Aluminium Bahrain B.S.C. (ALBH) Earnings Call Transcript & Summary

So without further ado, we are very pleased to be with you today. On behalf of Aluminum executive management, the CEO, Mr. Ali Al Baqali; the Chief Financial Officer, Mr. Bryan Harris; my colleague, Ahmed Abdulqader, Finance Manager and IR team led by Mr. Satyan Laxman. My name is Eline Hilal, Investor Relations Director, Insurance and Corporate Equity. This is Aluminium Bahrain conference call for Alba's financial results for the year of 2021. I hope everyone has the IR presentation in front of them, and I hope you had the time to go through our golden results. You have received -- you should have received the official press release, the financial statements and the IR presentation. The IR presentation is the same. So we do have 6 sections within the IR presentation. The first section is about the industry highlights, where we give insight about what is happening in the aluminum industry, the highlights, what the company has done over the last couple of months. And then we zoom in into Alba's financial results for the year of 2021. In the last 2 section, we have the industry perspective, where we share our insights about what could happen in the industry. Everything we share in this section is actually from market intelligence, what will happen in Alba for the foreseeable year in 2022. As last section, the appendix, where we are sharing the same insights as in the Section #3 about Alba's Q4 2021 results. And with that, we move into the industry highlights. In industry highlights, all insights and information within this section are taken from CRU market intelligence. So this is not something that we come up with. We refer to CRU in this section. So if we move to Page #5, we note that in the last quarter of 2021 as well as the full year of 2021, there was a very strong market demand fully supported by a V-shaped economic recovery. Moving further, 2021 was a golden year for the aluminum, being the best-performing metal out of energy-based metal. So that was -- 2021 was the best performing year for LME, if we want to compare it since -- last time since back to 2008. We have seen a robust rebound in the global demand supported by strong market recovery and economic activity in smarter. That has seen the consumption go up by 8% year-over-year. We have seen as well a double-digit increase in the world, excluding China consumption, plus 12% year-over-year, and this is led by Europe, plus 13% year-over-year; and North America, 13% year-over-year. With regard to the Middle East, another double-digit increase of 10% year-on-year, supported by higher consumption in the UAE, plus 11%; Bahrain, 9%; and Saudi Arabia, 7%. Chinese consumption, on the other hand, was up by 5% year-over-year, thanks to a good pick-up in its industrial activity. Moving on into the production so that we have a general overview of where the world market is today. The strong market fundamentals that we have in the demand has supported the supply growth by 4% year-over-year. Despite the supported growth of 4% year-over-year when compared to a demand growth of 8% year-over-year, this has left world market in deficit, and this deficit has widened by 2021 with China minus 1.1 million metric tonnes and without China, minus 1.2 million metric tonnes. With regards to what happened in Europe in terms of supply, the European smelting industry was hit very hard, specifically in terms of escalating the gas and power prices. And as a result, several aluminum producers and euros dropped their supply since October '21, and production in Europe has been up by only 1% year-over-year. When it comes to China, the supply in China was 5% year-over-year compared to a demand of 5% year-over-year. And in 2021, China was a net importer of aluminum, and that has helped to narrow the metal surplus outside China. With regards to our [ Middle East ], the supply has seen a modest increase of 1% year-over-year. This is -- that's why the supply in UAE, 2% increase year-over-year and Bahrain supply, which is Alba, by 1% year-over-year. Moving on into the LME prices and premiums. This is Page #7. Aluminum prices break higher on supply constraints due to European power market. As stated previously, the European metal supply was up only by 1% year-over-year. For all the participants, please on the line appreciate if you are on mute so that you can hear us properly. Thank you. The LME cash average for 2021 was $2,475 per tonne, which is up about 50% year-over-year. The LME inventories remained low for December 31, 2020, about 1 million metric tonnes versus 1.3 million metric tonnes by the end of 2020. With regards to premium, premiums were relatively high, and this is always to supply cuts and the higher freight costs. If you check the charts in the bottom of the slide, we will note that major Japanese ports averaged 218 for the fourth quarter, U.S. Midwest, which is the premium for the U.S., has averaged $675 per tonne, while DDP Rotterdam averaged at $322 per tonne. Moving on into the Alumina price. I wanted to bring your attention that the alumina price in Q4 was $383 per tonne, which is about 14% of the LME, price. Today, alumina price is averaging slightly above $400 per metric tonne. In Q4 2021, the LME price averaged 2,764, as you see in chart on Page 8. With that, we move from the industry highlights for what has happened in 2021 in major of the shakers and movers and now we zoom in to what has happened with Alba specifically in relation to the last quarter of 2021. So we start Alba's highlights with what we have [ noted ] in Page 10. So I'm sure you have seen in our previous press releases that Alba has -- we have stated on different occasion that Alba has collaborated with a top-class consultants to develop a fully-fledged ESG road map in line with the Kingdom of Bahrain's objectives in its race towards the Net Zero Emission by 2060. Our CEO was a recipient of the People's First Leader Award in October '21 during the GCC Government HR Awarding Ceremony with respect to one of the initiatives which he has initiated upon his appointment back in 2019. We have launched another plant-wide environmental, social and governance campaign, shaping our future on October 24, 2021. We have also supported Bahrain National initiatives to combat climate change with A Tree for every Employee. We have given a tree for every employee and contractor started from November 16, 2021. We have also one step further by appointing a new acting ESG manager to drive Alba's ESG transformation on the 5th of December of 2021. That person used to be the Head of environment. He has a wealth of knowledge and is fully equipped to lead ESG in Alba. We have also released 2020 sustainability report with independent limited assurance on compliance with the global reporting initiative standards on the November 7, 2021. We have also commissioned our stat for climate treatment plant, the first of its kind in the GCC, and this is the only treatment plan that one of the GCC smelter has, which is Alba. And this fundamental conservation project is the first of its kind and has the capacity to treat up to 35,000 metric tonnes of Spent Pot Lining, which is generated by Alba's Reduction Lines. This commissioning occurred on November 12, 2021, and the plant is up and running and [indiscernible]. Moving on into safety in numbers. This is a very interesting slide. We are very pleased to state that Alba has ended 2021 with 0 LTI, and we have topped more than 20 million safe working hours without LTI. In the chart on your left side, we are giving you our safety performance and numbers for the last 5 years. So if you check our total injuries, we had 105 back in 2017. While in 2021, the total injuries reached to 34. And as I stated before, we have closed 2021 quite strong with 0 LTI and with more than 20 million safe working hours. Moving on into our ESG road map. Our Board of Directors has approved last Thursday, 6 [ Green Energy ] policies for us to focus on and its journey towards the [ SDGs ]. First one is about decarbonization. And with decarbonization, we have [indiscernible] level initiatives which the company will be looking at to improve afforestation and reforestation. The inert anode ate technology provides that we do have [indiscernible] hydrogen to replace gas, carbon capture and storage as well as carbon [ offsets ]. Another major priority is the green energy and aluminum, and with that we have a few initiatives out of which we have the on-site solar. And as you know, Alba [indiscernible] in the last quarter of 2021 to build its solar farm of more than 5 megawatts of power and to collaborate with government. And in this regard, we have [indiscernible] specifically with sustainable energy authority last year and [indiscernible] pipeline. Recently, we have signed an MOU with BAPCO with regards to hydrogen [indiscernible]. Circular economy and secondary aluminum. I have noted in Slide 11, Alba has commissioned the Spent Pot Lining Treatment Plant. This is one of the [indiscernible] of the circular economy and secondary aluminum. And we're very pleased to say that we have [indiscernible] shipment of 200 tonnes of SPL to one of our clients in Thailand. Other initiatives falling under circular economy and secondary aluminum, we do have securing recycled infrastructure and partnering with international recyclers. Employee welfare, one of the major priorities that the company has and the CEO that pays -- he pays a special focus on this priority, is to make sure that our employees and workforce are satisfied to make sure we give back to the community in terms of community support and ESG training as well as making sure we do have equal opportunity employment between men and women in the company as well as promoting diversity and inclusion. A collaboration and partnership. This is more [indiscernible] financing in our relationship with our banks as well as collaborating with [indiscernible] to research and development. Last priority for the ESG road map is about transparency, communications and due diligence, and this is the more of our disclosure in ESG [indiscernible] the FCA life cycle and having proper ESG due diligence for every projects that the company is undergoing. Again, this is a very high level of ESG road map. We will be providing regular update [indiscernible]. Moving on into the operational highlights for Alba. We have closed 2021 with an all-time record in production of [ 1,561,000 ] metric tonnes. And we have registered a higher sales volume of [ 1,551,000 ] metric tonnes despite logistic challenges that we are talking about in the last couple of quarters. Alba proudly made in Bahrain and branching out with a product portfolio of more than 50 countries worldwide. We have launched a recent website also an up close the experience after unveiling Alba's vision, mission and values in January 2021. We have also promoted about 610 employees in 2021, the highest ever achieved in Alba's history based on the master training program, which was initiated back in 2016, Skills Matrix and the Training and Development Program, TDP and Al Jisr Programme which was launched in early 2020. Moving on into the sales breakdown. This is an updated slide from last year. So we are providing you here with our sales breakdown in terms of geographic footprint. We have sold in Bahrain directly 25% to all our local downstream. Asia, we sold 21%, and it's worth noting that Alba has 2 offices in Asia, one in Hong Kong and one in Singapore. MENA, we have sold 20%. MENA sales are managed from Bahrain with our colleagues, Fatema Al-Mohri. In the U.S., we have sold 14%, and we do have a subsidiary in the U.S. out of Atlanta. And in Europe, we have sold 20%, and our offices in Europe are actually in Zurich, Switzerland. In terms of product line, we have achieved 63% value-added products, 63% is between 40% in terms of billets, 16% foundries, 8% slabs, and the rest is between 17% liquid metal, which is sold to our major customer in Bahrain, Midal Cables, and standard ingot about 20% [indiscernible] T-ingots. Moving into Page 15. I will not spend much time on this. I will let the good stuff to be provided by our Chief Financial Officer. I will just mention that this is a golden year for a Alba. Alba has completed its golden jubilee operation in [indiscernible]. And we have also had a golden results from all perspectives, whether it is on the top line, on the bottom line, and on all aspects, and I'm sure you all agree with me, this is something unprecedented in Alba's history. And we would like to say thanks to each and every one with [indiscernible] Alba, whether it is shareholder and investor and analyst, a client, a supplier. And of course, our employee who, without them, we wouldn't have been able to reach these milestones and achievements. At the same time, we are very pleased to say that our Board of Directors has approved a final dividend to be paid after the Annual General Meeting, which is going to be held on the March 7, 2022. The final dividend tranche is $200 million, and that is a 25% dividend payout ratio. If we add [ $20 million ] to the $100 million, which was paid to the shareholders back in November 2021. So for all the shareholders as of the record date, they will be due to see $200 million, 56-point-something Fils for share after the AGM, which is falling on the March 7. And with that, I will branch out the last 2 slides in this section, AL HASSALAH, which is [indiscernible] program, which was initiated in the beginning of 2021. This initiative aims to achieve $100 million by the end of 2022 without accounting the $10 million, which is the one-off time savings in December 2021. We were very pleased to achieve $7.8 million, $60 million target plus 10, which is the off-time savings. And we hope to continue so that we aim to achieve $100 million as recurring savings by the end of 2022. On the pie chart on your right, this is the breakdown by value chain of AL HASSALAH. So as you see, we will be -- the major savings will be our operations, followed by our sales and value-added products. We have some savings coming from our solar power efficiency, which is mainly linked to power station 5, 3 blocks. And of course, logistics optimization coming from our raw material sourcings and others. With regard to Alba share price performance, we have started 2021 with 510 Fils. And we ended the year with 800 Fils on December 30, 2021. The highest share price in 2021 was 816 Fils. And the share price growth over 2021 was about 57% year-over-year. In terms of our operational productivity, we're very pleased to say that our VAP were 63% versus 44% in 2020. In terms of tonnage, this is the highest ever achieved. So it's almost 980,000 metric tonnes out of 1,561,000 metric tonne production. In terms of our headcount, we have increased our internal workforce by 5. So -- to 2021, we have 3,135 internal employees. In terms of hire of labor, we have 1,006 and the total headcount is about 4,141. In respect to the account receivable trend, which I'm sure you can tell you in our balance sheet, the accounts receivable days were 55 days versus 35, and this is linked to value-added products and higher LME price. Inventory days also has increased from 86 in 2020 to 109 for the same reasons, actually because of higher LME price as well as higher raw material price... Net debt EBITDA ratio. Net debt-to-EBITDA ratio was 1.36x in 2021, fully supported by, of course, $1.3 -- $1.6 billion EBITDA and higher LME prices 5.98x in 2020. And with that, I will leave what really matters to our Chief Financial Officer to take you through Alba's results for 2021.

Thank you, Eline. Good afternoon, everyone. It's a pleasure to speak with you today. Just a reminder for any that don't have their microphones unmuted, if you could please mute those. So again, I'm Bryan Harris, Chief Financial Officer. So I'll be taking you through the 2021 results in more detail before handing over to our CEO. Beginning with, as Eline said it, indeed, has been a golden year for Alba with our strongest quarterly and annual results in Alba's 50-year history in revenue, in net income and in EBITDA. So we'll start on Page 21 with the metal sales. So a reminder, the print really shows the progression between 2020 and '21 and shows the major contributing factors to the increase in sales. So you can see it start with $2.8 billion for the year 2020, and it shows the increase to $4.17 billion for 2021. So that's an increase of 48% in dollar terms, an increase of over $1.3 billion. So to break that down for you. [indiscernible], the main contributor was the increase in LMEs. So that helped us by $1.1 billion. Next biggest was on the premium side, which added $188 million. But we also saw increases due to our product mix, which is basically our VAP. So the fact that we shipped less commodity and more VAP contributed 39 million. And we also increased our volume as well by 18 million. So basically, in summary, mainly increases in LME and premiums, but also improvements in our VAP and in our overall volume. So looking at the breakdown in our volume on Page 22. This is actually quite interesting because you will actually see that we pretty much took out 300,000 metric tonnes from commodity and shifted it directly across to VAP. So negative 300 on commodities, positive 300 on value-added products. So that obviously drove a significant part of our additional income. And then we also increased our metal by 10 million. And so really, that gives us the overall difference from 2020 of 1,541 instead of 1,551 for 2021. And then you can see on the chart on the right-hand side, the big jump in terms of our premiums from 150 to 296. That was down to 2 main reasons. One, obviously, we tailwind from the market, the global market, where global premiums increased across all of our regions, but also our internal strategic change from commodities towards value-added products also contributed to that increase in the premiums. So looking at the cost analysis on Page 23. Again, we start with our 2020 cost on the left-hand side shifting to our 2021 on the right-hand side. So the -- obviously, the major increase in the cost side was the increase in raw materials. So that was mainly alumina and Coke and increase in raw material consumption, obviously, with higher sales and higher cost of sales, energy prices. So we have an annual increase up to this year of 0.25 for our gas price. So that accounts for the 40 million in energy price and then some improvements with the -- some of the other raw materials. The plant spending actually was lower than last year. And that's because the ForEx gain. So we obviously had some gains because we have some of our... We obviously have some of our loans in euros. And with the dollar strengthening against the euro, we had a ForEx gain. And so that allowed overall plant spending. So you can see in summary then, although our sales actually went up by about 48%, our direct costs only went up by 7%. So a significant increase in sales at a relatively modest increase and not part of sales. Looking at our business. So this just obviously takes our sales minus the direct cost a bit before 2020 was $455 million. For 2021, it was $1.6 billion. So an increase by almost $1.2 billion or an increase of about 259%. The major difference, obviously, was the additional mid sales of nearly 1.4 billion as well as alumina sales, which was an additional 33 and then the modest increase in direct costs of $168 million. And then like most other industries, we were impacted by increasing freight costs. So the selling expenses increased by $43 million. And the vast majority of that was increase in freight costs, paying more for ships came more for containers. Looking at our cash flow bridge for the year. We opened with $118 million in cash and ended with a cash balance of $248 million. We generated, as you would expect significant cash from operations of $1.6 billion. We had working capital changes of $828 million. So I anticipate that some of you may want more information about that. So as Eline said earlier, there obviously were significant increases in accounts receivable and inventory. So I'll break those for you. The accounts receivable went up for really 3 main reasons. First, for the prices and premiums increasing, you would expect the accounts receivable balance to go up accordingly. So if you're selling to your customers at double the price. Obviously, the amount that they owed you will virtually double as well. So that was the main contributor. The second contributor here is the difference in the payment terms as we've moved from commodities, where our customers would be paying us in cash or in some cases, we had traded paying us in advance and pastures as we shifted to selling more to total customers for high-margin products. Obviously, we trade with them on better terms. And so we have extended more better to [indiscernible]. The third reason is we did have very strong sales in Q4 and in December in particular. So a lot of those dovetails in December, boosted our console [indiscernible] number. Inventory also impeded significantly, and this was mainly as a result of the shift from commodities and traders [indiscernible] in the past, you were getting to traders, the goods would come out of our inventory pretty much as soon as they left our factory gates. Now selling to that customers they effectively go on ship. They go into warehouses and they obviously remain Alba's property through that much longer life cycle, and so the inventory value is higher. And then obviously, with the increasing LME, as I've shown, our raw materials increased significantly and that translates to higher raw material valuations, higher work in progress valuations and higher finished goods valuations. We did have some CapEx $186 million for normal CapEx cash out plus on final payments for line 6 CapEx, then our loan repayments for capital and interest amounted to $318 million extrapolate for the year and payments to shareholders. So that was the interim dividend that was paid out in November, leaving the cash balance of 248 million at the end of 2021. Just to then break down the income statement summary on Page 26. We had an average cash LME for the full year of 2021 of $2,475, compared with $1,702 for full year 2020, an average alumina price of $325. So that was significantly higher than last year. So our revenue went up from roughly $2.8 billion to $4.2 billion. EBITDA from $455 million last year to $1,636 million. And our net profit, as we said, our highest ever from $26 million last year to $1.2 billion this year. So with that, I'll hand over to our CEO, Sir Ali Al Baqali, to take you through the industry perspectives in 2022.

Thank you, Bryan. Before I go to the perspective, I would like to take this opportunity to thank all my executives, all Alba employees for the golden year we achieved in 2021. It was challenging with the profit with the logistics. However, we finished with a good year and despite the aluminum was on higher side. However, we managed our cost, we managed ourselves, and we managed to have the best year in Alba history for the last 50 years, and it's a profit of $1.202 billion, which is great. The industry perspective in 2022. I think the aluminum will continue seeing the higher LME and the premium because of different reasons. One of them is higher energy price in Europe and China. The second thing now that there's a tension political -- geopolitical tension between Russia and Ukraine. And there is a rumor that if there is a sanction on Rusal, for example, the LME price will go up to $4,000 per metric tonnes. These are still any rumor. But I think despite all these issues, even though the market is in deficit and the demand across the globe and mainly in North America is still in a growth mode. And especially the automotive sectors now they are coming back and the demand still continue. And just an update last year just in October, I had a visit to German and to Europe customer and they are fully booked for this year. And if they got the order and in October last year, the delivery for them should be June, July this year, which means they are the longer queue of booking, and this is good for us, which means we have a stability in our selling in this year. China, as I said, it's self-balancing. But we noticed that last year, they are in deficit, and they are net importer now. And I think this will continue this year also as well. LME price, as we specify in our Investor Relation presentation between $2,750 to $3,000. But I say this maybe -- it will move up and today the price is around $3,400 per metric tonne. If you are moving to the raw materials. The raw materials are similar to other raw materials and commodities. There is a slight increase in alumina price, there is a slight decrease in the fluoride, aluminum fluoride. Carbon, which means the Green Petroleum Coke, because the oil price today has reached around $100 per barrel. This also will affect our major raw material like GPC and other liquid rich materials. But I think, overall, the cost compared to the LME price is good for us and our margin is a healthy [ condition ]. If we move to the last section and IR presentation, 2022 Alba priorities. Definitely, our safety, it will lead our all priorities. Definitely, we are going to continue [ Foreign Language ] to push -- to make our employees more self at workplace and to another year with 0 LTI without lost time injuries. And this is not possible. And we always -- we believe and Alba does always in safety, we always -- we have to think like the sky is our limit. As Eline, she said on 10th February in the Board meetings, Alba Board approved our ESG road map that have different initiatives, and we are going to do a campaign first internally to give more awareness to our employees and the people involved directly in this initiative. Then definitely, Eline, she said, that we are going to give an update on a quarterly basis to our investors as well as to our Board of Director. Our production target for this year is very stretched. We are exceeding our capacity, and we are trying as much as we can increase from the existing technology. And we are aiming for this year 1,560,000 metric tonnes. And definitely, AL HASSALAH is one of our main priorities for this year is to close the program with the $100 million savings. Part of our initiatives also we are still continuing screening the market to have an opportunity on upstream as we always update the investors and the Board that we are looking to have at least 1/3 of our alumina requirement to be secured by either a minor joint venture with reputable suppliers or to have a long-term contract on offtake agreement. In marketing, we are still capitalizing in our Certificate of Stewardship. This also pay off our initiative because this year, in terms of the VAP, we are increasing our value-added product from 63%, and we are aiming up to 70% to 72% value-added products. Also, the Board approved to add a Block 4 in our Power Station 5, and this will force and increase our efficiency in power station 5 as well as are in progress and finalizing the bet for the solar farm project, which is around 5 to 7-megawatt. And this will be announced [ Foreign Language ] once we place the order. We're going to announce it [ Foreign Language ] in a bigger press release. The last Board meeting also there was a discussion about having a Line 7 in [ April ]. And we are going to have -- or to issue a pre-feasibility study this year in order to see the viable of Line 7 to go ahead with this good market momentum. By this, we are ending our presentation. And I will leave -- I will let Eline also to lead the question. And thank you very much. And [ Foreign Language ] our result is satisfying to everybody, and we wish this year also, it will be better than last year.

Thank you, Ali. [Operator Instructions]

Okay. Eline, I'm [indiscernible]. I would like to start. I was on mute all the way.

Thank you.

Can I start, Eline?

Go ahead. Thank you.

Okay. Thank you very much, Eline, and congratulations Alba team for the excellent year and excellent results and excellent quarter. And as I said in the beginning of my call, happy Valentine's to Alba. I would like to refer to Page 15. Basically, if you can go to the IR presentation, Page 15, you went very fast on that page. I just want to stress on this number 29, you said 26. And in all cases, I cannot give this number, 26 nor 29 because you're saying final dividend is 200 million. Is this including the interim that you paid? Or this is excluding? Excluding, we are talking about 300 million. If it's including. Then it is 200 million. So 200 million out of 1.2 billion, I don't know how you got this number 29. Can you just shed some light on this, please?

Ali, Alba, I stated very clearly when I have stated about the dividends that Alba has paid and distributed $100 million in November 2021, and I assume you have received your dividend. I said the Board has proposed to pay $200 million, which will be paid after the AGM on the March 10. So if you add 100 million up to 300 million, over 1.2 million, you will have 25% dividend payout ratio.

Okay. So for the year, how much is the payout for the year?

For the year, 25%.

For the year, how much is the payout in sales because what you wrote in your press release is 53.14 sales for the year.

Yes. No. That's not correct. In the press release, we said the Board will propose, the Board has proposed for the shareholders' approval 53-point-something per share for the dividend, which amounts to $200 million dividend to be paid after the AGM. However, in the AGM, the Board will approve in total $300 million, which is equivalent to $79.71 per share, part of which $100 million was paid in November 2021.

Okay. So to agree, we have $300 million, $100 million paid and $100 million proposed for AGM. Okay?

Correct. $100 million paid and $200 million will be paid.

Proposed, we'll see the AGM how it will go. Now about Page 18, if you don't mind. Page 18, I think -- I want to discuss with you the inventory days and the account receivable days and why we did not include in this page the account payable days. Yes, I think there is a typo. You wrote the inventory day twice 2020. So I think there's a typo there. But the account payable days is very important for me. I can see that you have excellent profitability ratios. I can see you have -- you are working on your leverage ratio, okay? But I think there is some issue in your activity ratios, which Bryan has mentioned to us, but your cash conversion cycle there is pressure there, big pressure. So you're expanding your working capital -- your operating cycle and there is pressure also from your account payable terms getting shorter and the receivables getting longer and the inventory is getting longer. So I would appreciate if you can give us some numbers of your accounts payable days. How did this change from 2020 to 2021? Last, what happened in the cash conversion [indiscernible]?

Thanks, Ali. Yes. So I've already given explanations for the accounts receivable and the inventory. So as you point out, the cash conversion cycle has also been affected by the account payable days -- and the 2020 account payable days was 53, and that reduced down to 49 days. The main reason for that is that we had some -- obviously, one of our largest expenses related to gas. And at the end of 2020, we had a payment that we held back for cash just to improve our cash position. And 2021, we were up to date in terms of our payments to our gas supplier. There was also an amount that we had agreed with our gas provider where we would pay them a proportion of what we owed because of the COVID situation, there was -- but it was not a discount, but it was an arrangement where we didn't pay the full amount, but that we would then repay the cash as conditions improved. So we made -- we started making those payments in 2021. So the main reason why the account payable days has reduced is because of the extra amount [indiscernible] in 2020 was reduced in 2021.

Thank you, Bryan. I highlighted the typo in inventory days by 2020. Did you see that?

We've seen this now. Thanks for bringing that to our attention.

Moving on to Page 19. On this page, you have mentioned the green boxes, the cash. I -- so what are you referring to here? I would prefer to see the debt component, the net debt and the EBITDA. So the green now, I can see the debt component, but I can't see the EBITDA. So I want to get to these number, 1.36, 5.98. And then I cannot divide, subtract, multiply. I don't know why you wanted to see the cash component here green. Do you have any idea why is the cash here instead of putting a normal net EBITDA and the EBITDA. Sorry, net debt and EBITDA, so we can give the number that you have. Just about clarity, I think. Maybe you can take a note of that...

Yes. Well, first, the EBITDA, it's very easy for you. For us, you always propose, Ali, and we listen to your proposals. However, one of the reasons we did not change -- we did not put the EBITDA because EBITDA is straightforward, and we've been providing you the EBITDA. And net debt-to-EBITDA trend, usually, if you check the major producers, that's how they build the chart for the debt-to-EBITDA. However, we know you are super smart and you are a certified financial analyst holder, [indiscernible] used to do the calculation. And we are referring here in this slide it was provided to the ratio as it is, which I'm sure if you divide net debt-to-EBITDA, you will get to the same cost.

Okay. Good. I agree with you. Just the last one about the liquidity, okay? When we talk about liquidity. Now I finished the activity with electivity, you said here that you have strong [indiscernible] Page #25, I believe. You have -- 1 minute -- okay you said sound cash position. Sound cash position, you are below $100 million with a balance sheet of $2.5 billion. I think maybe it was substantially cash position, but I don't think it's a sound cash position because you have $118 million and now you have [indiscernible] with all the sales, with all the net profits, but you have this very, very little cash, very, very little cash than what you have. And now from the cash, you are also going to pay us $200 million. So you will be left with $48 million, if my calculation is right. And also, since I'm on cash here, I would like to say that there are big short-term borrowings. And although you are repaying them, but I don't know why you have to borrow this much. This is too much. If you go to cash the statement, which you've not mentioned here, but your financial, we can see that you have availed a lot of loans in 2021. And then you look at there now in your balance sheet, you can see that there is a reduction in your current year liability with banks or current loans. But you have got very up, then you got it down, so there is always a tendency to borrow because of that lack of cash in the business. So this is also some point that I want to highlight.

Eline, well, let me just briefly cover that last slide. Yes. So obviously, as you pointed out, cash balance, $248 million. Yes, we will -- we do have $200 million that we'll need to pay in March. If we've done our cash forecasting and we're very confident that with the cash generation from January, February, we'll have more than sufficient to cover that dividend payment. And then as you point out, our debt position did go up slightly in the first half of the year, then you will see we repaid a significant amount of debt in the second half. So overall, our net debt position while total debt position has reduced significantly from last year and our intention is to continue that. So you'll see further reductions in our debt position going forward. I'll now hand back over to Eline.

Thank you, Ali, for your questions. And we trust we managed to answer you. We will leave the floor to someone else, if you have anything.

Yes, this is Amit Lahoti from Citi.

Yes, Amit, please go ahead.

Yes. Amit from Citi. I would like to touch upon the reason too of working capital increase, which was better terms to the customers. So my question here is twofold. One is the company to generate on customers in providing better terms for higher margins? And second, is it a permanent change or we expect it to return back to the normal levels?

I want to receive that one.

Amit, can you repeat your question because I -- we did not hear it very well.

Okay, sure. So I would like to touch upon the reason to of working capital increase, which was better terms given to the customers. So my question here is twofold. One, is the company too generous on customers in providing better terms? And second, is higher number of days of inventories and receivables per month change or we expect it to get that to a normal level?

Great. Thank you for that question. So that's a good question is will we continue to see that increase. So obviously, we had a major shift to 2021 of commodity to VAP. And yes, we think it's an Alba's best interest to continue to take that forward. So we have plans to further increase VAP. And so again, you will see less sales for cash at low margin and more sales to VAP customers at a higher margin. And so as a consequence, you will see further increases in accounts receivable, assuming LME levels stay where they are. We obviously do work closely with marketing department. So we evaluate the commercial trade-off, and we always make sure that overall, the shift to VAP, any loss in terms of the cost of capital is more than offset by the additional margin that's generated from that extra VAP. So from a commercial point of view, this is overall net positive for Alba.

But it would put pressure on the balance sheet because the cash flow generated would be impacted by this. So I'm sure management would have thought about it but if you could put some more color on how do you see free cash flow going forward for, say, this year?

Yes, you're right. It does put, you could say, required resources in terms of working capital. But where we see certainly 2022, how it will be more than compensated through the increased margin generated from those VAP sales. And as I say we intend to continue with the current trend of actually reducing our net debt.

This is Anoop from SICO. Congratulations to you on a great phenomenal year. I have 2 questions. The first is on the premium that you all earned over the LME in the fourth quarter. If I look at the number, the number that I drive it from there about $400, you all were maybe a little over $150 in the previous quarter. So assuming that a lot of increase the premium is because of...

Anoop, your voice is not clear.

Anoop, your voice is cutting off.

So this is regarding the premium that you earned over the LME in the fourth quarter. So my calculation show roughly around $400 plus a substantial increase quarter-on-quarter. So I'm assuming some of it is because of rise in [indiscernible] premiums and also because of maybe bill premiums going up. Now the fact that you all are guiding for higher value-added shipments in 2022, do we expect this premium to go higher from here from the $400 levels to maybe, say, $500 or something? What should we be modeling for the year based on how you see the market today?

I think the premium trend that's similar to the last fourth quarter, I think despite -- in case something happened between Russia and Ukraine, then definitely, the premium will go up. But otherwise, I think it would be same as the quarter 4 trend.

Okay. But Ali, this big increase in premium in the fourth quarter, is it got to do with the billet premiums going up because I hear that premium...

Correct. Yes, yes. Billet, the premium is the majority of the height in the premium, correct. You are right, the billets.

Okay. The second question is on, you mentioned that you all are possibly looking at the idea of a Line 7 and PS5 Unit 4, what is the business scale for this...

We couldn't tell you the last things you didn't...

Yes. So the question is regarding this expansion, possible expansion that you all are contemplating on Line 7 and on the PS5. What is -- I mean, how do you see the business scales for this long term? So One thing is [indiscernible] short gas, we don't really have the kind of gas resources for this. And secondly, even the market we look at today, LME is at 3,000, but there is no guarantee that it might be that way down the road. So the thought process behind going ahead...

That's why I know your question is valid. That's why we are going to intend to do the pre-feasibility study. A pre-feasibility study will study and to evaluate either Line 7 will be viable or not. And it will look at all the angles. For example, the gas availability, the gas contract everything, the LME price [indiscernible] everything if you look at this pre-feasibility study. I think this is the right time now to do this feasibility study because we are -- the demand for the few years is [indiscernible]. I do know that if we go ahead with Line 7, it will not take 1 or 2 years, at least 4 to 5 years till you finish Line 7, for example. That's then studies, not necessary we will do it tomorrow or after tomorrow. Study to evaluate it and this is exercise you are doing it every time.

Yes, I mean, this is not a new thing.

Anoop, this is pre-feasibility study [indiscernible]. This is pre-feasibility study. The official feasibility study will come later on provided to believe...

Positive outcomes of the pre-feasibility study.

Correct.

Okay. And any visibility on the gas pricing mechanism beyond 2020. I think this year, your [indiscernible] will reach to $4, but anything beyond that, that you have an idea of...

For the price, as you said, this year, we are going to pay $4 in April, okay? But for the supply, we have couple of yields to come. I think up to 2025, we have [indiscernible] okay, 2024, something like that. But the price is still we have 1 year to run, and there is a high-level discussion to have renewal of the contract.

I think if we have no more questions, we will end the call -- and in the event...

Eline [ Foreign Language ] conference call. And I wish that you have benefit of Zoom for better visualization and better audio. Actually, I had a bigger problem in hearing all the chart. It was really -- voice is kind of broken. There is interference between, there were noises in the background. And a company like Alba, I think, [ Foreign Language ].

Well -- thank you on this observation. We are actually looking [indiscernible] for the call. And I just want to say we don't have Zoom. Zoom is not supported by Alba. We rely on Microsoft Teams and Microsoft teams we tested it, and it's not really good. So that's the facility that we currently have, but your point is taken.

Team is fine. Either team or Zoom [ Foreign Language ] interactivity with audiences, it would be much, much better than just having it on a phone call. And [ Foreign Language ] I did not get all the speech because of voices got broken, interference in voices invoices, many participants. I know that's my observation...

[ Foreign Language ] I will spend 1 hour from my side to take through the IR presentation myself over Microsoft Team [indiscernible]. I will get hold of you by e-mails, and I will arrange for another call via Microsome Teams. Thank you for your patience.

Thank you.