Alumina Ltd ADRAWC

Morningstar Rating

Stock Research and Analysis

by Mark Taylor

Alumina's sole interest is a 40% stake in Alcoa World Alumina and Chemicals (AWAC), the world's largest alumina producer. Alcoa Inc. owns the 60% balance. AWAC is predominantly exposed to the first two stages in the aluminium production chain: bauxite Read more

Bulls Say

Alumina is a beneficiary of continued global economic growth and increased demand for alumina, particularly in China.

Alumina is a low-cost alumina producer. It has improved in a relative sense with the addition of the world-class Alumar refinery expansion, a contrast to high cost Chinese refinery additions.

The attraction to Alcoa and the favorable AWAC joint-venture agreements are positives.

The roll-off of legacy contracts which unfavorably link alumina pricing to aluminium is a powerful tailwind.

Alumina could participate in the ongoing sector consolidation. Read more

Bears Say

Aluminium is the most abundant metallic element and not in short supply.

Alumina is one-dimensional. This lack of diversity makes the firm susceptible to the ups and downs of one commodity price.

The AWAC joint-venture agreements leave Alumina at Alcoa's beck and call.

Aluminium and alumina production is energy-intensive, and energy costs should continue to rise.

Chinese investment, for production rather than profit's sake, eroded aluminium industry returns over the last five years. Read more

Management

We ascribe a standard stewardship rating to Alumina Limited. Don Morley has been chairman since December 2002. He was previously director of finance at WMC Limited. He is also a director of Iluka Resources and Spark Infrastructure. CEO John Bevan succeeded Read more

Profile

Alumina Limited (Alumina) is a forwarding office for AWAC distributions. Its profit is a 40% equity share of AWAC profit, less head office and interest expenses. Its cash Read more