ALRO S.A., the vertically integrated aluminium producer, has announced today its consolidated financial results for the first quarter of 2019. The Group’s turnover increased by 2.4% to RON 767.4 million in Q1 2019 compared to RON 749.2 million in Q1 2018. In the first quarter of 2019, ALRO Group registered a gross profit of RON 105 million (Q1 2018: RON 167 million) and an operating result (EBIT) of RON 59 million in Q1 2019 (Q1 2018: RON 101 million).
“In the first three months of 2019, ALRO Group recorded an increased turnover YoY, with higher revenues generated mainly by the processed aluminium segment and steady income from the primary aluminium segment, in line with our strategy of increasing, in the total production output and deliveries, the share of high and very high value-added products for more sophisticated industries, such as aerospace and automotive”, said Marian NASTASE, Chairman of ALRO’s Board of Directors. “At the same time, we continued, in Q1 2019, our investment programme in research & development areas, with the aim to improve the output and products’ quality, while reducing the overall consumption rates and, thus ensuring a sustainable long-term growth of our business” added Marian NASTASE.
During the first quarter of 2019, the global market looked fragile and reported decreased aluminium prices quoted at the London Metal Exchange (LME), levels influenced also by several factors such as the risks of higher production output in China, the US Government policies regarding the imposed aluminium tariffs and potential new imposed barriers, Alunorte curtailment, macro uncertainty, estimated aluminium global deficit for 2019 etc.
Therefore, in Q1 2019, the LME continued its decreasing trend as showed at the end of 2018, leading to an average price for three-month period ended on 31 March 2019 of 1,859 USD/tonne compared to the LME average price recorded during the three-month period ended on 31 March 2018 of 2,159 USD/tonne. All these market circumstances impacted the results of all major companies in aluminium industry, which reported either significant reduction of profits, or losses in the first quarter of 2019.
However, the analysts estimate a potential recovery of the aluminium market, later this year, based on the metal balance deficit registered at this point.
Locally, the energy supply remains a challenge, as approximately 40% of the national electricity consumption is covered by supply from transactions on the day ahead market (PZU), leading to price distortions. Being a highly volatile market, the spot prices have reached very high levels, with negative impact on final consumers in general, and on energy-intensive users, in particular. This translates into higher production costs for ALRO.
During the beginning of 2019, ALRO Group continued to remain focused on increasing the production and sales of processed aluminium products, in order to better respond to market demand and reported higher deliveries of processed products, partially offset by the approximately 300 USD/tonne drop in the LME quotations, which limited the revenues in terms of value. Thus, the investments done in the last years are paying-off as the share of high value added products (“HVAPs) and very high value added products (“VHVAPs”) dedicated to specialized industries, such as aerospace and automotive industry in its total deliveries have increased and reached 51% of the Q1 2019 Group’s total revenues, compared to 49% in Q1 2018.
Despite the downturn of the international aluminium market, the investment strategy that ALRO Group implemented showed positive results, with an EBITDA margin over 12%, at a level of RON 95 million in Q1 2019, compared to RON 133 million earned in Q1 2018. The Group reported positive cash from operations in which generated RON 61 million in Q1 2019; cash provided in financing activities was RON 72 million and the cash used for investing activities was RON 44 million.
The Group continued its investments in return-seeking capital projects to enhance the Group’s competitive position, while ensuring a sustainable growth and the amount allocated in Q1 2019 was RON 26 million.