While Alumina Ltd’s alumina production was largely within Credit Suisse’s expectations, the broker finds the net distribution of US$62m inflated with a proportion of a tax shield worth US$30-35m expected in the June half.
Rising realised alumina prices rising during the March quarter were largely offset by higher unit costs, leading to broadly flat margins.
Credit Suisse expects aluminium profitability to increase with new 5-year power agreements for the Portland smelter and government support packages. The broker’s 2021 earnings estimate falls by circa -US$50m with flow-on impacts in outer years immaterial.
Credit Suisse retains its Outperform rating with a target of $2.
Target price is $2.00.Current Price is $1.74. Difference: $0.26 – (brackets indicate current price is over target). If AWC meets the Credit Suisse target it will return approximately 13% (excluding dividends, fees and charges – negative figures indicate an expected loss).