EGA 2021 earnings soar to record high amid strong economic recovery

Growing demand for products and rise in global aluminium prices boosted profitability

Workers at the Emirates Global Aluminum plant in Abu Dhabi. Improved operational performance throughout the value chain and a focus on efficiency helped boost EGA's profitability. Rich-Joseph Facun/ TShow more

Emirates Global Aluminium, the UAE’s largest industrial company outside the oil and gas sector, reported record full-year earnings in 2021 as profit surged more than 12 folds with strong global economic recovery boosting demand for its products.

Adjusted earnings before interest, taxes, depreciation and amortisation, or Ebitda, for the 12 months to the end of 2021 more than doubled to Dh9 billion ($2.5bn).

Net profit for the reporting period jumped to Dh5.5bn from Dh445 million a year earlier at the height of the pandemic, which severely disrupted economic momentum.

“There was a strong global market for our metal last year as the world built back better from the Covid-19 pandemic,” Abdulnasser Bin Kalban, chief executive of EGA, told The National on Monday.

"Our record performance is not just because of attractive aluminium prices, we [also] delivered a solid operational performance."

EGA has rebounded strongly from pandemic-driven headwinds and today has "strength from mine to metal". It has an optimised capital structure that will allow it to continue delivering significant dividends to its shareholders in the future and grow its business.

EGA’s earnings were driven by a strong global market for aluminium as economies continued to recover from the pandemic despite continued uncertainties and emergence of new Covid-19 variants. Improved operational performance throughout the value chain and a focus on efficiency also boosted profitability, the company said.

A high percentage of value-added products and increased production at the company’s Al Taweelah alumina refinery and its Guinea Alumina Corporation also underpinned improved earnings.

EGA’s proportion of sales by value-added products or ‘premium aluminium’ rose to 84 per cent of total sales, close to its all-time high, compared to 72 per cent in 2020. Value-added products attract higher premiums over benchmark prices than those achieved by standard aluminium and allow EGA to maximise the value of its primary aluminium production. In 2021, EGA continued to be the world's largest producer of value-added products by volume, the company said.

Production and sales of every commodity in the value chain increased in 2021 compared to 2020. EGA’s average realised London Metal Exchange aluminium price for 2021 was $2,382 per tonne. Its revenue at the end of December jumped to Dh25.5bn from Dh18.7bn in 2020.

"In the shorter term, strong demand has continued in the first quarter of 2022. While like others we are still facing challenges with global logistics, we have adopted new approaches such as break-bulk shipping to overcome them," said Mr Bin Kalban.

Prices of commodities that were on the rise in 2022 in part due to supply chain bottlenecks have seen a further boost amid Ukraine-Russia conflict. Commodities including oil, gas, gold and industrial metals such as aluminium have seen a sharp surge in prices over the recent weeks amid fears of supply disruptions.

Russia accounted for about 12 per cent of global crude oil exports in 2020 and about 10 per cent of total oil product exports, according to Emirates NBD. It supplies 25 per cent of the world's natural gas exports and is also a major producer of industrial metals.

It is the third-largest source of mined nickel ore and a major supplier of palladium and aluminium to global markets. Aluminium, which surged to fresh record last week, was trading 1.09 per cent lower to $3,357.50 a tonne on the London Metal Exchange on Monday.

Despite short-term market volatility, EGA remains focused on "maximising the value of its existing assets by debottlenecking and driving further efficiency”.

“Higher prices for aluminium have prevailed since the world started rebounding from Covid-19, and this demonstrates the strong long-term outlook for our metal as a key material for the development of a more sustainable future," said Zouhir Regragui, chief financial officer of EGA.

"We will take more bold steps to strengthen our own sustainability."

EGA, whose Ebitda margin climbed to 35 per cent at the end of 2021 — one of the highest among industry peers — generated Dh7.5bn cash from operations for the reporting period, up from Dh5.5bn in 2020.

It significantly deleveraged its balance sheet, reducing its senior corporate debt facility by Dh2.7bn to Dh20.3bn. It fully repaid Dh1.6bn project financing for the construction of Al Taweelah smelter. In total, EGA repaid Dh4.4bn of debt in 2021 with its net debt to adjusted Ebitda ratio reaching 2.4 times.

“Our deleveraging trajectory remains very strong, driven by both market conditions and our own efforts to improve Ebitda. As a result, EGA is increasingly well-set for the next phase of our growth journey,” Mr Regragui said.

EGA, which is jointly owned by Abu Dhabi’s strategic investment arm, Mubadala Investment Company, and the Investment Corporation of Dubai said shareholders received Dh735m in dividends in 2021.

The company, which has over 400 customers in more than 50 countries around the globe, sold 2.54 million tonnes of cast metal last year.

It sold 280,000 tonnes of metal to its customers in the UAE, up from 252,000 tonnes in 2020, further growing EGA’s contribution to the UAE economy in line with the target to double the absolute economic impact by 2040.

Al Taweelah alumina refinery exceeded its nameplate capacity by 15 per cent, delivering 2.3 million tonnes of alumina to EGA’s aluminium smelters, making Dh830m contribution to EGA's adjusted Ebitda.

"For me this is truly world class performance," Mr Bin Kalban said.

Exports of bauxite ore from Guinea Alumina Corporation totalled 12 million wet metric tonnes, an increase of 2.3 million tonnes in 2020. GAC’s production, which is mostly shipped to external customers, made EGA one of the largest merchant bauxite suppliers in the world, the company said.