IRALCO’s Rising Stars Amid Aluminum Price Hike

EghtesadOnline: Things have changed dramatically for Iran's flagship aluminum producer in a year. Iran Aluminum Company has turned from a loss-making producer to a prosperous company with highly sought-after shares.

News ID: ۷۸۲۶۶۵

21 May 2018

And not much has been done by the company itself to turn the tide. In fact, latest data show production and sales volume have slid year-on-year.

But what matters is that IRALCO has simply sold its goods for more, enough to convert a loss-ridden year into a profitable one.

Company data published on Codal.ir indicate that the company has produced 170,292 tons of billets, ingots and alloys in the last fiscal year (March 2017-18), down 6.77% YOY. It sold 167,783 tons worth 14.59 trillion rials ($347.55 million), down 5.85% in sales volume but up 25.69% in value, Financial Tribune reported.

IRALCO has stepped back on billet and alloy output, as they were down 26.89% and 36.37% YOY to 15,517 and 16,293 respectively, while ingot production edged up 1.9% to 138,482.

And on the sales front, the company is selling less locally and focusing on exports. Billet, ingot and alloy sales were down 26.4%, 16.3% and 20.1%, while ingot exports grew 18.2% to 74,353 last year.

Profits are growing. IRALCO only earned less on billet sales, as it was down 2.64% to 1.43 trillion rials ($34.1 million). Ingot and alloy sales grew 17.1% and 10.6% to 5.37 trillion rials ($127.9 million) and 1.99 trillion rials ($47.3 million) respectively.

Yet ingot exports were the highlight; they grew 54.4% to reach 5.79 trillion rials ($138 million) during the year, 52% of which went to Turkey, Bourse Press reported.

All this has led IRALCO to post 121 rials in profit for each share by the end of the fiscal year, which is close to twice the company's projected profit for the year. It is noteworthy that the company posted 128 rials in losses for each share the year before last.

And this growth was mostly–if not all–due to the rising global aluminum prices. London Metal Exchange aluminum price jumped 52.6% since the start of 2017 to a high of $2,597.5 per ton on April 19. They have dropped about $300 per ton to date, but the April gain was more than enough for rejuvenating IRALCO.

The price hike was mostly due to the April 6 imposition of United States sanctions on Oleg Deripaska and his Rusal aluminum empire, which effectively cut off some 3 million tons of aluminum, or roughly 6% of global supply from the global markets.

Coupled with the sprinting devaluation of rial against the US dollar, IRALCO was in for a good run. Its shares at Tehran Stock Exchange, in fact, have grown 78% so far this fiscal year to reach 2,368 rials.

The sudden price upticks of "ALIR" caused market regulators to freeze the firm's shares more than a few times and ask for explanations, with the latest being on May 16.

IRALCO, however, did not believe there was much to explain. Its Saturday announcement published on Codal.ir said that "similar to previous announcements, so far there have been no fundamental, lasting and significant changes in the company's financial standing", adding that "any significant occurrence will be readily announced".