a rate of 8% or more."And in the developing countries, China is growing at over 20% and we are seeing strong growth in Russia, India and Brazil," he said."This growth in consumption needs to be met by supply. And power constraints in a number of countries are leading to supply being quite tight for aluminium."Mr Bevan said discussions for a new power deal that would clear the way for an expansion of the Portland aluminium smelter in Victoria continued, but it would be difficult to conclude an arrangement until the ground rules were "a bit clearer" on the Federal Government's emissions trading policy.He also said plans to expand the Wagerup alumina refinery in Western Australia remained the subject of an ongoing feasibility study. There would be no decision on the project this year.
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