Alumina to take hit on account of Alcoa write down

Australian company Alumina is reported to be set to take a $40 million hit on its 2008 earnings after its US partner Alcoa wrote down expenditure pertaining to their joint venture Alcoa World Alumina & Chemicals (AWAC).

The Melbourne-based company Alumina owns 40 per cent of AWAC, which is the largest producer in the world for alumina. The firm has producer refineries in the US, Brazil, Suriname, Jamaica, Spain and Australia. Alcoa, the majority partner, operates the business.

Alumina shares tumbled around 6 per cent to $1.43.

Alcoa is the largest aluminium producer in the US. It booked its first quarterly net loss in six years on account of falling prices and falling demand for the metal. It posted a fourth-quarter loss of $1.19 billion against a profit of $632 million a year ago.

Sales of the New-York based dropped 19 per cent to $5.69 billion on account of the economic slowdown dampening demand for aluminium. Aluminium prices have hit the five-year low mark, with orders from feeding industries such as auto, construction and and appliance manufacturers drying up.

Since June 2008, Alcoa has cuts production of around 750,000 metric tons, measuring around 18 per cent of its global capacity. It announced layoffs for around 13,500 employees for the year earlier this month, and has also decided to eliminate 1700 contractors, while reducing its capital spending for 2009 by 50 per cent. It forecast a loss of $920 million.

Alumina and Alcoa have also put on hold the planned $1.8 billion expansion of the Jamaica refinery, which is said to have resulted in the $40 million write-down to Alumina's full-year profit.