Emirates Global Aluminium (EGA), the United Arab Emirates’ largest industrial company outside the oil and gas sector, has reported a significant decline in its annual net profit for 2024. The company’s net profit dropped by 24% to AED 2.6 billion ($707.95 million), down from AED 3.4 billion in 2023. This downturn is primarily attributed to the suspension of bauxite exports from its Guinea operations and the introduction of a corporate tax in the UAE.
Impact of Guinea Bauxite Export Suspension
In October 2023, EGA’s subsidiary, Guinea Alumina Corporation (GAC), faced a suspension of bauxite exports by Guinean customs authorities. Guinea, being the world’s second-largest bauxite producer after Australia, plays a crucial role in EGA’s supply chain. The suspension led to a decline in bauxite exports from 14.1 million wet metric tonnes in 2023 to 10.8 million wet metric tonnes in 2024. Consequently, EGA recorded an impairment charge of AED 1.8 billion ($488 million) on the book value of GAC at the end of the financial year.
Abdulnasser Bin Kalban, EGA’s Chief Executive Officer, stated that the company is actively seeking a resolution with the Guinean government to resume bauxite mining and exports. He emphasized that, in the meantime, EGA is taking necessary steps to secure raw materials for its alumina refining and smelting operations. Despite the challenges, the company remains optimistic about its long-term prospects in Guinea, considering its vast bauxite reserves and strategic importance in the global aluminium industry.
The disruption in bauxite supply has also affected EGA’s cost structure, as the company has had to source alternative supplies at higher costs. Bauxite is a critical raw material for aluminium production, and any disruption in its availability can significantly impact production efficiency and profitability. Analysts suggest that resolving the situation in Guinea is paramount for EGA to regain its competitive edge and stabilize its financial performance.
Introduction of UAE Corporate Tax
The UAE implemented a new corporate tax at a rate of 9% on profits starting from January 1, 2024. This taxation policy has further impacted EGA’s profitability. The company reported that this new tax regime contributed to the reduction in net profit for the year.
Previously, businesses in the UAE benefited from a tax-free environment, which allowed industries like aluminium manufacturing to thrive. The introduction of the corporate tax marks a shift in the country’s economic strategy, aiming to diversify government revenue sources and reduce dependency on oil-related income. While the tax remains relatively low compared to global standards, it still affects profit margins for major industrial players like EGA.
Industry experts note that EGA, like many other corporations in the UAE, will need to adapt to this new fiscal landscape by optimizing operations, cutting costs, and improving efficiency to mitigate the impact of taxation. Some companies may also explore restructuring strategies to minimize tax liabilities while ensuring compliance with new regulations.
Revenue and Market Dynamics
Despite the challenges, EGA’s revenue saw a modest increase of 1.7%, reaching AED 30 billion in 2024, up from AED 29.5 billion in 2023. This growth is attributed to a 5.6% rise in aluminium prices, which averaged $2,392 per tonne in 2024, compared to $2,264 per tonne in 2023. The increase in aluminium prices is linked to geopolitical tensions, energy price fluctuations, and market speculation regarding interest rate cuts.
However, the global aluminium market is experiencing volatility due to trade tensions. Notably, the United States has imposed a 25% tariff on all aluminium and steel imports, affecting major markets for Middle Eastern producers, including EGA. This move has led to shifts in global supply chains, with producers seeking alternative markets and adjusting pricing strategies to remain competitive.
The demand for aluminium remains strong, particularly in sectors such as automotive, construction, and renewable energy. Aluminium’s lightweight properties make it a preferred material for electric vehicles and sustainable infrastructure projects. However, fluctuating energy costs and raw material supply constraints continue to pose challenges for producers worldwide.
Operational Highlights
EGA achieved record production levels across its value chain in 2023. The company’s smelters at Al Taweelah and Jebel Ali produced 2.66 million tonnes of hot metal, marking an increase from 2.65 million tonnes in 2022. Additionally, EGA’s Al Taweelah alumina refinery produced 2.48 million tonnes of alumina in 2023, up from 2.43 million tonnes in the previous year. These production milestones underscore EGA’s operational resilience amidst external challenges.
Despite production growth, EGA has faced rising operational costs, particularly due to higher energy prices and logistical disruptions. Aluminium smelting is an energy-intensive process, and fluctuations in global energy markets can significantly impact profitability. The company has been exploring ways to enhance energy efficiency, including investments in renewable energy and technological innovations to reduce production costs.
EGA has also been focusing on sustainability initiatives, aiming to reduce its carbon footprint and enhance environmental performance. The company has been investing in advanced technologies to improve energy efficiency and minimize emissions. Additionally, EGA has been actively engaging in recycling initiatives, promoting circular economy practices within the aluminium industry.
Future Outlook
Looking ahead, EGA anticipates continued price volatility in the aluminium market, influenced by global economic conditions and trade policies. The company remains focused on operational excellence, cost control, and strengthening relationships with global customers to navigate the challenging landscape. EGA’s leadership believes that aluminium demand will grow significantly over the coming decades, particularly for low-carbon and recycled metal, positioning the company to capitalize on these growth opportunities.
EGA is also looking to expand its market presence by exploring new partnerships and investment opportunities. The company aims to strengthen its position as a leading global aluminium producer while adapting to evolving industry trends. With sustainability becoming a key focus in the metals sector, EGA is likely to enhance its commitment to green initiatives and low-carbon production methods.
In conclusion, while EGA faces headwinds due to external factors such as the Guinea bauxite export suspension and the introduction of corporate tax in the UAE, the company continues to demonstrate operational strength and adaptability. Its strategic focus on securing raw material supplies and enhancing production efficiency will be crucial in mitigating these challenges and sustaining its position in the global aluminium industry. By leveraging its expertise, innovation, and sustainability efforts, EGA is well-positioned to navigate the complexities of the global market and drive long-term growth.
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