EGA's first-half earnings hit record on higher revenue

Emirates Global Aluminium, the UAE’s largest industrial company outside the oil and gas sector, registered record half-yearly earnings, with profit up more than threefold as rising sales drove revenue.

EGA’s adjusted earnings before interest, taxes, depreciation and amortisation (ebitda) surged to Dh7.6 billion ($2.1bn) in the six months to the end of June, more than doubling from Dh3.5bn in the same period a year earlier, the company said on Tuesday.

Net profit for the first six months of the year climbed to Dh5.9bn, from Dh1.7bn at the end of June 2021.

Revenue for the reporting period rose to Dh18.3bn, a jump of about 70 per cent from a year earlier.

“After our record performance in 2021, I noted that EGA could still do better and, indeed, we improved our operational performance throughout the value chain — from mining to outbound logistics for finished metal,” chief executive Abdulnasser bin Kalban said.

“This enabled us to capitalise on strong market conditions. Our net profit for the first half exceeded [the] net profit for the entirety of last year.”

Prices of commodities, including aluminium, rose sharply last year and the momentum continued in 2022. Russia's military invasion in Ukraine further drove prices higher, with aluminium hitting a decade-high in March.

Prices, which climbed 42 per cent in 2021, rose to $3,741 a tonne on the London Metal Exchange earlier this year. They have since come down to $2,390.50 a tonne.

However, EGA’s average realised price for the half-year period stood at $3,063 a tonne, the company said.

Although prices have come off from their first-quarter highs amid rising inflation and slowing economic growth, EGA said it remained focused on improving operational performance and efficiency to boost profitability.

“During the first half, we worked to debottleneck our operations, optimise our customer and product mix to maximise our revenue, robustly control our costs and set the course for future growth,” Mr bin Kalban said.

“We will continue to focus on delivering competitive returns for our sector, however the global aluminium market develops.”

The company's ebitda margin for the aluminium segment rose to 41 per cent at the end of June, from 32 per cent at the end of the first half of last year, one of the best among its global peers.

EGA’s sales of cast metal increased by 11 per cent to 1.31 million tonnes, up from 1.18 million tonnes in the first half of 2021, as the company enforced its production requirement plans and took steps to mitigate the effects of global logistics challenges.

The company currently has more than 400 customers across 50 countries.

Sales of value-added products, or “premium aluminium”, grew 5 per cent to 1.07 million tonnes, from 1.02 million tonnes in the first six months of last year.

Premium aluminium accounted for 82 per cent of total metal sales, with the company focusing on optimising its ebitda contribution from sales amid the high price volatility of alloy metals.

The company boosted production at its Al Taweelah alumina refinery to 1.15 million tonnes, sourcing about 45 per cent of its total alumina needs from its own factory during the period.

Exports of bauxite ore from operations in Guinea increased 11 per cent to 6.49 million tonnes in the January-June period.

EGA, which is jointly owned by Abu Dhabi’s strategic investment arm, Mubadala Investment Company, and the Investment Corporation of Dubai, said it paid $600 million in interim dividends to its shareholders.

The company significantly deleveraged its balance sheet this year and made a corporate debt prepayment of Dh2.9bn. Since January 2021, EGA has prepaid Dh6.5bn in total while making Dh968m in scheduled payments.

Its outstanding corporate debt currently stands at Dh17.4bn. The company's subsidiary, Guinea Alumina Corporation, has an outstanding project financing facility of Dh2.4bn.

“As you would expect, we were highly cash generative, so this enabled us to do two things … one to deliver exceptional returns to our shareholders … [and] continue our deleveraging, and to strengthen our balance sheet to prepare us for the next stage in our corporate journey,” EGA chief financial officer Zouhir Regragui told The National.

Despite the record half-yearly earnings, EGA sounded a note of caution and Mr Regraqui said the company expected this year to be “the story of two halves”, given the uncertain economic outlook.

“Prices have already come down, so we don't expect the same level of prices in the second half,” he said.

EGA is also closely following developments in China, which is “important for our industry”, particularly how the world's second-biggest economy manages the pandemic and “exits the zero-Covid policy”, he said.

In terms of demand, EGA has experienced “some cooling off from the highs” but there is “nothing alarming”, he said.

Mr bin Kalban said the company's focus remained on “more sustainable” growth and that EGA was in a “good position for any challenges in the future”.

“At the moment, nothing is [making] me lose my sleep,” he said.

In June, Mr bin Kalban disclosed that EGA was planning to manufacture silicon metal, a key raw material used in the production of premium aluminium locally, and that the construction of the plant could begin “as soon as next year”.

The project and plans to set up an aluminium recycling plant in the UAE are at the feasibility stage and would be great for the long-term sustainability of the company, he said on Tuesday.