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

Good day, and thank you for standing by. Welcome to the Aluminium Bahrain Q1 2022 Financial Results Webcast. This will be hosted by Anoop Fernandes of SICO. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Eline Hilal. Please go ahead.

Thank you very much. I would like to thank everyone for joining Aluminium Bahrain management for its Q1 2022 financial results webcast. This call will be led by the Chief Executive Officer, who will be doing the last 2 section of the IR presentation, industry perspective for the year of 2022, along with Alba priorities for the same year, followed by the Chief Financial Officer, Bryan Harris, who will be conducting the third section of this presentation, Alba's Q1 2022 results, and last, myself, who will be taking you through the industry highlights and Alba's highlights for the first quarter of this year. A special thanks goes to SICO for Mr. Anoop Fernandes for hosting the call for Alba. Without further ado, I kindly ask you please put your phone on mute as we speak -- as we go through the presentation. So first, we will start with the industry highlights. For those who are not aware, Alba relies on lots of market intelligence, but specifically for the purpose of the IR presentation, we rely on CRU Market Intelligence. So in these couple of slides, the numbers that we have used in the presentation can be found in CRU. Moving on into the global consumption. I'm sure everyone was -- is watching the news these days in respect to the Russo-Ukrainian War. Today, we're seeing economies of war that has affected the world consumption. Today, the world consumption has been flat, plus 1% year-over-year increase versus Q1 2021. Having started to recover from COVID-19 pandemic, the war has raised new challenges when it comes to the commodities and have created mixed market sentiment as we have all seen in the last couple of months. The market for commodities, including aluminium, foreign exchanges, equities and debt are all adjusting to the shock of the war and the uncertainty that the market is currently experiencing. We also are of the opinion that there will be severe economic consequences for Ukraine and Russia and potentially the global economy. With respect to the Middle East, the demand was up by 5% year-over-year, and it was supported by higher consumption in the Kingdom of Bahrain, plus 7% year-over-year, UAE, plus 5%, and the Kingdom of Saudi Arabia, 5% as well. For the United States, consumption was up by 3% year-over-year, supported by a surge in the construction and transport sectors despite higher cost and labor shortages in the market. For Europe at the energy pricing, the surging in energy prices and the prospect of potential supply disruption in the energy have weighed on the economic activity with auto sector feeling the mostly the heat in the supply chain stream, that has led to a consumption going up plus 2% year-over-year. Last for China, in the last couple of months, we have seen an increase in COVID-19 cases and slowdown in the property sector, together with the global impact of the Russia-Ukraine conflict has prompted the government to loosen the fiscal policy. And because of that, we have had a flat consumption, almost 0.5% year-over-year increase versus Q1 of 2021. Moving on into the world market supply. The world market supply was down by 2% year-over-year. Why? The war in Ukraine have highlighted many differences and strong differences between China and the rest of the world, with the LME and the Shanghai future price moving in opposite direction. And that's why we see that this has reflected on the supply growth in China, which was down by 2% year-over-year. Middle East supply was up by 4% year-over-year, and it's led by Bahrain supply, which was up by 1% and UAE by 7% year-over-year respectively. Europe is leading the world ex China output with its production going down by 5% year-over-year as a result of higher energy prices. The world market deficit softened on slower global demand growth with China and without China. So we're seeing today a minor deficit with China and without China. Going now into the LME price and premium. The strong aluminium fundamentals, which we have seen in the last couple of months in the market have supported a high -- the highest quarterly average LME aluminium price since 1988. LME cash averaged $3,267 per tonne, and that was up by 56% year-over-year with the highest almost touching $4,000 per tonne on the 7th of March and the lowest almost $2,800 per tonne on the 4th of January. The LME inventories remained low at about 0.6 million metric tonne as of the first quarter of 2022, and the inventories were down by more than 65% year-over-year. European and the U.S. premia have reached fresh all-time highs, unlike the MJPs -- MJP premium, and you can see that in the bottom chart as you see in front of you on Page #7. Midwest have reached $781 in Q1 2022 with DDP Rotterdam $480, while the MJP premium have gone down from $218 in Q4 2021 to $177 in Q1 2022. Moreover, on the alumina price, this is the aluminium price index. So it averaged 13% of the LME price, which is corresponding to $432 per metric tonne. And as stated in the previous slide, the LME price have averaged in Q1 2022, $3,267 per tonne. With that, we finished from the industry highlights. I hope that was quite informative for you before we branch out into Alba's highlights for the first quarter of this year. Everything you see, by the way, in this section has been previously disclosed, and here we are just reinstating the disclosure in the presentation. So first, we start with the major environment, social and governance highlights, as our CEO keeps saying, Alba -- at Alba, everything starts with safety and ends with safety, and we do believe safety first, safety always at all times. With that in mind, I would start myself with Page 12 before we branch in into ESG. And I would like to state that we are super pleased that Alba has exceeded 24 million in the first quarter of 2022 because we have achieved on 30th of April, 25 million, which was the highest safety milestone achieved in the company's history of commercial operations. I would like to state over here that I'm sure you have seen from previous disclosures that Alba has completed its Golden Jubilee of Operation in May 2021. Today or recently a couple of days ago, we have completed 25 million safe working hours. Today, we are closing more than 25.5 million safety hours as of to-date. Not only that, throughout the company's history, we have achieved more than 25 million metric tonne of aluminium produced since 1971. The chart on the right side, it speaks louder than words. So we have total injuries, 4 for Q1 2022. As you have seen, it's a good drop if we counted versus 34 total injuries for 2021. If we continue with the same rate, we're going to have about 12 total injuries for the year. Recordable injuries was 4 versus 0 LTI. And with that, I will continue back on Page 10 for the ESG highlights. If you remember, we have released in February -- on the 10th of February 2022, the ESG-approved road map by our Board of Directors. And throughout this road map, we have lots of priorities in particular, 6 major priorities. And with these priorities, we are having different initiatives in connection to each of these priorities. Part of which Alba has signed a memorandum of understanding with Mitsubishi Heavy Industries to collaborate on potential opportunities between the 2 companies to reduce Alba's carbon footprint. With respect to the Spent Pot Lining Treatment Plant, the Spent Pot Lining Treatment Plant has been fully commissioned and is now in operation since December 2021. Not only that, we have shipped 125 tonnes of the HiCal. HiCal is the SPL. Once it's treated, the Spent Pot Lining Treatment, the product, it's called HiCal. We have been as well the recipient of the British Safety Council for International Safety Award for the year of 2021. As stated on the Slide 12, we had 0 LTI for the year of 2021. We have also collaborated with BAPCO to implement ESG initiatives of common interest between 2 of the major industries in Bahrain through signing a recent MOU. We are also very pleased that last Thursday, our Board of Directors have approved to change or to rename the name of our Executive Committee to be renamed into Executive and ESG Committee. On this point, I would like to highlight that ESG has always been discussed at the Board and at all committee levels. However, we wanted to make this more official, so the Executive and the ESG Committee are now one committee specifically that ESG Committee sits very highly at the company's strategy for the coming 5 years. In addition to that, the CEO has formed a recent ESG Taskforce Committee to evaluate all ESG-linked initiatives associated with the 6 priorities, which the Board has approved back in February 2022 on the decarbonization, green energy and aluminium, circular economy and secondary aluminium, employee welfare, collaboration and partnership and transparency, communication and due diligence. Although we have achieved 30 million safe working hours on 28th of April, we wanted to say that by 6th of April, Alba has completed 24 million safe working hours. On Page 11, this is for your reference. Again, it's going to be featured in all our updates through the IR presentation. This is the road map, which was approved by our Board of Directors. It's a copy paste from what was approved along with the initiatives that we have under each of the priorities, and, of course, everything we are doing is in line to meet the sustainable development goals of Bahrain. Moving now into the major operational highlights. So our sales volume has topped at 354,000 (sic) [ 354,216 ] metric tonnes, slightly down by about 0.3% year-over-year, while our production was up by 2.4% to reach 391,050 metric tonnes. Our VAP has considerably increased, 65% averaging for this quarter versus 62% in the last quarter of 2021, with VAP volumes topping 230,000 (sic) [ 230,467 ] metric tonnes. In terms of volume, this was up by about 5.4% year-over-year. Effective 1st of April of this year, the natural gas has -- is now at $4 per MMBTU, and this price will be the same until 31st of March of next year. We have teamed recently with EtaPRO to use the Digital Industry 4.0. This is in line with the company's digitization plan and artificial intelligence to improve our power stations performance. We have also signed an MOU with Emirates Global Aluminium to explore opportunities to creep Alba's production, in particular, Line 6 and potentially deploy EGA technological expertise for the potential brownfield expansion of Potline 7. This was disclosed in last -- in the full year results on February -- on 10 February 2022. We have also inked an MOU with Bahrain Polytechnic to develop higher educational opportunities for Bahraini nationals, especially in various engineering discipline. This is also in line with the Master Training Plan the company has and in line with AL HASSALAH initiative, which is led personally by the CEO. Last, we have honored our national employees who have completed 10, 20 and 30 years in service. Moving on into the financial KPIs. I'll go there very quickly because the real inputs will be given by the Chief Financial Officer. Our EBITDA was driven, of course, by higher LME price and premiums, and it topped almost $492 million, which was up by 105% year-over-year. In terms of net income, it was driven by higher EBITDA, and it reached $390 million, up by 181% year-over-year. In terms of the free cash flow, it's up at $316 million, and it was up by 7,933% year-over-year. Also, please excuse the typo mistake for Q4 because it should be Q1 rather than Q4. AL HASSALAH initiative, which is the last update from my perspective. So in Q1 2022, we have achieved an additional $18 million on top of what we have achieved as of year-end of 2021, so that we have a cumulative savings of $89 million corresponding to $45.38 per metric tonne. On the pie chart on your right, this is the breakdown by value chain for how we intend to achieve the $100 million by the end of this year. And with that, we -- I leave the stage to the CFO to take you through Alba's financials for Q1 2022.

Thank you, Eline. It's a pleasure to be with you again, ladies and gentlemen. So I'll begin by taking you through from Slide 17. So Q1 has been one of the strongest quarters in Alba's 50-year history, as Eline mentioned, from an operational point of view, from a safety and environmental point of view, but obviously, relevant to my area also from a financial point of view. The theme for this quarter has been higher prices, both the -- on the LME side and the premium side, as well as increased volatility. So if we look at the first slide on Slide 17, the metal sales bridge. So this takes you through the step change from the comparative period of Q1 2021 on the left-hand side through to the actual results for this quarter. So last Q1 2021, we had sales of $784 million. The major differences between that quarter and the current quarter has been the LME price, which contributed an extra $349 million. And then the pricing power, which is basically the additional premium that we've received this quarter has amounted to $80 million. We had a very small reduction in volume of $3 million. So in all, our metal sales was $1.21 billion. So that's an increase of $426 million over the comparative quarter or 54% higher for Q1 2022. Moving on to the next slide to talk about the sales in a little bit more detail. You can see in terms of metric tonnes, we increased our value added, which amounted to 12,000 metric tonnes more than the comparative period and we reduced commodity. So again, the commodity is lower margin. So we reduced lower margin and increased our higher margin for the quarter, which gives us the 354,000 metric tonnes for Q1 2022. And you can also see the difference in the premiums per metric tonne on the right-hand side, that increased from $203 per metric tonne up to $427 per metric tonne, and that was driven by 2 factors. One, as Alba has shifted from commodities to VAP. So our premium has increased, but also, obviously, the global market has improved. And so we've been the beneficiary of that global market improvement. Moving on to Page 19, which looks at the cost side. So again, this is a bridge taking us from our comparative period of Q1 2021 to our actual results for the most recent quarter. The largest contributors you will see are on the raw material side. So we have the raw material price, which is alumina and coke are contributing $121 million of additional cost and other raw materials for the suspension, alloys, et cetera, contributing another $101 million. So basically, approximately $220 million of the additional costs was due to raw materials. So that's much more than the overall total increase. That was offset by a slight reduction in raw material consumption because our sales level was a fraction lower than the comparative period and then also a reduction in plant spending. So that plant spending represents other areas like workforce and other associated costs other than the raw materials. That basically left us with a total cost of $664 million. So that's an increase of $128 million. So substantially lower increase than the cost of -- then the revenue increase. So our sales increased by $426 million, but our costs basically only increased by $128 million. So obviously, much improved gross profit. Looking then at our EBITDA bridge on Page 20. So our EBITDA for our comparative period was $240 million. We had a substantial increase on the revenue side, as already explained on Slide 17 of $426 million. The direct costs went up by $128 million. So again, that was pretty much all raw materials. Selling expenses went up by $25 million. So this was mainly due to the increase of freight costs. So this was global increases in costs for containers and for other shipping costs, as well as this also includes non-U.S. tariffs. So as the -- we sell at a higher price, so the amounts that we pay in duties to government also increases. So it's obviously good news that we get more for the -- from the customers with the higher LME, but it does mean that we pay a little bit more in customs duties as well. And so overall, our EBITDA increased to $492 million. So a very strong EBITDA figure for the quarter, up by $252 million. So an increase of more than 100%. So 105% increase to the comparative period. Looking at our cash flow bridge then on Page 21. So this is a comparison to where we were at the end of 2021. So the left-hand side, you can see is basically the cash balance at 31st of December 2021 of $248 million. We generated a significant cash from operations of $483 million. A fair bit of that was taken up by working capital changes, so increases in inventory and accounts receivable. And then obviously, deduction from that, you take off your CapEx. We are now starting to make initial payments relating to Block 4, which is the Power Station 5, which you may have seen a press release that we have been looking into a fourth block. And then $12 million difference relating to servicing our debt. And then we also have, obviously, our $200 million that we paid out in March to shareholders to spread some of the wealth and good news with our current shareholders, and that left us with a cash balance at the end of Q1 of $346 million. So then looking at the financial summary. We obviously had a much higher average cash LME for this quarter compared with the comparatives. So it was $3,267 per metric tonne, LME price versus the comparative period of $2,092 per metric tonne. The average alumina price was $432 per metric tonne. So substantially up from the comparative period, which explains the increase in raw material cost. Revenue, as mentioned, just over $1.2 billion. So for those that are familiar with our financials, you'll probably recognize that we made more in terms of our net income of $390 million than we made during the first half of 2021. So a strong net income of $390 million, a strong EBITDA of $492 million, and adjusted net income of $387 million for the quarter. So with that, I'll hand over to our CEO, Mr. Ali Al Baqali to take us through the industry perspectives for 2022.

Thank you, Bryan. Thank you, Eline, for covering section 1, 2, and 3. I will take you through section 4, which is the industry perspective and section 5 Alba priorities. We are on Slide #24. The industry perspective, as everybody knows that the market is volatile and the demand is very strong, supply is very tight. And we noticed that for the last few weeks, China started exporting metal outside China, which puts a lot of pressure on the LME price, that's why you saw the LME price is operating below $3,000. The main reason was China started to export metal, as well as other fundamental in the market works, since this is already in place, also we noticed that due to the inflation and increase the mortgage, which means loan U.S., this puts also some concern in the future about the construction sectors in U.S. It will put more pressure in the LME price., and maybe it will -- demand in this sector will be volatile a little bit. Also based on the forecast from Europe Carbon Border Adjustment Mechanism, they are going to do a transitional carbon tax tariff starting from 2023, and it will be fully in force in 2026. Still the mechanism of KPI is still not set up, but we are expecting that there will be something that we'll start with minimum, then it will be increasing for the coming few years. Still the energy prices in Europe and in U.S. is very high and volatile, and this also puts a lot of pressure on all the communities. And if you noticed also the Fed increased the interest rate by 50 basis points. This is also 1 factor that puts a lot of pressure on the LME price and on the U.S. currency, as well as Europe. And if you look at the news today or yesterday for the first time -- for the last maybe 10 or 20 years, the first time U.S. dollars is equal to euro currency. We are pushing from our side to look at all the initiatives in our ESG road map as Eline, she said. And we put a task force in order to follow all these initiatives, I will cover this in Alba priorities later on. But as our expectations till the end of the year, the LME price will be range between $2,500 per tonne to $2,800 per tonne. If you look at today, the price is $2,722 per tonne. I'm not sure about the closing of today, but it will be expected in the same level. Moving to industry perspective for the raw materials -- trend prices for the major raw materials in Alba, like the oil price, we look at the oil price is increasing and volatile. The alumina price also same. But for the last few weeks, we see the alumina price has operated between $360 per metric tonne to $370 per metric tonne. And for the second major raw material is aluminium fluoride, due to the logistics issue and the uncertainty in Ukraine and Russia war, still the -- all the major raw materials is increasing for 2 main reasons. The demand is high. The second reason is the logistics, which make it also more worse with -- which inflated the price. However from Alba side, we secure all the raw materials for the end of the year, especially for these major raw materials. In terms of alumina, we have many contracts in long-term contracts, medium- and short-term contracts, and we don't see any unforeseen disruptions in our process or production. Moving to Alba priorities. Still, I mean, we are focusing more and we -- we give a top priority to our safety. As Eline, she said that we exceed now the 25.5 million hours without LTI. This is the first -- for the first time in Alba history we achieved this record. And we put all the mechanism, all focus in order to pressurize and support more focus on our safety in order to do a lot of campaign, especially this time and last year also and this year quarter 1, we make our safety campaign with the ESG initiative just to give a new mindset to our people in order to think or not only for safety, but to protect the other aspects of the environmental exit. As Eline, she said, the Board approved the road map for our ESG initiative. Actually, she stated that there are a few initiatives. Some of them are a quick win. We can do it very fast. Some of them require short term plan with a minimum CapEx. Some of them require medium term and require maybe some or heavy CapEx to be injected. However, there are some initiatives required long term and required also some, not only that CapEx, also the technology is not mature or not available or the technology has not commercialized yet. This required a lot of monitoring, a lot of focus, and I think we are on the right track to develop the road map. This will enable us to move and to put a certain initiative under KPI in order to monitor our progress and to move forward. One of these initiatives, maybe as you're aware, and we already announced on it is to have a solar farm for the 5 megawatts to 7 megawatts. This is already now at the final stage of the commercializing or evaluation stage. And definitely, we are going to announce in the future once we award the contract, we are going to inform the investors, inshallah. It's still our focus also to exceed the production target of this year. As you are aware that 1,560,000 metric tonnes, the target, but we are, inshallah, with creeping, with putting a lot of initiative to post the production by creeping mechanism, inshallah, we are going to achieve the plan or exceed it, inshallah, by the end of the year. In terms of AL HASSALAH, yes, AL HASSALAH, as Eline also explained, we are in the right direction to capture all the savings and reduce the cost on the controllable elements which we can control. Definitely, as you are aware that we cannot control the LME price, but we can control the other costs, which is directly in the operation. Today, just also regarding to the Block 4, I think we already announced that we already award with Block 4 for Power Station 5. Today, we already announced and we signed the final notice to proceed for Mitsubishi in order to proceed with the construction. And I think you will see this already in the news today. Thanks, Eline, for speeding the [indiscernible] and releasing before we did this investor relation meeting. And also in terms of Line 7, there is a lot of talk. We issued a tender for pre-feasibility study. And we award last week -- actually, we awarded last week the contract to [ backfill ] to do the pre-feasibility study. It will take around 4 to 6 months to finalize the study. Then based on the pre-feasibility study, we are going to decide after getting the Board approval to go for bankable feasibility study. I think everything on moving as per the plan. And by this, I end the presentation. I will hand over to Eline to receive any questions for us. Thank you. And I wish everybody a happy day.

Thank you, Ali. [Operator Instructions] So the first question was by one of our shareholders, Bahrain National Insurance, BNI, Deepak Babu. Thank you for the greetings and the congratulations. He wants us to elaborate on what has led to lower sales volume in Q1 2022. And he said, assuming it's shipping related, have these shipping issues being sorted out? And can we expect sales volume to catch up in the second quarter of 2022?

Yes, you are right. The main reason was the logistics issue. And definitely, we put all the mechanism, all the tools in order to cope up with the sales in quarter 2, inshallah in quarter 2. At the same time, when we are doing the presentation, we are matching, inshallah, and we achieve the target of quarter 2 sales.

For the second question, he would like -- Mr. Deepak wants to know about the breakdown or the spike in the selling and distribution expense in the income statement, and our forecast for -- on the -- with regards to selling and distribution expense in the coming quarters in terms of run rate?

Sure. Happy to take that. So that's mainly due to the increase in shipping costs, and this is a global phenomenon. So not only for Alba, not only for our own -- for the aluminium industry, but for most manufacturers and exporters. So it's a couple of different things to break it down to the next level. It's the increase in container costs and shipping rates. Also in order to resolve some of the logistical issues, we've also been creative. We've been using break bulk shipping to ensure that we get more of our products out there and that break bulk shipping tends to be more expensive than shipping by containers. The selling and distribution and general and admin expenses also includes non-U.S. duties. So obviously, as we sell product for a higher sales price with a higher LME, so we have to pay a little bit more for international duties. And particularly as we have shifted from selling from traders to end customers, we obviously get higher margin, but in return, that does increase our freight costs. So instead of just selling to a trader, now we're basically exporting it and then trucking it to the final customer, which obviously gives us a better margin, but it does mean we're paying higher freight costs. In terms of the -- our forecasts going forward from the experts that we've spoken to in the freight industry, they're expecting that the rest of this year will still be very tough in terms of freight, global freight costs, but they're expected to stabilize and start producing next year.

Next question is also from Deepak on the breakdown of the share of alumina, our major raw material in the balance sheet of [ BD 358 million ] as of March 2022. The breakdown of alumina, the inventory in our balance sheet totaled $358 million, how much is it for alumina?

Yes. I don't think we normally give a breakdown of our individual raw material amounts, but obviously...

But the majority is for alumina costs.

Yes.

Next question.

Next question, also last question from Deepak about the dividends. He said what does the company intends to continue with a regular interim dividend, is it an option that is currently considered?

Yes. So we paid a very strong dividend. Obviously, we paid $100 million interim at the end of last year and then followed that up with a final dividend of $200 million in March this year relating to year-end 2021 results. We can't really comment on what dividends may be payable this year. We do have ongoing discussions with the Board of Directors and other stakeholders. And obviously, we seek to have a balance between payment of dividends and using excess funds to reduce our debt levels.

Yes. For the final question, there's a question that what are the initiatives taken for us in operations, sales and marketing. The AL HASSALAH is a full program. It's covering all the operations, maintenance, marketing and all aspects of the controllable cost. Part of the operation and the creeping we received part of the AL HASSALAH reduced the overhead cost. It's part of it over time and et cetera from the marketing, definitely, premium is one part, getting value added project, that is one part of it. Costing, definitely, we reduced the metal loss, one of the AL HASSALAH initiatives, consumption factors in the operation also, it's one part of it. This is all the initiative as an example. But it's a comprehensive and there's a methodology on how to calculate the AL HASSALAH savings. Next question.

Next question is about our VAP capacity and how much it was achieved or utilized in Q1 2022?

Yes. For last year, as you are aware that we achieved 63%. This year, we are targeting above 70%, maybe 70% to 72%. It depends on our -- but we are targeting 70% and try to above 70%. This is the question only?

Yes. That's it.

Yes.

So another question -- 2 questions actually in one. What is the percentage contribution of alumina, power and fuel, carbon and other costs in aluminium? Cost -- consumption or cost structure maybe. And what are the major saving strategies implemented that has been addressed in -- by the CEO earlier? So we will answer the first question about the contribution of alumina, power and fuel in aluminium consumption.

Okay. I'll take that. The figures change basically from month-to-month, especially if you look at recent months with volatility, we've had alumina prices go up significantly and come down significantly. So we do obviously haven't tracked those figures. But I think it probably is sufficient for me to say that obviously, our largest contributor to total cost is the raw materials with well over 50%. The next biggest cost is gas costs, and then after that, you have workforce and other costs. So it pretty much stays in that order, but the actual breakdown of what percentage can be allocated to each of those varies depending on cost of market price of alumina and other raw materials.

Okay. I'll -- with regards to the question by [ Abhijeet Kumar ], he's asking about how much our sales and distribution costs are out of our realized premium over LME components?

The freight is majority.

The freight is the majority.

The freight is the majority actually. The normal term, the freight is, I mean, a small component. But now due to the logistics issue, the freight has increased more than double actually.

And you can see that actually reflected in our sales and distribution expense in our income statement, as you will have an idea that this has gone by 3x almost. With respect to a question by Mayank are on Slide 18, we do not release how much we have sold in terms of the different products that Alba has. We provide the sales as total sales, including value-added products and liquid aluminium. The only time we provide the breakdown for the sales in terms of product line is for the full year results. So we will not be answering these questions. But you can -- you're always welcome to look at our IR presentation for the full year results of 2021 and you will have an idea about the breakdown in our sales efforts in terms of product line. [ Ali Sheriff ], thank you for acknowledging our performance. We note that. We also note your observation on having Alba to potentially disclose its quarter-over-quarter performance in the presentation since it is included in the investor toolkit. So we can get back to you later, wants to check that with our management. For the first question that you have listed is regard -- is in regards to aluminium price index, which was disclosed by Century Aluminium at 12% of the LME. So your question is saying what is the difference between Alba disclosures and Century Aluminium disclosures between the 12% and 13%?

Just, Eline, before I answer this question, I will tell you how the API [ was largely indexed ] for API, CRU, Metal Bulletin and the plant. And if you look at them, you will see slight difference in terms of the pricing, almost they are same, but with a few dollar differences. What this -- what the Century Aluminium disclosed is their actual costs, which is reflecting them at 12%. What we disclosed in IR presentation related to CRU, cost of API for that quarter. This is the difference. Actual costs versus to API price -- listed price.

Second question by Ali is why Alba did go for the refinancing instead of paying its outstanding debt since the company is doing well?

Sure. Ali, I'm happy to answer that. So there are a number of benefits of doing the refinancing at this time, one to reduce the margin rate. So we -- you'll see from our press release that we reduced the margin from 3% to 2.35%. So that's obviously a big boost to profitability. We also wanted to improve our covenant terms. So we wanted less restrictive covenant terms to allow us to have more self-direction in terms of paying dividends and other things. So we improved our net debt-to-EBITDA covenant term from a requirement of 3 to 5x, and some other provisions within the contract that we also improved the terms to benefit Alba as well as extending the tenor of the loan. But yes, you're absolutely right. We -- it is appropriate, given Alba's current profitability to look at using some of the available funds to reduce our debt. And you will see that we have significantly reduced our debt levels during the quarter and we plan to continue to do so. So you will see our net debt having reduced and you can feel confident that, that will further reduce.

Thank you, Bryan. Last question from Ali Sheriff, it's with respect to the dynamic materiality or double materiality and whether Alba relies on both of them or on either one? If not, are we go -- are we planning to do that in the near future? For Ali, since Alba is reporting its sustainability on -- based upon the Global Reporting Initiative Core Option, you only have to do the dynamic materiality assessment than not the double materiality assessment. For you to do the double materiality assessments, you will need to be reporting in line with SASB, which Alba today is not doing it, but both of them are quite similar. So since we are -- we continue to report on the Global Reporting Initiative Core Option, which is in line with other producers of aluminium in the world, we will stick with the dynamic materiality assessment. Last question from here, and before I do that, I'll ask Sara at least to open the floor for the questions which have been received over the call before we complete the last question from Janet at Tellimer. Thank you for the notes. You have asked a question about the reasons behind the increase in selling and distribution expense, which actually tripled from Q1 2021. As per our financials, this has been already addressed earlier. So we will not answer the question. Do you expect this to be the trend for the rest of the year or are you expecting to -- are we expecting to see a decline soon? As long as we're having an issue when it comes to the logistics or the shipping, you will have to expect that we're having almost a similar value per quarter. Could you please shed some light on the decline in the net finance costs? On the recent loan refinancing moving from LIBOR to SOFR, do you expect the lower costs to persist on the rest of the year?

Sure. Sure, I'll take that. Yes. So you will see that our financial charges have reduced significantly since the comparative quarter, and that's due to a combination of us reducing our loan balances, so reducing our debt levels. And also coming out of COVID, we -- with the improvements in our financial situation, we were able to squeeze the banks and reduce the margins, both for our short-term debts, as well as obviously as part of the refinancing. The refinancing, obviously, we will see the benefit going forward in by way of reduced margins, but some of our shorter-term debts already you see some of those benefits flowing through in our Q1 result. In terms of going forward, yes, so obviously, interest consists of 2 components: one, the benchmark rates; and two, the additional margin that we pay. So as far as Alba is concerned, you will see the margin that Alba pays reducing because of the refinancing, but at the same time, you'll obviously see global benchmark rates increasing. So whether that's LIBOR or whether it's SOFR at the moment, both of those are increasing. So we will be paying less in terms of our margin, but together with the rest of the world, we'll be paying more in terms of global interest rates. But overall, we should see reduced interest charges in 2022 compared with last year.

Last question from Kumar. It's a follow-up question on AL HASSALAH savings. What are the major commercial and marketing strategy under AL HASSALAH? So my question to Ali Baqali, and myself, can you tell us where are you coming from?

No, I'll start from your question, the major achievement because of $18 million just comes from the value-added products, because in quarter 1, 2022, we achieved more value-added products than quarter 1, 2021. This is the main thing. And the second point from the operations side, we keep more metal in quarter 1 this year versus quarter 1 last year.

By that, we have tackled the questions which we have received on the web. Sara, are you on the line?

Yes. [Operator Instructions]

And can I please ask the participants not to repeat the questions which we have addressed via the web, please. So ask if you have any other questions, which was not addressed on the web, Please go ahead and ask the questions. If not, then we will repeat, it was already addressed.

No questions coming through on the phone lines.

Yes. Yes, Sara, this is Anoop. Just a couple of questions from my side. Thanks for the detailed presentation, that was very informative. Just one question on your -- on the PS5 Block 4. Is it going to be the same technology as in the same GE turbines that you're going to be using or is it going to be a different technology this time? And you've spoken -- yes, you've spoken about the 5 megawatt to 7 megawatt solar park. I mean what is -- what are the challenges within Bahrain to scale this up? I mean, beyond your own, the parking lots and so on in terms of developing a slightly bigger solar project, something like 100 megawatts, what are the key challenges in doing that?

Yes. Thank you for the question. I think it's a good question. For the first part, yes, we are using different technology this time. The Power Station Block -- Power Station 5 Block 1, 2, 3 was GE technology, it's a class machine. This Block 4 is Mitsubishi technology similar to a [ Ador ] technology. The capacity of this Block 4 is around 680 megawatts, which is higher than the previous blocks. And it's a proven technology, and we are seeking higher efficiency once we look for, inshallah, after around maybe 30 months, something like that. The challenges for the solar, yes, as you are aware that Bahrain is a small country. We are lack of spaces, land. Our initiative for the 5 megawatts to 7 megawatts was to show a case that Alba is having a system or having a road map in order to use the renewable energy. This is one part from our initiative, but we are working closely with the government, especially EWA now since the Ministry of Electricity and Water, they are handling the renewable sector from the government side. If there is any bigger scale of the solar farm, we already show our interest to the authorities that we will be a joint venture with them. And we are keen for any exploration on this renewable energy in Bahrain. But as I said, the big challenge is not the money, it's not the CapEx, the big challenge is having space in Bahrain to put all these solar farm on it.

Okay. Okay. Just one more. So if you look at the aluminium exchange inventory, I mean, much has been said about it, they are at record lows and so on. But a lot of their inventory is transferred in the form of sort of finished products or semi-finished products at the manufacturers' end. And there, we are seeing a substantial stock build. So when -- I mean, you all have a very global presence, right? You all sell across almost all continents. So what is the mood within your customers right now? Are they willing to stock up more just because of the shift from JIT to just-in-case? And all -- that entire theme or do you see a sense that customers are a little shaky now given what we are seeing in the macros and they may not want to stock up as much that excess inventory that we've seen that has been built over the last 1 year? Just a macro picture on what your customers', the sentiment there?

Yes. Just I will give you a feedback in my last visit to customers last September or October, I think I visited Germany. I visited a few customers, at that time, just for your information, if they got the order in October, they can commit the delivery on July this year, see how much they are tied in the demand. Yes, you are right, some of the customers, they are stocking extra inventory because the market is uncertain, they want to keep or increase the buffers for them. But what we see from them, yes, I mean, from our side that the market is still strong, the demand is there. Despite there is some -- I mean, maybe customers they are stocking some inventory, but overall, I think till the end of the year the demand is strong. We don't see any uncertainty, except what I said in my earlier talk about U.S., the mortgage is, I mean increasing and the people that are hesitating to build the houses accommodation just to reflect directly on the construction of their renewal. This is only the main concern we have. Maybe, maybe. I'm not sure, but maybe in case this will happen. Definitely though, we'll be getting some reductions or some maybe cancellation from U.S. market and related to the construction sector side.

We take the opportunity to thank everyone for joining this call. Thank you for the questions as well. And many thanks, Anoop and SICO for hosting today's call for Aluminium Bahrain until next time for our Q2 2022 or the first half results for this year. If you still have any questions, you're very welcome to drop your questions on [email protected]. Thank you very much, and have a beautiful day.

Thank you. Bye.

Thank you. This does conclude the conference for today. Thank you for participating, and you may now disconnect.

Thank you, Sara. Thank you.