EGA posts net income of AED 1.2 billion ($325 million) with strong operational performance amid challenging market conditions

World’s largest ‘premium aluminium’ producer continues to increase production and sales of value-added products, maximising the value of its production

Financial highlights of 2018

  • Net income of AED 1.2 billion ($325 million), a decrease of 64 per cent from AED 3.3 billion ($900 million) in 2017, driven by higher raw material prices
  • Adjusted EBITDA of AED 4.4 billion ($1.2 billion), a decrease of 35 per cent from AED 6.6 billion ($1.8 billion) in 2017
  • Adjusted EBITDA margin of 18 per cent compared to 32 per cent in 2017
  • Revenue of AED 23.5 billion ($6.4 billion), an increase of 14 per cent from AED 20.5 billion ($5.6 billion) in 2017 driven by higher sales volume, higher benchmark price and product premiums and higher volume of value-added products
  • Distribution to shareholders of AED 1.1 billion ($300 million)

Operational highlights of 2018

  • Record production of 2.64 million tonnes of cast metal, exceeding 2017’s 2.60 million tonnes and retaining EGA’s position as the third largest producer of primary aluminium in the world (excluding China)
  • Value-added products or ‘premium aluminium’ sold to 340 customers in 53 countries and increased by 161 thousand tonnes, to a record 2.3 million tonnes. EGA continues to be the world’s largest ‘premium aluminium’ producer ­
  • Sales to local customers increased to 275 thousand tonnes (2017: 268 thousand tonnes) and continues to represent about 10 per cent of total production
  • Strong progress on delivery of strategic upstream growth projects: Al Taweelah alumina refinery in Abu Dhabi and the Guinea Alumina Corporation bauxite mining project in the Republic of Guinea. Both projects are expected to start production in 2019
  • Aluminium Bahrain’s new expansion project, which uses EGA developed smelting technology, began production, in a milestone for the development of a UAE knowledge economy

United Arab Emirates: Emirates Global Aluminium, the largest industrial company in the United Arab Emirates outside oil and gas and the world’s largest ‘premium aluminium’ producer, today reported net income of AED 1.2 billion ($325 million) for 2018, a decrease of 64 per cent compared to 2017 mainly due to higher raw material prices and despite strong operational performance including record production amid challenging market conditions.

EGA’s revenue increased to AED 23.5 billion ($6.4 billion) in 2018, compared to AED 20.5 billion ($5.6 billion) in 2017. The increase in revenue was driven by higher sales volumes, higher benchmark price and product premiums and an increase in value-added product sales by 161 thousand tonnes to a record 2.3 million tonnes.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortisation (adjusted EBITDA) stood at AED 4.4 billion ($1.2 billion), a decrease of 35 per cent from AED 6.6 billion ($1.8 billion) in 2017. EGA’s adjusted EBITDA margin for 2018 was 18 per cent (32 per cent in 2017). The reduction in adjusted EBITDA was due to higher raw material prices in 2018, mainly alumina where EGA procures 100 per cent of its requirement from third party suppliers.

EGA’s exposure to raw material market prices will be reduced significantly once EGA’s alumina refinery in Abu Dhabi and bauxite mining project in the Republic of Guinea start-up and reach full production.

Al Taweelah alumina refinery is expected to meet some 40 per cent of EGA’s alumina needs once fully ramped-up. The Guinea Alumina Corporation bauxite mining project is expected to produce 12 million tonnes per year of the ore from which aluminium is derived.

Both projects are set to begin production this year.

EGA achieved record cast metal production of 2.64 million tonnes in 2018, up from 2.60 million tonnes in 2017.

EGA’s sales of value-added products were a record 87 per cent of total sales. Value-added products, or ‘premium aluminium’, attract considerably higher premiums over LME prices than those achieved by standard aluminium and enable EGA to maximise the value of its production.

EGA sold value-added products to 340 customers in 53 countries in 2018 and remains the world’s biggest ‘premium aluminium’ producer­.

Just over 10 per cent EGA’s production was supplied to customers in the UAE, serving the needs of the UAE’s downstream fabrication sector. EGA sold 275 thousand tonnes of metal to customers in the UAE in 2018, compared to 268 thousand tonnes in 2017. This included sales of hot liquid metal to customers located near EGA’s Al Taweelah smelter in Abu Dhabi.

EGA distributed AED 1.1 billion ($300 million) to its shareholders in 2018.

EGA recently closed a $6.5 billion corporate debt transaction, taking advantage of strong lending market conditions. This refinancing of EGA’s corporate debt optimises EGA’s capital structure, reducing the cost of debt, creating more flexibility for repayment, and aggregating debt at the EGA level.

Abdulla Kalban, EGA’s Managing Director and Chief Executive Officer, said: “The aluminium industry is going through a challenging period with higher prices for our raw materials and lower benchmark prices for finished metal. This is reflected in our financial performance for 2018, although EGA achieved record production and value-added product sales and continued our strong focus on cost control and operational efficiency.

“Our strategic upstream growth projects, which will significantly reduce our exposure to volatile raw material prices, are nearly complete and will both begin production this year.

“During 2018, two of our colleagues lost their lives in an industrial incident in Jebel Ali, which is unacceptable to everyone at EGA. We investigated this incident thoroughly and took strong action across our business to address all its root causes.”

EGA’s underlying operational safety performance compared favourably to global industry benchmarks in 2018. EGA’s Total Recordable Injury Frequency Rate in 2018 was 1.27 per million hours worked, compared to 1.53 in 2017. The global average Total Recordable Injury Frequency Rate in the aluminium industry in 2017 was 5.3 per million hours worked, according to the International Aluminium Institute.

EGA recorded three Lost Time Injuries in 2018 with a Lost Time Injury Frequency Rate of 0.12 per million hours worked, compared to 0.04 in 2017.

Al Taweelah alumina refinery is in the final stages of commissioning and first alumina is expected during the first half of 2019. The project has a total budgeted project cost of approximately $3.3 billion.

Construction at GAC, EGA’s bauxite mining project in Guinea, is more than 85 per cent complete. First bauxite exports are expected during the second half of 2019. The project has a total budgeted cost of approximately $1.4 billion. Bauxite from the project will be sold to third party customers around the world, creating a new revenue stream for EGA and a synthetic hedge for EGA’s purchases of bauxite for Al Taweelah alumina refinery.

During 2018, EGA’s shareholders - Mubadala and Dubal Holding - agreed to form a joint venture to develop a new power plant with a capacity of over 600 megawatts at EGA’s site in Jebel Ali. EGA will buy power from the joint venture for 25 years once the facilities are operational. The new facilities, which include the UAE’s first combined cycle H-class gas turbine, will improve the efficiency of power generation for EGA’s aluminium smelting, reducing environmental emissions and natural gas consumption.