Aluminium Bahrain (Alba) said its second quarter net profit dropped by almost half to 35.6 million Bahraini dinars (US$ 95 million). Lower metal prices and higher gas costs were main reasons for the drop.
The company cited that aluminium prices on the London Metal Exchange dipped close to $600 a tonne when compared with the same period last year, as a reason for the drop, as global demand dropped due to the financial situation. In addition, higher gas costs were blamed. Agreement on gas prices with the government-owned provider are seen as main priorities for the company.
Production for the second quarter inched up 1.7 percent while sales remained stable.
Earlier Alba said it had appointed BNP Paribas to advise on financing options for a proposed US $2.5 billion expansion plan. The new line would add 400,000 tonnes annual capacity to its current production of 881,000 tonnes a year and could be completed by early 2015 as reported by Reuters.
Alba is majority owned by Mumtalakat, the country’s sovereign wealth fund. Albas is also one of the world’s largest aluminium producers and one of the largest industrial companies in the region.
July 30, 2012
Analysis and Forecast: Increasing Risk
The importance of Alba to the Bahraini economy cannot be overstated. The company contributes as much as 8 percent to the country’s GDP as well as employ over 2500 Bahrainis. The company became listed publically in 2010, but continues to be majority owned by the state, through the Mumtalakat sovereign wealth fund.
After the riots of 2011, the Bahraini economy suffered tremendously, with foreign banks leaving permanently or temporarily relocating to other countries in the region. Growth in 2011 slowed down and financial assistance from Saudi Arabia contributed to stabilizing the situation. Alba therefore is Bahrain’s key non-oil contributor to the economy, given its predominantly Bahraini workforce. A deterioration in its performance will have a direct impact on the economy, particularly during a time when the country is facing greater economic challenges and becoming increasingly reliant on Saudi support.
The figure below shows the make-up of the Bahraini economy, showing the contribution of Alba.