Alro reports a 44 percent hike in net profit for 2011, with results influenced by aluminum price cut and utilities costs hike
Aluminum producer Alro reports a turnover of RON 2.24 billion in 2011, up from RON 1.81 billion in 2010. Its net profit for 2011 increased to RON 230 million from RON 159.78 million in 2010, in particular due to favorable market conditions during 9M 2011.
February 2012
Alro also increased overall investments from about RON 27 million in 2010, to over RON 85 million in 2011.
However, the financial results were negatively impacted by both international and local factors during the last three months of 2011. As a result, Alro’s net profit for Q4 2011 decreased to RON 7.61 million on turnover of RON 538.5 million, from net profit of RON 28.32 million on turnover of RON 475.53 million in Q4 2010.
The 70 percent decrease in profit for Q4 2011, compared to Q4 2010, was the result of two main factors: the decrease in the price of aluminum on the London Metal Exchange and the increase in utilities costs, derived mainly from the acquisition of electricity from the spot and balancing market.
At the international level, the aluminum price on the LME increased to as much as USD 2,800/ton in 2011, from a peak of USD 2,450/ton, in 2010. Moreover, the lowest price available in 2011 was above USD 1,900/ton, compared to 1,800 USD/ton in 2010.
Besides the decrease in the price of aluminum, Alro dealt with a local factor with significant impact of the Q4 2011 results – the price of electricity, determined by the draught. Due to the Force Majeure declared by Hidroelectrica, in Q4 2011, Alro received 50 percent or less of the required electricity from the power producer. As a result, Alro was forced to purchase a significant quantity of energy on the Day Ahead Market and from the Balancing Market. These are short term, unpredictable supplies of energy that typically incur high costs.
As a result, the costs of utilities increased by almost RON 49 million, in Q4 2011, compared to Q4 2010, and by an overall RON 192.53 million in 2011, compared to 2010.
In order to ensure long-term viability of its business, Vimetco, Alro’s majority shareholder, continues its efforts to become energy independent in Romania. At the end of 2011, Vimetco Power Romania finalized the first step of the bidding process for the general contractor for its own power plant in Tulcea. It is anticipated that the project for the power cogeneration plant of 250 MW at Alum Tulcea will have the financial support of EBRD and commercial banks.
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