This ASX 200 materials share is ‘very attractive’ after falling 24% so far this year: expert

A man reacts with surprise when her see a bargain price on his phoneA man reacts with surprise when her see a bargain price on his phone

The Alumina Limited (ASX: AWC) share price has struggled this year, but could it have better days ahead?

This ASX 200 materials share has slid nearly 24% year to date to the current share price of $1.425. For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has dropped 11% year to date.

So what could be next for Alumina in the future?

What’s the outlook for this ASX 200 materials share?

Alumina invests in alumina and bauxite via its 40% stake in Alcoa World Alumina and Chemicals (AWAC). Pennsylvania-based Alcoa Corp (NYSE: AA) holds the remaining 60% stake. AWAC is the largest alumina company in the western world.

Allan Gray portfolio managing director and chief investment officer Simon Mawhinney believes Alumina is “very attractive” at the current share price, despite energy prices.

Speaking at an investing webinar this week, Mawhinney said: “Alumina typically is effectively hedged for high energy prices… I think it’s very attractive at these prices.”

On Thursday, Alumina provided an update on Alcoa Corp’s quarterly earnings. AWAC’s cash margin leaped to $99 per tonne in the second quarter of 2022. This was up from $88 per tonne in the previous quarter. Underpinning this result, was a higher realised price for alumina.

Commenting on the results, CEO Mike Ferraro said:

Net AWAC distributions for the first half of 2022 were $162 million, a $25 million increase over the previous corresponding period.

Alumina Limited has received further net AWAC distributions of $39 million since the end of the second quarter.

Ferraro added the outlook for the alumina market is positive in the medium term, noting growth in aluminum metal consumption amid de-carbonisation is positive for the alumina industry.

However, he said many producers faced cost pressures in the first half due to Europe and China supply disruptions.

This led to higher energy and caustic soda prices. As a result of these energy prices, AWAC will cut production at the San Ciprian refinery in Spain by 15%. This is effective immediately.

Alumina share price snapshot

The Alumina share price has lost nearly 10% in the past year, while it has shed almost 7% in the past month. However, this week, the company’s shares have gained 2.5%.

This ASX 200 materials share has a market capitalisation of about $4.1 billion based on the current share price.

The post This ASX 200 materials share is ‘very attractive’ after falling 24% so far this year: expert appeared first on The Motley Fool Australia.

Should you invest $1,000 in Alumina Limited right now?

Before you consider Alumina Limited, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Alumina Limited wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

See The 5 Stocks
*Returns as of July 7 2022

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/saErICS

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s