Alumina Boosts Annual Dividend And Plans To Buy Back Shares
The Age
Friday February 2, 2007
INCREASING global demand for aluminium, fuelled by China, has produced a double bonus for investors in Alumina, which has boosted annual dividends by 20 per cent and is planning a share buyback soon.
With net profit rising 62 per cent to $511 million because of the cash flows Alumina receives from its 40 per cent stake in the Alcoa majority-owned and managed AWAC production business, Alumina will return more of its earnings to shareholders. At the same time it is boosting its share of investment in AWAC's new mining and refinery projects. A fully franked final dividend of 12? a share takes the payout for the year to December 31 to 24?, a level the company plans to maintain as a minimum. Alumina shares rose 36? to $6.82 yesterday.Chief executive John Marlay said the board had yet to decide on the size or the timing of an off-market share offer. There were major differences in the structures and ownership of Alumina and Alcoa, he said, and no comparisons could be drawn between their buyback plans. Mr Marlay said he expected global demand for aluminium to remain strong this year despite more production in China. Revenue earned by AWAC rose 26 per cent last year compared with 2005, with a 17 per cent year-on-year increase in Chinese consumption alone. With the amount of cash flowing into Alumina's coffers, analysts have raised the possibility of the company becoming a takeover target despite its partnership with Alcoa. Major producers Alcan and BHP Billiton have both announced in recent days that the cost of building aluminium refineries has blown out by hundreds of millions of dollars. Credit Suisse says that given the value of Alumina's business is 30-50 per cent lower than construction costs per tonne of expanded capacity, it would be cheaper to buy Alumina than build plants, even allowing for a takeover premium. "Moreover, with an acquisition, the cash flow starts upon completion of the deal, i.e., no long construction delays," Credit Suisse said in a research note this week.
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