Company Analysis - Commissioned /

Aluminium Bahrain: Q2 19 preview: Best operating performance since Q2 18

    Vahaj Ahmed
    Vahaj Ahmed

    Head of Industrials Equity Research

    Tellimer Research
    26 July 2019
    Published byTellimer Research

    Aluminium Bahrain (ALBA) will report its Q2 19 results on 28 July. We expect the company to post a net loss for the quarter of BHD3.3mn. This compares with a net profit of BHD29.1mn in Q2 18 and a net loss of BHD15.8mn in Q1 19. 

    The qoq improvement in gross profit that we expect will primarily be driven by a 17% increase in net sales (21% increase in volume, 4% lower unit revenue). We expect a 7% qoq increase in the cost of sales, led by a 5% qoq increase in energy cost per tonne to US$452/tonne. This is mainly due to the annual increase in the gas tariff of US$0.25/mmbtu (which comes into effect on 1 April every year). By contrast, the cost of raw materials – mainly alumina – averaged US$402/tonne in Q2 19 versus US$413/tonne in Q1 19. These changes translate into a gross profit estimate of BHD20.6mn in Q2 19 versus BHD0.9mn in Q1 19. 

    We expect higher finance costs to partially offset the better operating performance. According to our estimates, finance costs are likely to stand at BHD3.7mn in Q2 19 (versus BHD1.1mn in Q1 19). This should partially offset our operating profit estimate of BHD6.1mn in Q2 19, versus the loss of BHD15.6mn in Q1 19.

    ALBA trades at 2019f PE of 7.6x and 2019f EV/EBITDA of 7.7x versus its five-year medians of 9.1x and 4.8x, respectively.

    ALBA will hold a results conference call on Monday, 29 July, at 13:00 UK time and 16:00 Dubai. The dial-in numbers are +44 203 991 1888 / +1 877 890 2416 / +973 1619 8763. The passcode is 4076.