Emirates Global Aluminium (EGA), the United Arab Emirates’ largest industrial company outside the oil and gas sector, has reported a significant decline in net profit for 2024. The company’s financial results reveal a 23.5% drop in profits, falling to AED 2.6 billion ($707.95 million) from AED 3.4 billion in 2023. The decline is largely 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 2024, EGA’s subsidiary, Guinea Alumina Corporation (GAC), faced a major disruption when Guinean customs authorities halted bauxite exports. Guinea is the world’s second-largest bauxite producer after Australia and plays a crucial role in EGA’s raw material supply chain. This suspension significantly impacted the company’s production, reducing bauxite exports from 14.1 million wet metric tonnes in 2023 to 10.8 million wet metric tonnes in 2024. As a result, EGA recorded an impairment charge of AED 1.8 billion on GAC’s book value at the end of the financial year.
Bauxite is the primary source of aluminium, and disruptions in its supply chain can have far-reaching consequences. The sudden halt in exports led to an increase in procurement costs and forced EGA to seek alternative suppliers to meet its production requirements.
Abdulnasser Bin Kalban, EGA’s Chief Executive Officer, addressed the issue, stating, “We continue to seek a resolution with the Government to resume bauxite mining and exports. In the meantime, we have taken and will continue to take all steps necessary to secure our supplies of raw materials for our alumina refining and smelting operations.”
Introduction of UAE Corporate Tax
A further challenge for EGA came with the UAE’s introduction of a 9% corporate tax on profits, which took effect on January 1, 2024. This new tax regime has affected the profitability of major corporations, including EGA, leading to a reduction in net earnings.
The tax marks a significant shift in the UAE’s business landscape, as the country had long been known for its tax-free environment. Companies now have to reassess their financial strategies to accommodate the additional fiscal burden. While EGA remains a key player in the global aluminium market, adapting to these new regulations has required cost-cutting measures and operational restructuring.
Volatility in Aluminium Prices
Beyond the direct impact of the Guinea bauxite suspension and corporate taxation, EGA has also been navigating volatility in aluminium prices. Global trade tensions, particularly the imposition of tariffs on aluminium exports, have created uncertainty in the market. The United States’ decision to impose a 25% tariff on steel and aluminium imports has further complicated trade dynamics for major suppliers, including the UAE.
Fluctuating demand, geopolitical tensions, and supply chain disruptions have led to price instability in the aluminium sector. While demand for aluminium remains strong, particularly in the automotive, aerospace, and construction industries, unpredictable pricing poses challenges for producers like EGA. To mitigate risks, the company has been focusing on increasing efficiency in production and exploring new markets for its products.
Operational Highlights
Despite these setbacks, EGA has reported some positive operational results, demonstrating its resilience and adaptability. Notable achievements include:
- Adjusted Core Earnings: EGA’s adjusted core earnings rose to AED 9.2 billion from AED 7.7 billion in 2023, driven by higher realised aluminium and bauxite prices, as well as record production of alumina and aluminium.
- Alumina Refining: Al Taweelah alumina refinery, a key part of EGA’s integrated production chain, produced 2.48 million tonnes of alumina in 2023, meeting 48% of the company’s total alumina needs.
- Aluminium Smelting: The company’s smelters in Al Taweelah and Jebel Ali produced 2.66 million tonnes of hot metal, marking the highest production levels in EGA’s history.
Strategic Developments and Acquisitions
In May 2024, EGA completed the acquisition of Leichtmetall, a European specialty foundry. This marks the company’s first strategic acquisition since its formation through the merger of Dubai Aluminium and Emirates Aluminium in 2014. The acquisition aligns with EGA’s long-term vision to expand its global footprint and cater to the growing demand for low-carbon primary and recycled aluminium.
This move is part of EGA’s broader strategy to position itself as a leader in sustainable aluminium production. The global aluminium industry is increasingly shifting towards environmentally friendly and low-carbon solutions, and EGA aims to capitalize on this trend by investing in advanced recycling technologies and sustainable production methods.
Safety and Environmental Initiatives
EGA has continued its commitment to safety and environmental responsibility. In the first half of 2024, the company reported a Total Recordable Injury Frequency Rate of 1.11 per million hours worked. However, the year was marked by a tragic incident on June 17, when a contractor lost his life at the Jebel Ali site. An independent third-party expert conducted a thorough investigation, and EGA has since shared the findings with industry stakeholders to enhance safety measures and prevent future incidents.
On the environmental front, EGA is progressing with its plans to develop the UAE’s largest aluminium recycling plant in Al Taweelah. The project is ahead of schedule, with the first hot metal expected in 2026. Once completed, the recycling plant will have a capacity of 170,000 tonnes of secondary billets per year, supporting the global transition to sustainable and recycled aluminium.
Financial Outlook and Future Prospects
EGA’s financial performance in 2024 reflects the challenges posed by external factors, but the company remains optimistic about the future. The company’s net debt to adjusted EBITDA ratio improved to 1.6x in the first half of 2024, down from 1.8x at the end of 2023. Total debt stood at AED 16.5 billion, with a scheduled repayment of AED 102.9 million made during the period.
Despite current headwinds, EGA’s strong operational performance, strategic acquisitions, and focus on sustainability position it well for future growth. The company is actively exploring new opportunities in high-demand markets while continuing to optimize its supply chain and production capabilities.
Conclusion
EGA’s declining net profit in 2024 underscores the impact of global and regional economic changes, including the Guinea bauxite export suspension and the newly introduced corporate tax in the UAE. While these factors have presented significant challenges, the company’s commitment to operational efficiency, strategic expansion, and sustainability initiatives suggests a strong foundation for long-term resilience and growth in the global aluminium industry.
