CRU: Alcoa posts profit despite an impairment

Pittsburgh-based aluminum producer Alcoa reported a net profit of $20 million in the second quarter, even after accounting for a $197 million charge on closure of the Kwinana alumina refinery in Perth, Western Australia.

The earnings were within the $5 million to $25 million range the company had flagged a few days ago.

Kwinana’s full curtailment was in response to running at a financial loss and 80% of its 2.2 mt/y capacity due to a natural gas shortage and delay in mining approvals. The $20 million net income is in contrast to Q1’s net loss of $252 million.

“Sequentially, the results reflect higher average realized third-party prices for alumina and aluminum and lower production and raw material costs, partially offset by higher energy costs and higher interest expense,” the aluminum producer said.

Adjusted EBITDA came in at $325 million, an increase both sequentially (+146%) and from last year (+137%). Alcoa’s average sales price for alumina was $399/mt versus $372/mt, and for aluminum $2,858/mt versus $2,620/mt. Turnover went up 11.9% to $2.91 billion, with third-party alumina shipments 5.4% lower quarter-on-quarter at 2.27 mt but aluminum’s up 6.8% to 677,000 mt.

Regarding San Ciprián, Alcoa said that it continued to work to find competitive energy solutions for both the refinery and smelter, while progressing the process for the potential sale of the complex. Both alumina and aluminum prices improved during the second quarter, and based on current economic conditions, Alcoa anticipates that available funding will be exhausted by the end of 2024.

“It was another fast-paced quarter at Alcoa as we approach the closing of the acquisition of Alumina Limited and continue to execute initiatives to further enhance our operations,” said president and CEO William Oplinger. Expected completion of the Alumina deal is Aug 1.