Susan Gordon, Staff Reporter
The Jamalco plant in Clarendon. - FILE
WORLD ALUMINIUM prices are at record levels, but Govern-ment-owned Clarendon Alumina Production Limited (CAP) is taking out short-term loans and advances to 'smooth out' its cash flow, says general manager and chief financial controller Winston Hayden.
Last Friday the Financial Gleaner reported that CAP was projecting a loss of US$2.76 million for the fiscal year 2006/2007. This loss follows an estimated loss of US$9.48 in the previous fiscal year. CAP is in a 50/50 joint venture with Alcoa at the Jamalco plant in Clarendon.
"In order to 'smooth out' it's cash flow over the medium term, the company (CAP) is refinancing its debt on more favourable terms. It has made use of short-term loans and advances in the interim," Mr. Hayden said in a written statement.
He ascribed CAP's financial challenges to the continual rise in record-level oil prices, unprecedented harsh weather conditions and a strike at the end of 2001.
LOSS PROJECTED
"There's a loss projected for 2006/2007 because although the operation is expected to perform well, the cost of oil, the most expensive raw material used in the process, is expected to remain high," Mr. Hayden stated referring to the projected US$2.76 million loss.
In addition, he said the price of caustic soda, another key raw material had roughly doubled within the last year. What seemed to have impacted heavily on CAP's operations according to Mr. Hayden, is the the 'wildcat' strike at the end of 2001 which he said cost the company approximately US$20 million.
He explained that although a level of profitability is expected for the company in the near future owing to favourable market conditions for alumina, CAP will not recover in full in one year. The results of Jamalco's expansion plans which started three years ago to increase the Halse Hall Clarendon refinery production from 1.25 million metric tonnes per annum to 2.65 tonnes will not materialise in time to take the company out of its woes this year.
This expansion plan cost US$77 million in the first stage and another US$1.2 billion ultimately, according to public affairs and communication officer for Jamalco, Brian Doy.
While CAP is expecting losses this year, Alcoa last month reported record profits for its last quarter. Mr. Hayden said Jamalco is a competitive alumina operation rated among the most efficient plants in the world.
HIGH OIL PRICES
Norman DaCosta, a former board member of the bauxite industry watchdog, the Jamaica Bauxite Institute Board, said that blaming the losses on high oil prices is a contrived explanation.
Firstly, Mr. DaCosta said the high prices for alumina of over US$670 per tonne and aluminium of over US$2,700 per tonne on the world market more than compensate for the increase in world oil prices. He said the increases also cover the hike in costs for other inputs such as caustic soda.
And hurricanes should not have been an insurmountable profit barrier either as Mr. DaCosta said it is industry practice to store a stockpile of bauxite in covered domes to last for as long a one month.
