Exports give Comalco a bumper year

By BRIAN FALLOW

Comalco New Zealand made a bumper $166 million after-tax profit last year, its best result since 1988 and nearly double 1999's $87.9 million.

Comalco NZ, whose ultimate parent company is RTZ, owns 79 per cent of the Tiwai Point aluminium smelter, which last year turned about 15 per cent of New Zealand's electricity production into export sales of $1.1 billion.

Executive director Kerry McDonald said: "Such results are essential in this cyclical business to boost the average level of profitability."

Comalco NZ lost money in five of the past 10 years.

The latest result represents a return on shareholders' funds of 41 per cent. The average for the past decade was 17.7 per cent.

The result mainly reflected higher world prices for aluminium.

Comalco's revenues were $992 million last year, up 37 per cent on 1999.

The increase reflected a 0.5 per cent rise in volumes, a 12.5 per cent jump in average aluminium prices and the lower exchange rate.

But the boost from the weaker dollar was offset by an increase in import costs and its impact on a $US180 million debt on Comalco NZ's balance sheet.

With US industrial production having fallen for four months in a row, there were clearly risks to the metal price. "But overall, the outlook is pretty reasonable," said Mr McDonald.

Normally, lower prices and rising stocks in the aluminium industry were early indicators of a downturn.

"But we are not seeing either of those effects."

One factor relieving pressure on the market is the Californian power crisis. Much of the US smelting capacity is in Washington state and Oregon, where producers are scaling back production and reselling electricity to Californian utilities.

Domestically, life under the Employment Relations Act was a case of "so far, so good," Mr McDonald said.

He said smelter management had held constructive discussions with various union representatives.

"It is an ongoing risk, but the view given to me is that the trade union movement is interested in constructive engagement, within the framework of the act. We have not seen any signs of anything other than that."

Under a 1995 voluntary arrangement with the Government, Comalco agreed to cut carbon dioxide emissions per tonne of aluminium to 4 per cent below 1990 levels by last year.