ALRO registered a preliminary consolidated turnover of RON 2.8 billion in 2019Mon, 02/24/2020
Current international demand and price trends continued to be influenced by economic slowdown and trade conflicts;
Alumina market affected by the excess output that led to downward prices in 2019;
In 2019, the energy supply in Romania remained highly volatile and led to very high levels of spot prices with a direct adverse impact on final consumers, in general, and on energy-intensive users, as ALRO, in particular;
Increased volumes of primary aluminium sales in 2019 compared to 2018, and at the quarter level (+ 6% in Q4 2019 compared to Q4 2018);
Flat-rolled products (“FRP”) increased in quantity terms (+ 3.6%) compared to 2018, on higher plates by 5% (more than 2,200 tonnes) and coils by 13% (more than 1,970 tonnes)
Increased bauxite sales to third parties, + 88% in quantitative terms in 2019 compared to 2018;
25 AP12LE pots part of the project initiated back in 2018 with Rio Tinto Aluminium Pechiney aimed to further improve the energy efficiency were commissioned in 2019 and the programme will be continued in the following years until all the pots are relined according to the new technology.
Slatina, 24 February 2020 – ALRO S.A. (BSE: ALR, “the Company” or “ALRO”), one of the largest vertically integrated aluminium producers by production capacity, in Europe, announces today its preliminary consolidated financial results for the year 2019. The Group’s registered a turnover of RON 2.8 billion down 7% YoY, an EBIT of RON 99 million and a net loss of RON 68 million as a result of mixed external local and international adverse factors, such as trade conflicts, excess output, lower demand and LME prices and higher prices for utilities during 2019.
„Although we have proceeded throughout 2019 to develop, manufacture and sell high value-added and very high value-added products (“HVAPs” and “VHVAPs”), our financial results were negatively affected by various external factors like slow international market in terms of demand and prices or the cost of energy which continued to show volatility and higher prices”, said Marian NASTASE, Chairman of ALRO’s Board of Directors. „At a global scale, the aluminium market was affected, in 2019 by a 15% LME decrease YoY, by international politics, such as the US tariffs on imports, the Chinese retaliation, the Brexit negotiations, all these driving the clients on the aluminium market to have a cautious behaviour, which had a significant impact on our results in 2019. On the local Romanian market, we have faced further adverse conditions, mainly derived from the prohibitive energy prices.”
The corresponding evolution existed also in the last quarter of 2019 when ALRO Group reported a net loss of RON 45.6 million compared to a net profit of RON 11.8 million recorded in Q4 2018. At ALRO’s level, the same trend was visible in the last quarter of 2019 and the company reported a net loss of RON 43 million compared to a net profit of RON 23 million in Q4 2018.
Concerning the factors that are impacting the local Romanian market, energy prices in particular, at the end of December 2019, the Romanian Government issued an Emergency Ordinance for amending GEO no.115/2011 through which the Romanian Government is committed to implementing a State aid scheme to compensate large energy-intensive undertakings for a share of their indirect emission costs. The State aid scheme is a transposition of the provisions resulting from the EU ETS Guidelines 2012/C 158/ 04.
Such European support schemes have been in force since 2012 and already applied in 12 European states – Germany, France, Spain, Norway, Finland, Hungary, Greece, Latvia among those states – in which ALRO has strong competitors. This European aid scheme offers direct subsidy for the compensation of costs relating to greenhouse gas emissions passed on in the electricity price for the economic agents from various fields of activity, in order to preserve their competitiveness.
The European Guidelines are defining also the list of industrial sectors which qualify for the direct subsidy as well as the formula of implementation, in the smallest details.
For ALRO, as well as for companies from other 15 Romanian industrial sectors and 8 subsectors (as they are regulated by the EU ETS Guidelines 2012/ C158/ 04), these compensations have the role of counteracting the high energy price on the overall cost. Moreover, the source of funds for the actual compensation come from the auctioning of the greenhouse gas emission certificates attributed freely by the European Union to Romania. Therefore, the scheme is supported directly from this mechanism implemented across European Union and is not affecting the rest of the Romanian consumers.
Despite these adverse conditions, ALRO and the group continued in 2019, to invest in energy efficiency, environment protection and in developing and manufacturing high and very high value-added products. Thus, the group continued its strategy to achieve the Green Factory, Next Generation Factory, Innovating and Sustainable status, with close to zero waste and emissions. In 2019, one of the most notable results of ALRO Group’s strategy regarding energy efficiency and environment protection was, starting to operate 25 electrolysis pots based on AP12LE technology (Aluminium Pechiney Low Energy), which have an important impact on the quantity of energy consumed. This is the result of the agreement signed with Aluminium Pechiney, part of Rio Tinto Aluminium (“RTA”) in September 2018. As of now, this project shows the expected results and the company is committed to continuing this project in the following years until all the pots are relined according to the new technology.
Furthermore, despite of the tough environment in 2019, the group remained committed to its long-term strategy of increasing the production of HVAPs and VHVAPs. It achieved higher sales of processed products overall by 1,000 tonnes compared to 2018, mostly plates, and by 920 tonnes more Primary products (mostly wire rod). This is a notable achievement under the current circumstances of high competition from Chinese producers and the large quantities of metal redirected to the European market instead of the USA.
These preliminary financial results are unaudited and are available in a separate document on the Company's website, Investor Relations category, Reports section: http://www.alro.ro/en/reports.
1 EBITDA earnings before interest, taxes, depreciation, amortization and impairment;
2Adjusted Net Result: Company’s net result plus/(minus) non-current assets impairment, plus/(minus) the loss/(gain) from derivative financial instruments that do not qualify for hedge accounting, plus/(minus) deferred tax.
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Notes to the Editors:
The companies part of ALRO Group are: ALRO S.A. – manufacturer of aluminium, Alum S.A. – producer of alumina, Sierra Mineral Holdings I, Ltd. – bauxite mining, Vimetco Extrusion S.R.L. – extrusion business line, Conef S.A. – holding and management company, Global Aluminium Ltd. – holding company and Bauxite Marketing Ltd - marketing. Having this structure, the Group created an integrated production chain assuring the raw materials for ALRO.
ALRO is a subsidiary of Vimetco N.V., a global, vertically-integrated primary and processed aluminium producer. ALRO is one of the largest vertically integrated aluminium producers, by capacity, in Europe, having an installed production capacity of 265,000 tonnes per year.
The main market for ALRO products is represented by the European Union; the Company exports its products to the USA and Asia, as well. ALRO is ISO 9001 certified for quality management and has NADCAP and EN 9100 certificates for aerospace production organizations, ALRO’s products adhere to the quality standards for primary aluminium on the LME, as well as international standards for flat rolled products.
Starting from 18 March 2019, the Index Committee of the Bucharest Stock Exchange approved the inclusion of ALRO (code ALR) in BET, the main index of the market, and in BET-TR, the total return version of BET. The BET index will thus include 16 companies, which is a first time in the history of the local capital market, and it represents an unprecedented diversification of the sectors reflected by the index. ALRO’s shares have been listed on the Bucharest Stock Exchange since October 1997, and following this decision ALRO becomes the first company in the aluminium industry present in the two indices.