AWC has seen prices rise (alumina ASP) and costs escalate (shipping, freight, electricity, caustic soda). Shown below are costs increasing from low 200’s to now low 300’s.
They are a Q1 cash cost producer, and as such manage to maintain a pretty decent margin, regardless of what’s going on, however, based on current Alumina pricing (~$330) the margin will shrink.
AWC have little to no debt. If China slows (taking commodities with it) or prices correct further (monetary policy, USD etc) or if energy costs continue to add to overall cost pressures, they should be okay.
But the market, given the yield is ~7%, doesn’t want a bar of them, because of the near term margin pressures.
It would appear that much of the supply curve is underwater, at current prices. That is clearly unsustainable, and will lead to significant supply curtailments. We are already seeing many European producers reduce output.
AWC gives us exposure to the longer run EV/green-energy story, e.g. a world that need the lightweight flexible material for electric vehicles, solar modules, wind farms etc, at a very cheap multiple on a through-cycle earnings basis.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.