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

Thank you very much. We are pleased to connect with you for Alba's Q3 and 9 months results for the year of 2023. The call will be chaired by the CEO, Al Baqali; and in addition to our acting Chief Financial Officer, Ahmed Abdul Qader; as well as myself. So as always, we will go into the IR presentation. I'm sure many of you are familiar with our content. We like consistency. While we changed the content within each section of the presentation, the subject of the content will continue to remain the same. I will take over and give you some highlights into the industry so that we know more about what's happening and what has been happening in the aluminum industry over the last quarter. Then I will zoom in into Alba's highlights for the third quarter of this year. For switch, our CFO will take a deep dive into Alba's Financial for the 9 months of 2013 -- 2023, sorry. And then in the last 2 sections, this will be covered by the CEO to give us his perspective about what will happen for the industry for the remainder of the year as well as what are Alba's major priorities for the remainder of the year and beyond. And with that being said, I will go into the industry highlights. The majority of this news are public information and they are extracted from CRU market intelligence. So if we take a look at the slide, it's about the consumption. The consumption for the third quarter of this year rose by 3% year-over-year. And if you want to know more about the rationale behind the increase in consumption, we have noticed that the economic growth in major markets around the world continue to be under pressure, in particular for the third quarter of this year, and I'm sure you can all connect to that, our site for monetary policy has weighed on household spending and commodity consumption. For the Middle East, as a region, it had the highest consumption. The demand was up by 7% year-over-year, supported by higher consumption in UAE and the Kingdom of Saudi Arabia. For China, the demand was up by 5% year-over-year, driven by recovery in the manufacturing sector, to know the Chinese imports have jumped to highest level since November 2021 with major inflows coming from Russia. As for the demand in North America, it was down by 3%, owing to uncertain growth in auto and construction sector while the economic growth -- the slow economic growth in Europe as well as the higher inflation have led to a contraction in the aluminum consumption and it was down by 3% year-over-year. Moving further into the supply worldwide. The supply was also up by 3% year-over-year despite a generic sense of well demand for the metal. The production loss pushed up higher by increased output in China and in Americas. And you will note that the production in North America was up by 7%, and this is due to the restart at Canadian smelters mainly Kitimat and Alumar. The supply in China was up by 4% year-over-year, and that's attributed to the output growth in Yunnan following the recovery of hydropower generation. As for the supply in Europe, it's contracted by 5% due to weak manufacturing activity. And with that, the world market was left to be in surplus with China, plus 3,000 tonnes and without China, plus about 90,000 tonnes. Moving forward to the LME price and premium for the Q3, we note that the LME price and premium has struggled to find positive momentum. And you can see that from the write-up and the below chart on this slide, so the LME price remains to be under pressure with bearish market sentiment dominating the trading activity. The LME cash average was down by 8% year over year, and it stood at $2,155 per metric ton. With regards to the inventories, there hasn't been much update in the LME inventory from Q2 2023 to Q3 2023. So it continues to stay at a low level with 0.5 million metric tons, with growing inventories of Russia metal in LME-registered warehouses causing concern. For premium, the premium, they are on the swing and are expected to further drop in the near term owing to weak physical demand. Moving forward on -- to talk more about the Alumina, which is the major raw material for the aluminum. Alumina price index averaged 17% of the LME price as stated before, the LME price at full Q3 2023 was $2,155 per metric ton, and the alumina price was about $360 per ton. And with that, we'll take you through Alba's highlights for the period. Everything you see over here is based on public information and can be seen in Alba's website. So this is safety and numbers. We're just giving you a sneak peek into what the company has been doing over the last couple of months. We do expect to safety. We believe safety and productivity are mutually inclusive in terms of the total injuries over the Q3, it was 10. The recordable injury was 1 and the LTI was 0 for the third quarter, while you see on the right side of the slide that we have achieved of the 29th October, 9 million safe working hours. In reality, the numbers, we have 8 million reporting hours. But because we always like to say in terms of the future, we wanted to showcase as well over here that we have bypassed the 8 million safe working hours. And today, we are running at more than 9 million safe working hours. For our major highlights for ESG, it's quite a lot, but we are quite pleased with the achievements of the company. We're very pleased to report that Alba is the first smelter in the region to have successfully -- to have been successfully recertified to the newest version, version 3 of Aluminum Stewardship Initiative performance standard, we have been a recipient of Al Bilad Award for CSR, in particular environmental category. We have recently inaugurated Mangrove Nursery to mark the occasion of International Mangrove Day. So we do have our own small nursery in Alba. We have launched as well in July 2023, a new Safety Campaign, which is -- it's quite straightforward, Stop, Think and Act. And we've been conducting lots of awareness sessions from then until today. We have also been the proud recipient of the Brandon Hall Group Silver Award for Excellence for this year for our Training and Development program the TDP. We have also joined forces with Nasser Artificial Intelligence Research and Development Center to advance in artificial intelligence with the successful completion of Green Anode Density Prediction. We have also implemented the Virtual Reality technology training for Potline Emergency and the work is in progress for another 4 areas for in-house training courses. In addition, Alba has organized and Entrepreneurship Masterclass Workshop for its employees' children about 60 students in collaboration with INJAZ Bahrain. In line also with developing our Bahrain youth, more than 90 trainee students have completed their on-job training program during this time. And after -- before we have topped 7 million safe working hours by mid-September of this year. Moving further, I wanted to put a refresher that everything Alba does, specifically when it comes to ESG, it's a journey and not a destination. So things will continue to change day after day. We have shared this with you before in the Q1 of last year, and we have slowly advancing and making progress on each of these priorities. And by that, I will leave the floor to the CEO to take us into the teaser that we just gave you overview to know -- for you to know what is our plan as we advance to 2035 in line with the Kingdom of Bahrain's objective. The floor is yours.

Thank you, Eline. Good morning, good afternoon, everybody. Before I go on this slide, I just would like to refresh your memory that in 2022, we launched our ESG road map to target net carbon 0 by 2060. And part of our journey on that road map is to give you an update by 2023, what were our initiatives in order to achieve our net carbon emissions. In terms of the first initiative, which is already ongoing, and we are expecting to finalize this of the completed in the quarter 2 next year. We're already launching the 6.2 almost megawatt solar power capacity. It's ongoing, and we are on target. I think it will enhance our corporate initiatives. I know it's a small megawatt compared to what we are utilizing. But the main objective of this initiative is to show the customer, to show all the stakeholders our commitment toward using the renewable energy in the future in order to have our green aluminum. The second initiatives related to efficiency upgrade. And in these initiatives, there are 2 projects on the table. One, it is already in traction and before maybe 2 weeks we celebrate by receiving the gas turbine coming from Japan, from Mitsubishi. This is a major milestone for us in terms of having this Power Station Block 4 in process. And we are aiming to finalize or to commission the full Block 4 in the Power Station 5 by quarter 4 next year. This it would add additional capacity, more efficiency to our power generation with around maybe 680 megawatts. But this also in terms of ESG and decarbonization will reduce our GHG intensity by almost 0.5 tonne of carbon. On the other hand, we have said that we had our Board meetings, and the Board gave us a green light to continue with this study to do a class 3 estimate for the Line 7. A class 3 estimate means that the accuracy of the CapEx is narrowing to around 20% plus or minus. The Class 5, which already presented yesterday to board was Class 5 estimates, which represent between 40% to 50% accuracy. Moving to the recycled material. We have looking a lot of initiatives and update that to give you a high level that we are looking to have either remake facility in Bahrain or in Europe or in U.S. This will enhance our capability to have low carbon project in the future as well as support our protection for the coming few years. The last initiative, I think also in this year before maybe 3 to 3 months, we almost issue a tender, a public tender to have an offtake agreement for 25 years renewable energy by either solar or any means of renewable energy. I will request 500 megawatts minimum to get, but we are open for any investors to come and to offer even below that number of megawatt. This is under evaluation, we received a bid under evaluation. We receive the bid for interest, not the commercial bids. After we communicate, we submit the tender documents to these interested parties. And hopefully, we can have a major milestone in this achievement. This is just high level projects. We are doing a lot of things in-house to reduce our carbon emission, but these are the high level projects and mega projects that we can call it. I will return turn the floor to Eline to continue with the presentation.

Thank you. This is only a teaser, I'm sure if you follow our disclosures, you will know more about what the company is doing in respect to ESG. We'll be providing more and more insights soon so please stay tuned. And with that, I will go into the operational highlights. So which -- what the company was doing in terms of business-led activities. So our production for the third quarter have almost got to 410,000 metric tons, up by about 1% year-over-year, while for the 9 months, we have exceeded 1.2 million tonnes, up by about 2%. As for our sales volume, as you see, for the third quarter, we have exceeded 430,000 metric tonnes up by 17% year-over-year. While for the 9 months, we have almost topped 1.18 million metric tonnes, up by 7% year-over-year. With regards to our value-added sales, this was 68% for the third quarter versus 67% for the 9 months of 2023. We have also debuted in new alloy 6060.HE in Alba's product portfolio as part of our AA6060 alloy family's dedicated mainly to the company's extruder customers. As you have seen perhaps we have put a regulatory filing to the regulators in August, if I'm not mistaken, about the natural gas supply that has been extended by an additional 5-year period and will remain at $4 per MMBtu for the coming 5 years. AL HASSALAH Top up, this is part of our CEO's yearly objectives. We are doing our best to sustain the savings which we have achieved back in 2022 at about $115.34 million throughout this year and more to come, which will be announced in due course. For the major KPIs for Q3 and year-to-date, I will not go through that. I will only take you through the third quarter results because for the half year results, it will be covered by our acting CFO. So for Q3 2023, we had $168 million EBITDA. Of course, it was driven mainly by lower LME price and premium, and it was down by about 28%. For the profit, it was $46 million and as you see, it went 64% year-over-year, mainly because of lower EBITDA. As for the free cash flow, it was $184 million, down by 25% year-over-year. And with that, I will leave the floor for Ahmed to share with us more insights on the company's performance -- financial performance for the 9 months of the year.

Thank you, Eline, and good afternoon to all participants. So I will be taking you through our financial highlights for the year 2023, quarter 3 and starting at day 17 with our turnover. So in 2023 year-to-date, we have achieved a total turnover of $3 billion comparison to the year 2022 year-to-date decreased by around $600 million, and it's mainly because of the LME price drop and even the premium market price drop. But the positive side that we have a high sales volume and this year, which has offset the impact of the drop in the LME and the premium prices. Moving on to Page 18. And as we stated earlier, our sales volume has increased from 1.1 million metric tonne year-to-date 2022 to 1.18 million metric tonne in 2023. So typically, the high sales volume contributed because of the high added value of the sales in the year as well as the liquid metal. Despite that high sales volume, we have a drop in our premium, and this was typically as covered for Eline in the previous slide because of the market premium price. So our premium year-to-date in 2023 recorded at $306 per metric tonne. Continuing on the cost side of our business. As you can see, our costs have slightly increased around $100 metric tonne and this is mainly because we have increased in our sales volume as well as the increase in our overall production. So this contributed in the increase in our cost. For the positive side, the direct raw material prices have decreased, and this is typically because of the market situation and completion has stabilized by the end of the quarter. So moving on, on the EBITDA side. So our EBITDA for the year '23 recorded at $601 million, which represent around 19.5% at EBITDA over sales. So as highlighted earlier, the major variance is mainly because of the metal sales as we indicated earlier, because of the LME and as well as the premium prices. On the cash flow side, we continue to report a healthy liquidity position, shows the cash balance in quarter 3 2023 at $284 million, a slight increase by around $40 million. So from our operation, it was a positive -- negative variances come to the working capital changes and typically because of the change in the LME prices in the market, the CapEx spending stands at $140 million. So we have investment in Block 4 as highlighted early even by our CEO of $72 million this year. So our free cash flow on the year 2023 recorded a $396 million. Just to give you a snap in our financial highlights. So the LME where the major event dropped from year-to-date from $2,800 around 2022 now is a level of $2,200 per metric tonne. When it comes to alumina price, we have seen a drop in the raw material plus overall in particular alumina price year-to-date at $363 per metric tonne. So this would make our EBITDA $601 million in 2023 for profitability of $252 million for the year-to-date 2023. The word here I end my part in financial highlight and I will hand it over to our CEO and to -- for the rest of '23.

Thank you, Ahmed. I will take you very quickly on industry perspective and Alba priority for the remaining of the year and next year. For the industry perspective, if you look at -- from the beginning of the year, actually, even from the quarter 4 last year, the market was volatile, uncertain and the LME price while dropping due to different factors. One of them is the inflationary interest rates, inflation and the power challenge in Europe started from last year and this continue and we should not forget also Russia and Ukraine war. This whole put the market in uncertainty, the customers hesitated to book bigger volumes as well as there is a decline in the construction sectors which affect the affiliates market. In terms of the prospective for the end of the year till next year, just we came from ending the week that in week almost is like of a presentation to look at the outlook of the market. And all the market intelligence conferences or the presentation ensures that the market will continue with the same level by the end of this year as well as this will continue till the quarter 2 next year. But we are expecting quarter 3, quarter 4 next year, the market will be improve, especially in terms of construction sector. In case the sales start to decrease, the interest rate and in the future. Another reason also with the lower net income, as Ahmed stated in his financial update that the premium -- there is a pressure on the premium and this will continue further, especially in the U.S. and Europe. However, as you can see that we are expecting even the premium will be improved, maybe from end of quarter 2 next year. In terms of the CBAM regulations, the Carbon Border Adjustment Mechanism. Officially, everybody start reporting from 1st October, they are starting reporting GHG intensity per product. Still there's no clear procedure what will be going to happen. But from what we are receiving till 2026, the reporting will be in 2024. It will be like the final starting for the CBAM tax that will be started from 2026 and there is some major change by the CBAM regulation. As I said before, the LME range, we are expecting it will be between $2,100 to $2,200 to let the LME price within the range of $2,200 for the few days and we are expecting the same that it will be ending the year. Moving to next slide. The next slide about the major raw material. We see that the alumina price starting need to soften a little and it's almost within the range of $300 to $350 per metric tonne. And I don't see any change in this till by the end of the year, unless next year, if China, they start, for example, to take or decrease their aluminum, then this is what we saw in EBITDA data because now at currency, China they are starting importing alumina from rest of the world. The liquid pitch. There is like a direct correlation between the liquid pitch and the oil price. At the moment, the liquid pitch price is on the higher range little bit, but we are expecting this correlation is come direct with the oil price. If the oil price is going up, we'll see a little increase in the liquid pitch price. If the oil price halt at the same level, but we didn't see any reason to increase the liquid pitch above the target price for the time being. Aluminum fluoride is almost stable, same as the -- same as quarter 1, quarter 2, quarter 3 also same. We'll see also quarter 4, little bit softer impact, I think it will be in the same range for the next year. I don't see any big changes. For the black material, which is GPC, CPC and anode, this also -- there is some correlation between the oil price and these 3 materials. But at the moment, we see that there is some recovery in the price. But if Chinese, they start also cutting the production of these or the GPC or the CPC or the anode, definitely will affect the price because the supply will be less and the demand will be high. This will increase the price a little bit from this year. By this, I will move to the last section in our presentation, which is 2023: a top priority. As Eline start the presentation from beginning, definitely, we consider safety as a top of priority for us. And then she said that it is a generally not a destination. This is correct. From beginning of the year, we did a lot of safety campaign to improve our safety. And in the chart, which she projected earlier, we are improving the safety KPIs and the safety performance. Unfortunately, we had one LTI, it was in the last week of Ramadan, but after that, we did a lot of awareness sessions, and we -- inshallah, we are going to achieve 10 million our without LTI, inshallah, by within the 2 weeks' time. For the embrace sustainability across our value chain, this is definitely, we are -- I already updated you in the beginning, we gave some initiatives and our milestones towards 2020 -- 2035. And by 2026, we have a lot of a plan on high level to achieve the net carbon zero. For the production, definitely, every year, we have a new challenge. This year is a big challenge for us to maintain the production and to exceed, inshallah, last year production, which is above 1.6 million tonnes. And also, I think this agenda is always highlighting every quarter, we are updating our shareholders or the investors that the upstream opportunity for so many years we are looking for an upstream opportunity to secure our Alumina requirements at least well there. At the moment, we are purchasing around 3 million tonnes of alumina. If we can get an opportunity to secure 1/3 of this, which is 1 million tonnes from an offtake agreement or a minor joint venture with a reliable refinery plant, it will be very good to secure the security, and at the same time, to offset any highs in the alumina price. We did lot of certifications, not from the marketing like an ASI initiatives or Ecovadis, but just to let you know that within -- for the last 2 weeks, we got a certification or an award to certify Alba and safety, registered the content. We've done an audit and we got 4 star out of the 5 star. This is very good in terms of the aluminum industry because we are the first aluminum industry to conduct such audit. We've done the audit in 2010, and we got 2 stars. This year, we got 4 stars, and we are aiming for 5 stars, inshallah, in the coming years. I already update you on the Block 4 update you for the Power Station 5 and the Solar Farm. This is also on the top of schedules, on the top of priority. We are going, inshallah, to achieve them on time and within the budget. And, plan 7, as I said, we are proceeding with the class 3 estimate with Bechtel .And it will probably, definitely, all the data is available at the board, they will take the finance say on Line 7 project. Line 7, just to give you an update also, Line 7 is -- our aim is to copy Line 6 in terms of production and -- but now we are negotiating with the government in terms of allocating the Line 7 as well as to finalize the gas contract with the government in order to get an extra quantity or not. But as we updated you last time also, we already got a letter from the government to confirm the gas price for the coming 5 years at $4 per MMBtu. By this, I am ending the presentation, I will leave the -- or I will return this to Eline to -- or to receive any questions from your side.

Thank you Hussain and Ahmed. [Operator Instructions] Any question which is not answered today, or if you guys want to have more questions, you're very welcome to drop us your questions by email, and we can always address them. And by that, Sandra, if you don't mind, if we can start with the questions. I will go through the questions that I see on my screen. But then if you receive something else, please let me know.

No problem. [Operator Instructions] We have one question on the telephone line.

Yes. Can you please let us know?

Sure. One moment, please. The question comes from the line of Nour Sherif from Arqaam Capital.

A couple of questions for me, if I may. We can take it one by one. So if you can explain how much of savings should we see from the new Station 5 Block 4 and how much of savings were already booked for the 6.2-megawatt solar plant?

Yes. I'll take that. I'll try to answer each of your questions one by one, so that we don't confuse everyone. So as you know, Nour Sherif, the Power Station 5 -- Block 4 of Power Station 5 is still in construction. So we haven't really seen any savings yet. The Block 4 is used to be conditioned by Q4 of next year. So we still have one more year until we finish from the construction and until we commission the Block 4. So we should be able to see savings starting from Q1 of 2025. But because now until then, we're not relying on Block 4 because if you remember, Baqali stated a while a back that we just received gas turbine on site. And it's a long way to go until we commission the gas turbine. And so we're moving in terms of milestone. As of today, Block 4 is not completed and if you noticed in the Alba priorities for the year, we're trying to complete the Block 4 construction ahead of schedule and if not ahead of schedule on time or on schedule. The commissioning as per the time line is due to occur within Q4 of next year.

Yes, clear. And how much of savings should we expect?

The savings would be more in terms of the gas consumption -- the gas consumption because the Power Station Block 4, it will be more efficient. So we will rely more on Power Station 5 with the blocks that we have. It would be 4 blocks. So the savings, it would be seen from less gas consumption, and accordingly, the savings is not -- cannot only be quantified only in terms of monetary value because the savings that Alba perceive is also in terms of carbon emissions because it's a very high efficient gas turbine. So -- and because it consumes less natural gas. With lower consumption of natural gas, it will end up to emit less. So lower gas -- natural gas consumption. You will emit less to the environment. So it's a double-edged savings. lower -- emissions to meet our ESG road map criteria all the while consuming less natural gas. And if you consume less natural gas, you don't pay for something that you do not consume.

Yes. And in terms of how much of savings should we expect from the solar plant?

The solar is really -- we would like -- and if you know -- Nour Eldin, if you know someone or a company that has the capacity to -- for us to be an off-taker for more than 500 megawatts, then I would be in a position to quantify for you what the savings will be. The current solar farm that Alba is constructing on the ceiling of its parking space on 5 Alba has the capacity to produce 6.3 megawatts and 6.3 megawatts is not in enough to have electricity -- to put electricity in the administrative department. So it's a very small capacity. But this is what we can do at this stage. Having said that, if you remember, in the ESG roadmap for 2035, the CEO stated that Alba has officially launched a tender to be -- for us to be agnostic for at least 500 megawatts. And so if you know any of the good companies that are willing to give us solar power for at least 500 megawatts, please let us know.

Yes, sure. All right. And one follow-up on the cash costs. So we have seen on my numbers in terms of cash cost preponed and away from the volume pickup that we have seen in Q3. Actually, cash costs have firmed Q3 compared to Q2, while I was expecting slightly lower on the back of some normalization from marketing trades and slightly alumina. So what was the reason behind higher cash costs? And that's away from volume sold?

So I will be answering to that specific question. So generally, what we have done, there is an implication which is referred as inventory absorption. So whenever we witnessed inventory or raw material prices drop, so this will have a temporary impact in our cash costs in the beginning of the period. But as we proceed forward in the time line, as we observe everything in our inventory, external valuation so we would expect to see our cash cost also to improve even further.

Yes, that is clear. So we should see the lower inventory prices starting next quarter.

What did you say, Nour Eldin? Can you raise your voice, please.

I was saying that -- yes so I was saying that the lower inventory cost should be reflected starting next quarter.

correct.

Clear. Okay. And one last one on...

Just one second to just add to what Ahmed has stated. So there is a lag between the time of effort, if you check for our cost so while the prices have slightly softened and the third quarter of this year. So I'm going to go through the financials. Under the income statement, cost of revenue for the third quarter, you will note that Nour Eldin that we have a slight increase in our cost of goods sold from a Q3 2022 to Q3 2023. And this has been mainly because the cost of materials that we are using so we could have both that in Q1 of this year, but we would have used that in the third quarter of the year. And this is why you see a slight jump in our cost of goods sold. At the same time, we need to also remember that Alba is adding higher production. So we are producing more. So that would also assure more raw material, so that will also [indiscernible] would also slightly increased while we are increasing dual production.

Yes. Okay. And one last question for me on the potential dual lifting. Where are we in the process? And if you can share more details about it?

No, no, no comment. No comment. If you have seen our clarification to the regulator, you would note that this is still at a very high level discussion. So I talk about that with my CEO on a daily basis. And so we're just doing some analysis in-house ourselves. Nothing is yet material. And in the event, there would be any disclosures, it will be disclosed. So we will definitely put an official disclosure, but there is nothing at the moment that would illustrate for us to provide more insights because as a management, specifically I mean, the senior management, they always talk about value-added initiatives at all times. So talking is something but doing something is a different story. So at the moment, these are only discussions. So I will branch into the questions for [ Mr. Shah ]. What sort of premium versus standard products do your value-added product typically commence. Has that premium be falling or rising recently? I think this is a straightforward question [ Rahul ] as you see our revenue despite increasing our sales volume year-over-year, whether it is on the quarter 77%. As for the 9 months, 17%. If the premium is not falling, we wouldn't have been -- it would have had higher revenue. So that should answer your question, the premiums are falling specifically for the Europe continent and the Americas. You indicated -- the second question is you indicated that you see aluminum prices to soften until Q2 2024 and potentially firming thereafter. Could you please provide some more context for this view? Supply versus reason and validation. I thought that question was addressed actually by the CEO in his thoughts about industry perspective. We stated clearly that the prospect for a healthier 2024, which we hope that will happen, it will hinge on better economic performance. So as you see, we do have high inflation, and we do have higher interest rate today. The consumption is quite bad. The tighter monetary policy is affecting households and consumers from spending. So if we do not see a better economic performance within 2024, we wouldn't be seeing a better prospect for the LME price. These thoughts were given to us or that's what we understood from attending the LME week in October and the consensus is that the industry will continue to have and LME price reaching at the same level as of today or maybe slightly less. And hopefully, we will see a better performance starting from the second half of next year. Asia sales look to have bounce back after a few weak quarters. Why is this could it be the start of an upward trend? I would say over here that's usually more or less, our distribution for the sales on quarter-over-quarter. You might be seeing a difference quarter-over-quarter. But in reality, we do have a very fair distribution for our sales. So please wait until we release our full year results so more or less our major market will and as will continue to give a hand about 35% of our sales followed by Europe, Asia and the Middle East as well as America. Any update on Line 7 study, I will not address that. That has been addressed. How do you expect the carbon intensity of the business to shift over the next decade. That has also been addressed with the CEO when he gave the insights on our road map for 2035. I'm trying to be very quick in the interest of time because we do have another call to attend in some minutes. So another request came from [ Mr. Chou ]. So the gross profit margin was lower quarter-on-quarter at 12% for Q3 2023 versus 17.5% in the second quarter. This alumina price as a percentage of LME stayed the same quarter-over-quarter at 17%. What were the other drivers for the lower gross profit margin quarter-over-quarter.

So I will be answering to that question, Mr. Chou. So when it comes to quarter-to-quarter, so returning to quarter 2 '23 is quarter 3 to one major event that our sales volume has increased and even our production has increased. So and those 2 elements, this is increasing, which will have an implication to add. So plus, as I have indicated earlier, the inventory absorption. So this will have an implication in our cost. So throughout the time that the price overall might drop so this will have an impact in the inventory valuation. Thank you for the question.

What was the observed coke and pitch cost tonne during the quarter? Ibrahim, we do not provide these kind of details. So I would be more than happy to guide you into how to get some sort of an answer to your question, but we do not provide this detail, otherwise, you will know exactly what is the cash cost per tonne for our metal. What was the realized premium of LME for Q3 2023? I would say it to Mr. Chou, you will be able to know that if you look at the revenue bridge, the metal sales bridge. And how do you see the LME premium tracked for Q4 and 2024, I think we have stated clearly through the CEO that regional premium will continue to decrease from now on the back of the lower demand on the physical premium. What percentage -- this is [ Dugar ], what percentage of production is coming from Line 1 to 3? So Line 1 to 3 produce about 300,000 tonnes out of 1.6 million metric tonnes or you can do the math. Is Line 7 expected to cover volume loss from these 3 lines and this get decommissioned in 2027. This question will not be addressed. Once we have more insights across the feasibility study of Line 7, we will be providing at that time more insights. Until now, please bear with us. Was the large inventory absorption as a one-off this quarter, or is it expected to continue to support sales volume?

With the large inventory absorption.

So the inventory absorption, I think it will -- I haven't stated before that it will get down as we move forward. But you need to also understand that if we are increasing the sales quarter-over-quarter and when -- and then although we are selling, of course, and then you know you have the lag time between shipping from Bahrain to the rest of the world, if the vessel is unloaded that would still be considered inventory. It will not be considered as sales. So while the inventory absorption this quarter, let me go back to my slide. So inventory absorption, if I go into Slide #19, under the direct cost bridge, I'm assuming your question is for the 9 months results. So it has increased year-over-year by $107 million. Please support me if I'm saying something wrong or even Ahmed.

Yes. So continuing also to that particular question. So typically, it will depend on the volatility. So if you are witnessing even volatility when it comes to our raw material prices. So we witnessed this absorption to continue. So the more it is stabilized, the more we expect things to be smooth and we don't expect any absorption to have any implication to our results. So that question for [indiscernible]

Yes. [ Yousef Husseini ]. Thank you. I think that's the last question from today's call. You were mentioning that Block 4 from Power Station 5, how much is more efficient versus the older stations? First, to note the Power Station 5 that had the 3 blocks of 1,800 megawatts has an efficiency of 54%. The new gas turbine, which is added -- which is going to be added, has a higher capacity 680.9 megawatts that has -- it has slightly higher efficiency so probably about 56%. And of course, once Q4 -- Block 4 is fully commissioned, hopefully in Q4 of next year, Alba will stop relying on all the power stations, and will start relying on the Power Station 5 that has -- that will have about 2.4 gigawatts, which is more than sufficient to cover our operations. And that efficiency, as I stated before, it's a double-edged sword so it's going to be because it's super-efficient because it's a new Power Station and the efficiency is about 55%. So you will consume less natural gas so you will end up saving more because you consume less natural gas. And effectively as well, we will be emitting less to the environment and that will also help us and serve us in our ESG road map in line with the Kingdom of Bahrain’'s commitment to reduce our greenhouse gas emissions.

No more question?

I think if you guys have no more questions, we could end the call. otherwise, if you have more questions, please drop them to our IR e-mail, and then I will be more than happy to address any of the questions you have. And I apologize for Mr. Chou or someone else who has requested about the cash cost. First, in relation to the cost, Ibrahim Al-Haldeisi, we do not provide this kind of insight, because then you will know the company inside out. So we will leave that to you, you are quite smart. We can hope you to understand more about our good structure and by that, you'll be able to know yourself what is the cost performance for this quarter. And with that, I thank you very much. And I also thank the management team. Of course, SICO, they have been very much supportive in hosting our quarter conference call, specifically, Anoop Fernandes. Thank you very much. And we look forward to connect with you again for the full year results for 2023, We are due to publish to release our results on 14th February of next year. Once this date hopefully is confirmed, as of now it's almost confirmed, you will be notified. And we will stay contacted. From now until then if you have any questions, please feel free and send us an email. Thank you very much, and have a lovely day.