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Tiwai Point smelter profit halves in 2016

NZ Newswire logoNZ Newswire 30/05/2017 Pattrick Smellie

Weak global aluminium prices saw underlying profit more than halve to $24 million in 2016 at Pacific Aluminium's Tiwai Point aluminium smelter.

Only a consistently weaker New Zealand dollar cushioned the smelter, which made a $54m underlying profit in the previous year when prices had already tumbled to historic lows, from "aluminium prices which languished at around US$1605 per tonne," New Zealand Aluminium Smelters chief executive Gretta Stephens said in a statement.

Underlying profit includes the impact of non-cash movements in the value of the smelter's contracts for electricity supply with Meridian Energy.

On a statutory net profit after tax basis, the profit fall was more dramatic, falling from $173m in 2015 to $67m in 2016.

The result was achieved on total revenues of $684m, compared with $745m the year before, despite producing more metal in 2016 than 2015.

Aluminium prices have improved somewhat this year, trading at around US$1950 a tonne at present. The company declined to give an outlook for 2017 earnings.

An energy sector analyst for Woodward Partners, John Kidd, last month described the smelter as facing a "deeply favourable cocktail" of factors this year.

These included improved global prices, higher premiums for the Tiwai Point smelter's top quality output, low input costs because alumina costs had not risen at that time to reflect higher metal prices, and "flat" energy costs.

However, Ms Stephens said the smelter's "modest profit" was "swamped by transmission costs", reprising the company's long-held complaint that the smelter, which uses around one-seventh of all the electricity produced in New Zealand, should not be contributing as much as it does to parts of the national grid that it does not use.

The Tiwai Point smelter is one of five ageing Australasian smelters that its majority shareholder, Rio Tinto, earlier this decade placed into a separate vehicle, Pacific Aluminium, with a view to their sale. Buyers did not emerge.

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