Aluminium Bahrain (ALBA) will report Q1 20 results today (4 May). We expect the company to post a net profit for the quarter of BHD6.8mn. This compares to a net loss of BHD15.8mn in Q1 20 and a net profit of BHD13.6mn in Q4 19.
We expect a 40% qoq decline in gross profit primarily due to 9% lower net sales (7% decrease in volume, 2% lower unit revenue). The decline in sales volume is based on the data from World Aluminium which suggests a similar decline in production from the Asia (ex-China) region. We also estimate that the Q1 20 cost of sales will be 4% qoq lower at BHD239.8mn (versus BHD248.9mn in Q4 19) despite higher depreciation expense. This is due to the 2% qoq decline in both: (1) the cost of raw materials (mainly alumina, which averaged US$300/tonne in Q1 20 versus US$306/tonne in Q4 19); and (2) the per-tonne cost of energy (mainly gas, due to the higher efficiency of the new power station PS5). The above changes translate into a gross profit estimate of BHD26.7mn in Q1 20 versus BHD44.8mn in Q4 19.
Q1 20 opex and finance costs could be lower than Q4 19. According to our estimates, Alba’s operating expenses (excluding FX and/or revaluation gains/losses) should stand at BHD12.6mn in Q1 20 versus BHD13.4mn in Q3 19) owing to lower distribution costs broadly in line with the qoq decrease in volume. Moreover, we expect BHD8.1mn finance costs in Q1 20 (versus BHD14.8mn in Q4 19 which included one-off items). It is important to note our finance cost estimate for the full year 2020 is BHD31.5mn (versus BHD22.5mn in 2019) resulting from no further capitalisation of interest expense following the full commissioning of Line-6 in Q4 19. This should result in pre-tax profits of BHD7.1mn in Q1 20 versus BHD13.6mn in Q4 19.
ALBA trades at 2020f P/E of 18.4x and 2020f EV/EBITDA of 6.1x versus its 5-year median of 9.1x and 4.8x respectively.
ALBA will hold a results conference call on Tuesday 5 May 2020 at 12:00 UK time, 15:00 Dubai. The dial-in number is +973 1783 7990, no passcode is required.
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