Alro reports net profit of USD 8 million for the first quarter of 2009

Fri, 15/05/2009 - 00:00

Financial highlights

• Turnover of USD 118.7 million
• Net profit of USD 8.3 million

Operational highlights

• Primary aluminium production of 56,000 tonnes
• Production of flat rolled products of 6,000 tonnes

Outlook 2009

• Budgeted turnover for 2009 of USD 374 million
• Budgeted net profit for 2009 of USD 22 million
• Investment programme of approx. USD 6 million in 2009, pursuing projects started in 2008
• Continue rigorous cost reduction programme, including downsizing of personnel

Slatina, 15 May, 2009 – Alro SA (BSE: ALR), the largest aluminium producer in Central and Eastern Europe, today announces the stand alone results for the first quarter ended 31 March 2009. The Company reports a net profit of USD 8.3 million, compared to a loss of approximately USD 15.8 million, registered in Q4 of 2008. Alro’s turnover for Q1 2009 was USD 118.7 million, compared to a USD 153.5 million turnover in Q4 of last year. The Company’s total primary aluminium production for Q1 2009 was of 56,196 tonnes (Q4 2008: 70,422 tonnes) and production of flat rolled products amounted to 6,076 tonnes (Q4 2008: 6,045 tonnes).

The financial results for Q1 of 2009 are a direct result of the cost reduction plan implemented by the Company last year which focuses on core activities and services, relevant business assets and highest levels of product quality and short delivery times. The Company reduced raw material costs and renegotiated contracts with suppliers, where appropriate, re-used as much scrap aluminium as possible and cut down administrative expenses. Furthermore, it reduced aluminium production in order to adjust its output to the international aluminium demand. All the measures taken have resulted in a reduction of production costs by approx. 25%, per tonne of aluminium.1

The decline in demand and price in the aluminium market continued in the first quarter of 2009. Prices fell from USD 1,830/tonne on average in Q4 of 2008, to a low of USD 1,250/tonne in February 2009, stabilising at around USD 1,400/tonne in April 2009. As a result, Alro is closely monitoring the international aluminium market, continuing to implement its cost reduction plan and is prepared to take further measures if the situation demands it.

For 2009, Alro budgeted a production of electrolytic aluminium of 201,225 tonnes, 64,000 tonnes less than last year’s actual output. This reduction is mainly a consequence of the shutdown of one pot line, implemented at the end of 2008.

Alro budgets a turnover of USD 374 million for 2009 and a net profit of USD 22 million. This year, the Company will continue investments started in 2008, which are budgeted to reach approximately USD 6 million. Alro is continuing the upgrading work on the Cold Rolling Mill, finalising the construction of the alumina silo and the modernisation of the heating system in the plant. Furthermore, the Company is continuing with the implementation of the aero programme. Last year, Alro received NADCAP certification (National Aerospace and Defence Contractor Accreditation Programme), recognising that Alro’s processes conform with the rigorous international requirements of the aerospace industry.

With the planned capital expenditure programme for 2009, overall investments made in Alro between 2002 and 2009 total USD 254 million.

The 2009 cost reduction programme also includes a cutback in personnel. The Company aims at reducing staff through three methods. Alro will continue implementing the voluntary redundancy programme, whereby employees receive a financial compensation package. Further outsourcing of none core activities will also result in lower number of personnel going forward. A third measure to be implemented, depending on the results of the first two, would be compulsory redundancies, fully respecting relevant legal obligations.

Commenting on Q1 2009 results, Marian Nastase, Vice President of the Board at Alro said:

“Alro has taken and will continue to take all the necessary measures, although some of them painful, in order to maintain the Company’s viability under the most difficult market conditions. We have taken drastic decisions to ensure the Company quickly adapted to the slowdown of the international economy. Since the outlook doesn’t indicate a major change in demand from our main customers, carmanufacturers or building companies, we are taking further measures to reduce costs. We understand the responsibility we carry towards our shareholders, employees and local community and our main objective is to implement a plan that allows Alro to overcome these unusually hard times.

We will keep focusing our efforts and resources on high added value processed products and on meeting customers’ demand in terms of quality and delivery periods. We are continuously monitoring the international aluminium market and are prepared to adapt to any changes that may occur. Having a good level of investment in the business so far, range and quality of products, as well as a strong programme to reduce costs, we are confident the Company is well positioned to overcome the downturn and to increase output once demand picks up."

Note
1In March 2009 compared to December 2008