Alumina Chases Capital For Blow-outs
The Age
Tuesday August 26, 2008
ALUMINA has settled on an all-equity solution to the funding problems created by its share of big cost blow-outs at Alcoa-managed bauxite-alumina growth projects in Brazil and industry-wide cost pressures.
The Melbourne-based group will raise $910 million in a steeply discounted underwritten rights issue on the basis of 5-for-19 at a price of $3 each - a 29.1% discount to the dividend-adjusted last sale price of $4.23 a share.The market was put on notice in July that Alumina would be looking at its debt and equity funding options following the revelation that its share of the Brazilian projects - through its 40% stake in the Alcoa-managed AWAC joint venture - had soared from $1billion to $1.48 billion.Alumina has earmarked $550million from the rights issue to cover the Brazilian blow-out with contingencies. The remainder will be used to strengthen the balance sheet so that it is "capitalised for the needs of the business, including for increased working capital".Alumina has said that the short-term funding needs for Brazil should "not cloud the fact that this business will continue to generate significant amounts of cash over the cycle and that we think our dividend policy (a 12-a-share interim payout was previously declared) is appropriate". The need to raise funds also comes as profits are under pressure. Alumina's profit for the first (June) half was down from $284 million to $44million.On an underlying basis (it adds back $108 million for non-cash charges for revaluation of embedded derivatives and retirement benefit obligations), profit was $152 million, down from $271 million in the previous corresponding period. Aluminium prices were higher in the June half, but Alumina's revenue was squeezed by the dollar's rise and cost pressures, particularly energy costs.Metal prices have weakened since, although there has been an offsetting fall in the dollar.LINK? Track aluminium prices at www.kitcometals.com
© 2008 The Age
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