Alumina Limited warned its shareholders that the company is getting into a period of increased spending on growth which might affect shareholder returns in the coming years. The warning came after Alunorte had resumed production with the lifting of the embargo. The company management told its shareholders that the high commodity price and profits enjoyed last year were not expected in 2019.
Alumina Limited paid a dividend yield of 11.5 per cent in 2018 – the highest dividend yield in the ASX 200. The highest payout was announced after the company registered a 167 per cent increase in revenue, an 87 per cent rise in profits and a 68 per cent rise in dividends due to higher alumina prices.
Alumina Limited chairman Peter Day told shareholders in Melbourne on Thursday that, having spent the past five years trimming marginal assets from its long-standing joint venture with Alcoa, it was time for the companies to resume investing in growth. He added that the partners are focused on brownfield expansions in their existing refineries.
"An investment in growth projects can be expected to impact the cash otherwise available for dividends in the short term, but create value in the longer term," he said.
Chief Executive Mike Ferraro told that Pinjarra and Wagerup alumina refineries in Western Australia are likely to get funds for brownfield expansion.
They are looking at increasing production in the long term. The expansion projects would take about two years and could be generating returns within three years of an investment decision, he said.
Ferraro said his projection for 2019 is less lucrative than last year considering the trend in alumina prices.
''We will not surpass 2018,'' he said. ''Last year our average selling price for alumina was $US445 per tonne and this year to date the average is about $US350 to low $US400 per tonne range. It is sitting at about $US380 per tonne at the moment.”
Alunorte and Rusal coming back to operations will contribute highly towards it.
Alcoa World Alumina and Chemicals (AWAC) is a joint venture between Alumina Limited and Alcoa, in which Alumina Limited owns 40 per cent of a global fleet of bauxite mines, alumina refineries and aluminium smelters while Alcoa owns 60 per cent.
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