ALRO posts net profit growth in first half of 2020 despite pandemic

ALRO, one of the largest vertically integrated aluminium producers in Europe, measured by production capacity, announces today its consolidated financial results for the six months ended 30 June 2020. The Group’s turnover registered a slight decrease mainly due to market conditions that affected all players in the aluminium industry and due to the crisis caused by the COVID-19 pandemic.

ALRO Group’s net profit was around RON 254 million in H1 2020 (H1 2019: RON 80 million) and the operating result (EBIT) increased to RON 343 million in H1 2020 (H1 2019: RON 166 million) thanks to the fact that the Romanian authorities have approved the implementation of the EU-ETS compensation scheme based on the EU decision and thus the high invoice for the energy was partially compensated.

“The earnings for H1 2020 were affected due to a combination of factors, lower LME prices on international markets and impact of COVID-19 over the demand levels, partially mitigated by the efficiency of our operations and previously implemented cost-savings measures. Moreover, recovery signs are already visible in the market, the LME quotations on the international markets show in H2 2020 an upward trend and steady levels above 1,650 USD/tonne. Through these developments and by implementing even stricter controls and savings measures to improve the cash-flow, increasing our competitiveness through human capital, integration of state-of-the-art technologies and by providing high-quality and value-added products, we are confident that we can maintain the long lasting relationships with our customers while attracting and building new ones”, said Marian Năstase, Chairman of the Board of Directors, ALRO. “In the context of the new requirements of the European Green Deal, we will focus on the products mix for increasing the high and very high value-added products, continue to invest in energy efficiency projects and to direct capital towards long-term environmentally sustainable investments having innovative technology with the aim to remain a viable choice for all investors that are interested in green investment opportunities “, added Marian Năstase.

In H1 2020, the aluminium industry faced a drop and reported an average of 1,595 USD/ tonne from an average of 1,791 USD/tonne in 2019; however, from 1,450 USD/tonne in April and May, LME bounced back to quotations of over 1,650 USD/tonne in July 2020.

In H1 2020 the global primary aluminium market was affected by a surplus of capacity and overloaded inventories, and thus the primary aluminium consumers such as rolling mills and extrusion plants have faced the falling demand for their products, reduced or suspended operations. While the downstream and end-use aluminium sectors have been closing production units, aluminium smelters have generally continued to operate. Moreover, the two main market segments for aluminium industry, aerospace and automotive, have been strongly hit by COVID-19 pandemic, effects which have been translated in the Company’s revenues.

Since an early stage of the COVID-19 pandemic outbreak, ALRO has implemented complex protocols and procedures in coordination with central and local authorities and compliance with the recommendations of the World Health Organization for industrial sites. Thus it managed to ensure the health of its employees, preventing infections and securing a continuous supply chain for its business partners and clients. Besides this, ALRO has tested its most exposed employees for COVID-19 and has its own healthcare office, open 24/7 to monitor its staff’s health.

The Group’s consolidated sales in the first half-year of 2020 were of RON 1,360,942 thousand, lower by 9.6% compared to the level reported in the similar period of 2019 (respectively RON 1,506,218 thousand), mainly due to the unfavourable market conditions and due to the COVID-19 pandemic crisis. ALRO’s sales were of RON 1,222,845 thousand in H1 2020 (H1 2019: RON 1,330,783 thousand).

The Group’s Net Result for the first half of 2020 is a profit of RON 253,662 thousand, a higher value compared to RON 79,708 thousand registered in H1 2019 mainly due to the initial recognition of the EU-ETS scheme into the financials and due to the cost-saving actions continued in 1H 2020 even with more caution and with a more rigorous approach. The decrease of stocks for the finished good products and for the main raw materials significantly improved the cash flow. In this way, the Group managed to maintain the business viable and partially to off-set the descending trend of the LME quotations and decreased levels of demand caused by COVID-19 pandemic lockdown while maintaining as scheduled the obligations towards its financiers.

ALRO Group’s sales of primary products in volume terms increased to 65,883 tonnes in H1 2020 from 65,155 tonnes in H1 2019 due to wire rod sales higher by 2,600 tonnes as ALRO remains one of the first suppliers in this competitive market, being the biggest producer of aluminium wire rod in Europe. Sales of processed products in volume terms slightly decreased to 53,605 tonnes in H1 2020 from 54,853 tonnes in H1 2019 mainly due to lower coils as the most affected industries by the COVID-19 pandemic were automotive and aerospace. However, the extruded products showed significantly increased levels, i.e. by 18.7% in H1 2020 compared to the similar period of 2019 mainly due to deliveries of profiles to the solar panels market.