Australia's Alumina lowers 2007 profit outlook

SYDNEY, July 25 - Aluminium producer Alumina Ltd. cut its 2007 annual earnings outlook on Wednesday to A$490 million ($434 million) due to higher-than-expected refining costs, sending its shares down seven percent. Alumina, which partners Alcoa Inc. AA.N in the Alcoa World Alumina and Chemicals (AWAC) joint venture, said refining costs were expected to rise by $20 a tonne, up from its previous estimate of a $4 rise. The forecast was 14 percent below its 2006 underlying profit of A$569 million, released in February. Alumina did not give a figure for its previous forecast, but said underlying profit for 2007 would be lower than would be derived from previous guidance. The company said the higher costs in 2007 were due partly to the effect of a lower U.S. dollar, which accounted for about $8 a tonne of the forecast cost increase. The Australian dollar has risen sharply against the U.S. dollar in recent months and is trading around 18-years highs. Others factors included strikes at its bauxite operations in Guinea and power outages at the Kwinana and Pinjarra refineries in Australia. Higher freight and contractor costs also contributed, along with lower-than-planned production at Pinjarra. The AWAC joint venture produces alumina from bauxite, which it feeds to Alcoa-run aluminium smelters or sells on the open market. Alcoa owns 60 percent of AWAC and Alumina owns the rest. Alumina shares hit a record high of A$8.80 on July 16, driven by speculation the company could be a takeover target for BHP Billiton following Rio Tinto Ltd.'s $38 billion bid for Alcan Inc. AL.TO. Alumina posted underlying 2006 net profit of A$569 million in February. It said on Wednesday its underlying profit for 2007 than would be lower than derived from previous guidance. Alumina shares were trading down 7.9 percent at A$7.51 by early afternoon in a broader market down 1.1 percent.