Dubai: Dubai Aluminium Company (Dubal) announced a 101.9 per cent jump in net profits to Dh2.12 billion in 2010 compared to Dh1.05 billion in 2009, a level of growth that commodity analysts say is mainly driven by rising aluminium prices.

Dubal recorded a 25.8 per cent increase in revenue to Dh8.67 billion compared to Dh6.89 billion in 2009.

The company squeezed its unit costs to achieve this result, Abdullah Kalban, President and Chief Executive of Dubal, told Gulf News.

“First, the market was very good. Second, prices increased during the last year and the quality of our product helped penetrate the market and third, we started reducing our unit cost through purchasing, energy saving and optimising our operations,” he said.

The London Metal Exchange (LME) prices increased from $1,900 to $2,350 per tonne in the last year, which also helped boost the company’s performance, he added.

“A good mix of higher production and sales volumes coupled with higher aluminium prices and sustained focus on working capital management resulting in improved cash flow from operations, and strong free cash flows are some of the factors driving this massive growth in net profits,” said Venkatesan Subramanian, Director of Metals and Minerals at Frost & Sullivan.

Output rises 1.5%

Rising commodity prices globally are expected to sustain Dubal’s future profits, he added.

Although it faced some pressure from raw material prices, the company was able to improve its operational efficiency and keep the variable cost of production per unit almost constant, he added.

“Since the output increased by 1.5 per cent, the company was marginally able to leverage on economies of scale. Hence the cost per tonne was almost stable.”
Dubal’s compound annual revenue from 1995 to 2010 increased by 11 per cent.

Profit growth rates rose by 7.9 per cent during that period. The company’s major investments this year was the commissioning of 756 reduction cells in Emirates Aluminium Company (Emal) Phase one, which was completed last year and is ready to produce 740,000 metric tonnes a year starting in 2011.

“The stake in Emal offers the advantages such as operational efficiency arising due to improved bargaining power in raw material sourcing, leveraging marketing network, reduction in overheads, ramp up of production faster due to Dubal expertise and overall planning and operational efficiency,” said Subramanian.

Upstream projects

Dubal’s foreign investments focused on securing raw materials last year. It is now engaged in four upstream alumina projects in various stages of development in Brazil, Republic of Guinea, Cameroon and India.

“These are emerging markets for aluminium products and investments in these regions would help expand geographic market base,” said Subramanian.
Dubal and its partner North Hydro are in a joint venture to develop an alumina refinery for the Dubal smelter by 2013, Kalban said.

The company is not affected by the political turmoil in the Arab world, said Shaikh Hamdan Bin Rashid Al Maktoum, Deputy Ruler of Dubai, UAE Finance Minister and Chairman of Dubal, yesterday at a press conference on Dubal’s annual results.

“The Arab world now is unfortunately in a state of fixing its situation internally. Dubal depends mainly on Europeans and Asian countries more than Arab countries,” he said.

Dubal is planning to produce 1.24 million tonnes this year, Kalban said. It exports 88 per cent of its annual production to over 300 customers in about 45 countries.
The company said its Emiratisation rate was such that 70 per cent of employees at senior management level are UAE nationals while 14.2 per cent of its total workforce were local employees.