Australia's Alumina, said on Wednesday its underlying 2006 profit fell 10%, due to higher operating costs and a strong Australian dollar, sending its shares down over 2%.
Net profit for the six months to June 30 came in at A$284.3 million compared with A$259.9 million a year ago, but the company said underlying earnings were A$271.0 million, down from A$302.0 million a year ago.
Alumina said global demand for aluminum and alumina was expected to grow by 10% in 2007, driven by Chinese demand for aluminum -- which is expected to increase by at least 30% year on year in 2007.
The company, which partners Alcoa in the Alcoa World Alumina and Chemicals (AWAC) joint venture, had flagged a fall in profits, and last week cut its full-year underlying profit outlook to A$490 million (US$419 million) from A$569 million a year earlier.
Alumina said the outlook for prices was expected to remain positive but benefits were eroded by the stronger Australian dollar, which averaged 81 cents for the half compared to 74 cents in the first half of 2006.
"Cost pressures and a strong Australian dollar are likely to persist in the second half and impact earnings," Chief Executive John Marlay said in a statement.
First-half earnings were also impacted by higher bauxite costs, power outages at its Kwinana and Pinjarra refineries in Australia and higher freight, maintenance and contractor costs.
Marlay said AWAC could lift its production capacity to meet demand through growth projects in Brazil and options to increase capacity in Australia and elsewhere.