×

Australia's Alumina Cuts Year Earnings Outlook

Australia's Alumina cut its full-year underlying earnings forecast by 17 percent on Thursday, citing lower aluminum prices, a higher Australian dollar and increased costs.

Alumina said it expected 2007 underlying earnings of about A$405 million (US$358 million), down from a forecast of A$490 million made in July last year.

Alumina partners Alcoa in the Alcoa World Alumina and Chemicals (AWAC) joint venture, in which it has a 40 percent stake. Alcoa holds the remaining 60 percent.

Alcoa said on Wednesday in New York that its revenue fell in the fourth quarter due in part to lower metal prices, but its net income was boosted by restructuring and tax benefits.

Alumina said aluminum prices had averaged US$1.21 in calendar 2007, against an assumption in July of US$1.24, cutting underlying earnings by about A$30 million.

Higher production costs, mainly from freight and energy charges, had reduced earnings by another A$25 million, while a strong Australian dollar and higher borrowing costs had also cut earnings.

The AWAC joint venture produces alumina from bauxite, which it feeds to Alcoa-run aluminum smelters or sells in the open market at a percentage of the aluminum price, typically between 12 and 15 percent.

Alumina shares fell as much as 6 percent on Thursday on the lower earnings outlook.