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

Good day, and thank you for standing by. Welcome to the Aluminium Bahrain Fourth Quarter 2024 and Full Year 2024 Results Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Eline Hilal, Director, Investor Relations. Please go ahead.

Thank you very much for the introduction. Good afternoon, and good morning, everyone. Please accept our apologies for connecting late. We had a software issue, we were not able to connect on time. What matters is as we are here with you virtually, and we're going to take you through our IR presentation for the fourth quarter and the full year of 2024. I have with me in this room, the Chief Executive Officer, Ali Al Baqali; the Chief Financial Officer, Ricardo Santana; our Finance Manager, Ahmed Abdulqader and the full Investor Relations team. And we thank you in advance as well for connecting with us. Without further ado, we will start with the content of the presentation. So if we may please go through Page #3, I will be covering the first 2 sections. One, the first section is on the global demand-supply dynamics. This was called previously, the industry highlights. Then I will dive into Alba's highlights for the last quarter of 2024. Post that, our CFO, will take us in detail into Alba's financial performance for the full year of 2024. And in the last 2 sections, our Chief Executive Officer, will give us more insights about what are we expecting today in the aluminum industry for 2025 as well as highlight Alba's priorities for 2025. In the appendix, we do have the financial results for the Q4 2024 which we will not be covering unless if you have any specific questions. And with that, we move into Slide #5 to talk more about the world market consumption. As we note, the consumption was up by 3% year-over-year. In terms of the global economy dynamics, we've seen resilience with moderating inflation and stabilizing growth, but risks remain with geopolitical tensions, trade policies and supply constraints. That has been the major highlight for 2024. For China, the primary aluminum demand was up by 4% year-over-year, driven mainly by energy and transportation sectors, though properly market oversupply remains a concern. In the Middle East, the consumption was up by 1% year-over-year, led by higher consumption in Bahrain, plus 4% year-over-year. With regards to Europe, the consumption remained flat, hindered by manufacturing weaknesses and uneven regional growth. For North America, the demand was down by 1% year-over-year with strength in packaging and electrical sectors, offset by weaker auto and construction markets. Moving into Slide #6 for the world supply. The supply was also up by 3% year-over-year. In China, the supply rose by 3% year-over-year but mainly -- but remained near its capacity cap of 45 million metric tonnes. For Europe, the output was up by 2% year-over-year, mainly supported by Germany and Russia. For the Middle East, the production rose by 1% year-over-year with Saudi Arabia contributing with an 8% rise into the supply. For North America, production was down by 2% year-over-year, primarily due to a 12% decline in the U.S. output following New Madrid smelter closure. As for the market balance, a slight deficit to grow with inventories falling to lower levels compared to historical norms, 242,000 metric tonnes with China and surplus without China about 41,000 metric tonnes. Moving now to the LME price and premium trend, Page 7. The LME price in 2024 averaged $2,420 per metric tonne with fluctuation in the first quarter between a low of $2,470 on 19 December and a high of $2,655 per tonne on 7 October 2024. With regards to the LME inventories, it grows by 12% year-over-year to about 635,000 metric tonnes by year-end 2024. And in the premiums, as you see in the below chart, the aluminum spot premiums reached multiyear highs in Q4 of last year, driven by tight supply and geopolitical factors. Moving on into the last slide within this section, Page 8. The alumina price index was 21% of the LME price. If you note in the first chart on this slide, the Q4 2024, the LME price averaged $2,573, which is an increase of $383 per metric tonne versus Q4 2023, while alumina price index as stated earlier, it averaged 21% in the last quarter of the year versus 16% in Q4 2023. Moving on into the Alba highlights. We will start first with our safety performance. As you see on Page 10, we have hit 30 million safe hours without LTI on the 23rd of January. And for the last couple of days, we have topped 31 million safe hours without LTI. If we look at the chart on our left, you will see our performance trend from 2019 to 2024, where we had our total injuries in 2019 at 59 versus 20 in 2024, I consider a significant reduction in terms of injuries. LTI, we have finished 2024 strong with 0 LTI versus 1 in 2023 in terms of our recordable injury, we have also seen a notable reduction from 9 in 2023 (sic) [ 2022 ] to 4 in 2024. This is our ESG journey by 2035. Nothing has changed in this slide, except for that we have celebrated the commissioning of Block 4 in Power Station 5 yesterday before our Board meeting. And just as a reminder, Block 4 adds 680 megawatts 0.9 to Alba Power Station 5 and by that, Alba Power Station hub -- Power Station 5 will have more than 2,000 gigawatt -- megawatt electricity. Moving on now to our ESG achievements and our plans for the future. As listed in the previous slide, we have achieved 31 million safe working hours without LTI. We have -- as per our communication in November, we have successfully contained a minor industrial fire safety at power rectiformer supplying Line 1. And despite this incident, we have also closed our production strong for 2024, and that has also been announced. With regards to the social aspects in ESG, specifically with regards to empowering our local talent, we have celebrated the graduation of our first batch of Top-Up mechanical engineering cohort from the University of Huddersfield in U.K. as well as the first batch from Bahrain Polytechnic in Bahrain, the Top-Up engineering. With regards to security and environmental stewardship, we have renewed our alumina supply contract with Alcoa for 10 years, a partnership rooted in sustainability. Alcoa has been one of our other suppliers when it comes to raw materials. This contract was renewed in October of last year. We have also signed a JV with Daiki Aluminum to establish the first dross treatment -- the first aluminum dross processing plant in Bahrain by September 2026 on the basis of Alba having 70% out of this JV versus 30% for Daiki. In terms of our community impact, we continue to prioritize the well-being of our female employees with the month-long breast cancer awareness campaign. In terms of preparing towards our future, we are -- we have been embracing artificial intelligence and automation through our recent partnership with ARRAY Innovation to accelerate industry's 4.0 transformation through advanced artificial intelligence and data analytics as well as automation solution and Comvision as well to transform our inventory management and tracking system. With regards to our plans for tomorrow, as stated previously, yesterday we have celebrated the commissioning of the Block 4 as on -- as per schedule. In terms of our solar farm, we're progressing as well as per schedule, and we are about to also commission the farm. Moving on into Alba and Ma'aden. I will be reading from this slide, which is on Page 13. Just to note, these points have been formerly filed on Bahrain Bourse website. So on 16 September of last year, we have announced a nonbinding agreement with Ma'aden to commence due diligence towards a potential business combination with segments of Ma'aden's Aluminum strategic business unit. By September -- by 17 September 2024, Alba was notified on -- by its shareholder, SABIC Industrial Investment Company, of an agreement for the sale of its 20.62% shareholding in Alba to Ma'aden. And as you know, SABIC has a substantial shareholding of more than 10% and Alba's issued and paid-up capital, and as such, this transaction is subject to CBB's approval. On this note, I would like to mention that SABIC has completed its block trade on Bahrain Bourse on 17 February just 2 days ago. And as of today, Ma'aden has become officially a shareholder in Alba owning 20.62%. Earlier in this year, 13 January 2025, Ma'aden and us, we have announced to extend the validity period of the nonbinding agreement from December 31, 2024 to 30 April 2025 and then we have agreed with them to discontinue the discussion with regards to the merger and to terminate any contractual rights with respect to the marketing and sales of products produced by Ma'aden. And with that, just to show you our celebration with regards to the new production record we have set despite the challenges we have had with R16 rectiformer. We have celebrated achieving 1.622 million metric tonnes earlier in January of this year. In terms of our operational highlights, our sales volume increased by about 1% despite the market challenges and the uncertainty in last year, and we have hit more than 1,611,000 metric tonnes. For our net finished production, we disclosed that with an all-time record as stated previously. For value-added sales, we have averaged for the first time in our history, 72% of total shipments corresponding to an increase of 5.6% year-over-year. Moving now into the slide of e-Al Hassalah. As you know, this is a new key initiative that we have announced earlier in '24 with the aim to achieve $150 million in terms of a target. It's a 3-year program, and we report our achievements on a yearly basis. So in 2024, we have achieved $59.57 million versus a target for 2024 of $60 million. The target for 2025 this year is $60 million and for 2026 is $30 million. Moving on to Slide #17. These are our sales in terms of geographic footprint. As you see, Bahrain is the highest almost in terms of our sales breakdown, we have sold directly to Bahrain 27.4%, in the same -- as well for the same percentage we have also shipped to Europe 27.4% with the rest being almost equally distributed between MENA region 16%; Asia, about 15%; and Americas 14.3%. With regards to our breakdown in terms of product lines. As stated previously, we have 72% in terms of our value-added sales, value-added sales comprise foundry, foundry LOEs, which is 19%, rolling slabs 11%, and billets 33.1%, and the rest is distributed between liquid metal, standard ingots as well as high-purity metal. In terms of our high-level KPIs for Q4 and the full year, I'll just go into some of the rationale behind our financial performance. Our EBITDA for the full year was up, driven by higher LME price and partially offset by higher alumina prices as well. In terms of our net income, it went up and this performance was driven by higher EBITDA, while for our free cash flow, it was impacted mainly by working capital changes. This has allowed us -- allowed our Board of Directors to recommend a final dividend tranche of $100 million to be paid starting from 8 of April 2025. And that corresponds to 35% dividend pay-out ratio. Just as a reminder, Alba has paid an interim dividend last year in August following the release of our half year results. On the following slide, Page 20, this showcase Alba share performance for the last year. We started 2024 with BHD 1.145 per share, and we've ended the year at BHD 1.3 per share. This is a 13.54% increase year-over-year. The highest share price last year was at BHD 1.420. In terms of our operational productivity. So we've ended 2024, at 3,179. This is our workforce, internal workforce, plus 1,200 employees as our contractors for our external workforce. In total, it's 4,379 persons. It's worth noting that Alba's Bahrainization rate has increased over the year. And today, it sits at 87%. In terms of our value-added sales, as stated previously, we have hit a record level at 72% versus 2023, where we have achieved 68% of our total sales. Our account receivable days trend have increased by 5 days from 46 days to 54 by end of 2024 as the same can also be said with regards to our inventory days trend, where we had an increase of 10 days from 2023 of 103 days. Last in my slide is our net debt-to-EBITDA ratio trend. As you see, we have maintained a very healthy ratio where we have 1.17x of our EBITDA. The net debt today -- sorry, at the end of 2024 was at $1.1 billion, while our cash was $303 million. And with that, I will leave the floor so that you have more substance and understand the rationale behind Alba's strong performance for the full year of 2024. Ricardo the stage is yours.

Thank you very much, Eline. It's a great pleasure to talk again to our investors, really pleased to do that. Before we start talking about the numbers, it's important to put the year of 2024 into perspective. In summary, the year of 2024 was another year of record for Alba. As Eline demonstrated on her presentation, from a safety perspective, we have achieved all-time lows in total -- in recordable injuries and total injuries. We have achieved it now just now in January this year, 30 million hours of operation without any LTI. And now we are operating 31 million hours without LTI. And over the last 6 years, this is the third time that we operated without any LTI. From an operational perspective, looking only over the last 10 years. This is the 10th consecutive year in production for Alba. This is also the seventh consecutive year of record sales and the fifth consecutive year of record VAP sales. Just to put again the numbers into perspective, when we look over the last 6 years, we basically added 600,000 tonnes of VAP products to our portfolio. So definitely an outstanding performance. Moving to the -- going through the numbers, starting on Page 24. The first chart shows our performance in terms of the top line in terms of our sales revenue. So we have achieved this year $4.29 -- $4.3 billion basically of sales revenues. And this is mainly due to higher LME and that basicallly increased $170, $167 compared to previous year, an increase of 7%. And our premiums, which was partially offset by lower premiums that decreased by 7%, around $20. And at the same time, we see an improvement on product mix and improvement in volume which increased our metal sales to $22 million. So our reliable operations, our improved performance in sales enabled us to achieve these good results on the top line. Going through the next slide, on Page 25. We see a drill down in terms of quantities at the left chart in terms of the sales over -- comparing '24 and '23 we see that there is a very clear migration between commodity products and value-added products. So 65,000 tonnes less commodity products against 62,000 value-added products, 12,000 liquid metal increase. So it is for our local country players, customers. And this increase in value-added product is basically 6% when compared from previous year, which again, is an outstanding performance. At the right, we have already mentioned the premium above LME trends. So what we get in terms of revenue above the LME. We were 7% below as a consequence of the challenge in the market around $21 and 7%. Final premium average in 2024 it was $268 per metric tonne. Going to the next slide, Page 26. We have an overview of our production costs. We have a marginal increase in production cost around 1.7% and this is mainly as a consequence of major raw material prices, mainly alumina, which was partially offset by an improved performance in terms of our consumption of raw materials and also was offset by lower prices mainly in coke and alloy. So other raw materials. We also see a small variance related to the alumina sales cost that was basically, this is a cost part of the sales. So this is obviously will come later on the EBITDA analysis. And also, we see an inventory absorption of positive impact of $43 million over the year as a consequence of higher production than sales. In terms of plant spending, we had a year where we faced around $60 million of one-off and timing on provisions impact, from this $91 million total impact around $60 million are between one-off and timing provisions. And remaining $31 million is normal ordinary inflationary pressures, plus some timing in some of our maintenance activities for the year. If we go to the next slide, Page 27, we look at EBITDA. We see there is an improvement in margins. So last year, we were at 20% of EBITDA over our net sales revenues. And this year, we're going up and has been updating 20% performance of our net sales. The main point, as described on the slide of Page 24 is fundamental sales which LME has a very positive impact as described on that slide. We have a minor impact on the sales of alumina and the direct cost impact as explained on the Slide #26. Selling expenses, we had a $16 million impact of our EBITDA, and that's mainly as a consequence of higher prices, is still as a consequence of freight and the challenge that we see on the Red Sea and at the same time, a higher volume of sales and shipments. Going to the next slide, we go to the Page 28, and we see the cash flow bridge, how we have utilized the cash generated in 2024. So basically, we generated close to $1 billion from our operations. We had the challenge of higher alumina and LME impacting our working capital but we also have a positive impact on our working capital related to lower inventory and optimized cash collection of our receivables. We have spent around $225 million of CapEx on the year, which is really in line with our historical trend. And we have also separately, we demonstrated on this graph, spent around $52 million for the conclusion of the Block 4 Power Station 5. We have serviced our debt in $243 million, and we paid in 2024 to our shareholders, $130 million last year. Our net cash flow for this year generated was $144 million. When we see at our right and we see what was the operating and investing cash flow comparing to -- comparing 2024 to 2023, we see that there is a decrease in amount of cash flow generated in 2024, and that's mainly related to the prices of alumina and LME as explained on the chart on the left. If we go to our final slide, Page 29, this is a simple [indiscernible] metrics, financial metrics for the year. We see at the left Q4 2024 and Q4 2023. When we look at the Q4 '24, for the quarter, we see an increase on our revenues, but also -- and that's good part is related for the increase on LME. But we also see an increase -- a decrease in terms of margin when we look at EBITDA comparing Q4 2023 and '24, 20% against 17%, and that's mainly related to the impact that is demonstrated on the last -- on the final row of this table, that is the impact of the average API increase. So the profit for the quarter after the adjustment of the unrealized derivative commodity hedging is $98 million, $62 million -- against $62 million in Q4 2023. For the year -- for the full year on the right of this table, we see an increase on the revenues as we discussed before, our EBITDA with a healthy increase in terms of margin, 22% against 20% as described before, our reliable and safe operation enabled us to retain the benefit of a higher revenue but we were also challenged by higher alumina price as a consequence of some supply chain issues at the end of the previous year. So with that, I pass to our CEO, Mr. Ali Al Baqali.

Thank you, Ricardo. I will take you -- good morning, good afternoon. I will take you through the last 2 sections in our IR presentation, which is industry perspectives and Alba priorities in 2025. I will start with industry perspectives. Market is still uncertain and volatile due to several reasons. One of them is the U.S. tariffs, which is increase in aluminum and steel by 25%. There is still -- the market is still volatile because of this, and there is a lot of uncertainties behind the demand on this. But to be clear, the U.S. they produce almost less than 0.5 million tonnes, and they are -- need more than 4 million tonnes, which means there are shortage of metal. Definitely it will put pressure on the premiums and the Midwest to increase to reflect the increase in the tariff, which finally it will be absorbed by the final consumers in the U.S. The second reason that the possible of European sanctions on the Russian metal, this is also another thing it will lead to positive and negative things in the market depends on the U.S. tariff and if the U.S. administration, if they don't give any exemption to any countries, then that it will be fair for everybody and the market will react accordingly based on demand and supply. However, they target exemptions or whatever then it will reflect somewhere on the premium from both sides, the European premium and U.S. premium. If we go back to the demand, as normal way in beginning of every year, we saw there is a slow demand in the aluminum. However, anticipation of this, it will be picking up later on in the quarter 2, and it will be normalized by the end of the year since there is a cut in the Chinese to 45 million as a cap of production as well as there is no expansions to increase the supply, this all reflected on the market fundamentals. If we look at the premium, once there is an announcement of the U.S. tariff, the Midwest premium reflected very, very rapidly. And we saw a sharp increase in the premium in the Midwest. Also, if we look at MJP, MJP premium for quarter 1 this year, it's almost $228 whereas at quarter year, which was $172. Our expectation for delivery price is still very difficulty to identify the range but to me, to not go through or it will not go below than $2,400 and it will not exceed $2,600 on the digital formation. If we move to the feed stock. If we move to the feedstock for the major raw materials, the alumina price is expected to be volatile. We saw a sharp decrease in the alumina today within the range of $500, but still there is bauxite constraint and concern because of some of these bauxite are still -- they don't have the licensing to release the material. In terms of the [indiscernible] material, like the carbon, like GPC, CPC and anodes, the expected price would increase because of the oil price increase. For the liquid pitch, we see there is some price stability from quarter 4 till quarter 1 this year, and we believe that this stability will continue till the end of the year. In terms of aluminum chloride, we are expecting to be -- the price to be soft a little bit on the market as demand. If I move to the Alba priorities, which will start with Page 34. We are always focusing our priorities on safety. As Ricardo mentioned that, we are operating on 31 million hours without LTI. This is our aim to achieve these things and always to keep the plant 0 of harm and always our objective to allow Alba employees to come to Alba safely in the morning, work 8 hours and they leave also the plant safely. And in terms of the ESG, as you are aware that we have our ESG roadmap, it was approved, and there are some action or a quick action already done like the Block 4, we completed the Block 4 in December. And yesterday, we celebrated for the opening or inauguration of Block 4. Block 4 will make us to utilize the gas more efficient which will increase the efficiency of our Power Station 5 as well as it will reduce the carbon intensity by 0.5. In terms of operational excellence and the growth, we are pushing to always exceed the last year projection, and we are targeting above 1,622,000 tonnes. In terms of e-Al Hassalah, as Eline mentioned in the beginning of the presentation, we have a plan to achieve $150 million. Last year, we achieved almost the target of the first year, and we are targeting this year 2025, the $60 million. In terms of our growth or market expansion, we are leveraging from our industry-leading certificate like ASI, like EcoVadis, like also to try to sell on a trial basis, more on our new product, which is called EternAl. EternAl is a low-carbon project targeting lower carbon emissions, which consists of 15% scrap content. This is one project and other project, 30% of scrap content. We are going to maximize the VAP to exceed the 2024 VAP percentage. And as Eline mentioned, this year, by quarter 1, we are going to complete the solar farm, which will add 6 megawatt to our grid. However, these are small megawatt, but it shows that our commitment to our customers, our stakeholders that are very serious to reduce the carbon emission and Alba. In terms of the new replacement line, yesterday we got the approval from the Board to proceed with the final feasibility study that will take almost maybe 6 to 8 months and based on that definitely we are going to go for the next phase to present it to the board in order to do the bankable study and feasibility study later on. Last slide, which is 35. Normally every year, in the beginning of the first week or second week of January, I have my own annual majlis with all Alba employees, similar to the townhall meetings. During that meeting, I share all my new objectives with all employees, with all my executive and management teams and to give them an update on what we achieved in 2024 and what is our objective for 2025. This year, we put 4 broad objectives. The first one we called Albawee. Albawee means you are belong to Alba in every aspects and you are like -- if you are in front of any football club, you said I am [indiscernible] whatever, this is the same concept of that. Alba's an open space, this is also another objective for Alba. There is no limit, the sky is our limit for any objective report in terms of production, in terms of efficiency, in terms of reliability, nothing to stop us from thinking out of the box. The third objective, which is targeting the human, and we target that tapping into talent would like to have a proper succession planning to take Alba to the next level in the future. And we have very comprehensive succession planning, addressing or targeting all level and organization from the CEO till the supervisor level. Then the final objective which continue to our saving program which is e-Al Hassalah year 2 to complete the e-Al Hassalah within the 3 years in order to achieve the $150 million. By is, we conclude our IR presentation. I will leave the floor to Eline to have any questions from you. Thank you very much.

Thank you, [indiscernible] and Ricardo. As I stated earlier, we have had a technical issue, so apologize for this. So I will go back to our coordinator on the call to help us read the questions since we are all connected through our mobile phones in the executive conference. Anoop, are you on the line?

Eline, I think let's just open the floor for the audio questions first.

[Operator Instructions] Our first question comes from the line of Shashi Shekhar from Citi.

I have 3 questions. The first one is on the impact of U.S. tariff. I just wanted to understand the impact of tariffs on aluminum by U.S. on Alba's sales and profitability? And how does Alba export to U.S.? My second question...

Your voice has disappeared.

Shashi Shekhar from Citi, your line is still open. Please go ahead.

Yes. So the question was about the impact of U.S. tariffs on Alba and how Alba sells to the U.S. Maybe we can take that. Let's wait for him to join.

Yes. As I stated, the impact is still not known because the good thing, if the U.S. they impose the 25% across all the levels, then there will be no major impact on Alba. For the short term, what we see now, the implementation of the tax will be imposed from March, we noticed that from first day of announcing the tariff, the premium increased to cover a majority of that percentage. And by the way, also the aluminum also increased. For the short term, maybe if there is an impact, it will be very minimal. But for medium and long term, it will be absorbed and it will be balanced by the end of the year. Any other questions?

Yes. So Shashi has joined us again.

Yes. Sorry, the call got disconnected. Well, I had 3 questions. I think I already conveyed the first one. My second question is on the deal with Ma'aden. Could you please provide some details on what happened there? And I mean, why the talks terminated? And can we expect the talks to resume in the medium term? And my last question is on inventory levels. I think expectation was for inventory to lease in the fourth quarter, but that didn't happen. Wondering what happened there, whether I'm wrong or something else happened? That's it for me.

Yes. Ma'aden, I will take it, then the CFO will handle the inventory, will talk about the inventory. Ma'aden, as we stated in our announcement in Bahrain Bourse, the discussion was discontinued. There is no pledge, no thing. This was normal initiative all was discussed. Then to resume the talk in the future, nobody knows in our radar to be discussed. And this is -- the main thing that was between the major shareholder, to me, personally, if you look, it was a good discussion, it was good initiative. But maybe now it is not the right time to go through it yet. Inventory?

So here it's Ricardo again. So in terms of the inventories for the end of the year, as mentioned during the presentation, we had seen a relevant impact in terms of pricing, and that's for both the finished good as LME went up and also an impact in terms of alumina as well as the price went all the way up to $800 a ton close to the end of the year, and that obviously impacts our inventory. But in terms of volumes, we are basically in line when we see the full volumes, but a bit below in alumina, which helped us and partially offset this impact of price.

Okay. So some of this could unwind, right, in the first quarter, the pricing impact?

Can you -- sorry, can you just repeat, please?

The pricing impact of aluminum and alumina, some of that could unwind in the first quarter '25, right?

Yes, definitely, there is a part of this impact that will come on this first quarter, but we also need to take into consideration that the LME is now at a higher level than it was at the end of last year. So we have a combination of these impacts and some type of offset of this higher impact because of LME is higher as well. And the good thing is that we see that alumina price is also going down, some minutes ago last time that I look at it, it was around $500 which is an improvement based on what we have seen over the year. So the message is yes, we will see a bit of this price impact unwind on the first quarter, but we also see a positive impact on LME that is better than expectations.

Yes. We have a question on the chat from Nour Eldin. Should we still expect the dual listing in KSA? Is there a time line? That is question one. And there's a question on the tariffs, which you've answered. The second question is, do you see the recent decline in alumina as sustainable for the rest of the year?

Yes, for the dual listing, I will take it and the rest of the question, I will leave it to the CFO. Dual listing, as you are aware that it is part of our strategic initiatives in the past. And since we start with the Ma'aden discussion, we keep it in hold. However now since we end the discussions, definitely it will be in our radar, but I don't have the clear window when we are going to do because we have to reinitiate the process and to update our studies.

Right. So in terms of alumina price, what was the key reason that we saw for last year price increase were related to supply chain disruptions. So we had a list of them as well known on the market. So there was disruption in Jamaica, disruption in Brazil, disruption in Australia. So all these disruptions are basically in the past, the price due to its mechanism, it takes a bit of time in terms of adjustment because it's really -- it really depends on the new spot sales that are not happening that much at this stage. But in terms of our view so far, based on the market fundamentals, we see that the price will go back to what are the historical trends. And as we do not foresee any other huge disruptions in the supply chain.

Okay. This is Anoop. I have a couple of questions actually. Let's start with the housekeeping questions, the modeling part. Firstly, there was a big jump in the SG&A expenses in the fourth quarter. Is there any particular reason why there was a spike in these expenses? Secondly, on alumina, should we expect the realized price in the first quarter to be somewhere upwards of $600. I know in the presentation, you have mentioned about $553 as the realized price in the fourth quarter, but should we sort of model upwards of $600 just for the first quarter and then a decline thereafter? And the last question here is on the liquid pitch. I think, Ali, you had mentioned some tightness in the coal tar market. Could you please talk a bit more on why do you see that tightness going forward?

Okay. So starting with G&A increase. We had sort of timing consequences and also some one-off costs, we had higher consultancy costs and even some impact of the studies that we are doing for the merger, potential merger with Ma'aden. We had some timing in our bonus provision that has impacted this year and previous year's results. And at the same time, as part of the incident that we had under our rectiformer 16, we had some one-off costs that were considered this year. So from once we see from perspective of the line G&A, we see that the time impacts that happened, they happened related to the one-off or timing impact, okay? Related to alumina, see, I will -- you will have your own models and you know very well how to do your calculations and estimations of what will be the impact. But I can tell you that it makes the whole sense to consider that we still have some impact to come in the first quarter and that the first quarter will stay on the high side in terms of alumina costs. And the expectation mainly based on what we see now and taking into consideration that we have a lag effect -- impact, sorry, to lagging effect to impact our results around 2 months, 2 to 3 months. We expect that the price goes down, mainly taking into consideration the $500 that we are seeing today as being traded in the market but we always need to bear in mind as well the positive impact of LME that is higher than it was in the year end of 2024 which I'd like to mention.

Yes, for the liquid pitch, if you notice that all these black materials, there is somehow direct correlation between oil price and these commodity markets. If you look at the liquid pitch, this is from what we are getting now. We saw there is a stable price from quarter 4, quarter 1, but maybe because of the oil price goes up, maybe the second half of 2025, maybe the price will increase a little bit.

Okay. Understood. While we're waiting for more questions to come in. Just 1 on the surge in Midwest premiums. So just trying to understand how does this impact Alba? I mean you'll have a higher cost that you have to pay because you have to now pay tariffs in the U.S., but do you get fully compensated for that with the higher premium? Or is there some positive net impact or a negative net impact? If you could please give us the mechanics of how this works and in terms of your sale and realizations?

Yes. See, there are 3 international index for the premium. One is to target Asia market, which is MJB, Japanese port. And there is Midwest, which is targeting America, Brazil, Mexico, North America as well as there is DDP Rotterdam duty paid and duty paid, it depends. If there is anything reflected normally the premium include certain aspects like the transportation cost, like cutting costs somehow and administration costs. If you noticed that since there is an announcement from U.S. to increase the tariff by 25%, the Midwest increase from 24% to 30% something or 40%, 42% something. This is purely -- it's almost absorbed more than the 25% -- less than the 25%. Maybe half of that is already absorbed just because of the announcement. Imagine that, also there's an increase in LME price because of that announcement. Overall, as and when it become imposed, the Midwest, it will reflect the 25% automatically in the premium. So of course, the final absorber for this cost, it will be by the end user in the U.S. You've got the mechanism now?

Yes, I got that. But for Alba on a net basis, there is no impact, right? Because the higher tariff that you pay is sort of compensated.

It is absorbed by higher net -- higher premium.

Okay, understood, understood, understood. Just 1 last question before we join the queue again. So recently, there has been some news about tightness in the market and the curve has gone into backwardation at the front end. I mean, are you -- is this related to just this volatility because of the tariffs? Or are you seeing some green shoots in terms of demand, some turnaround in the cycle? How are you seeing this? I mean, are you all noticing the sort of tightness from your customers as well?

Okay. So in terms of -- yes, we have seen recently a backwardation of the curve. We don't see that as an impact on the mid-term or any type of lower demand. We see as a normal adjustment in terms of LME as it's very high at this stage or is high at this stage. So obviously, we might see in any other commodities, some short disruption, but mainly because of this change in terms of the tariffs in the U.S., the market will adapt but we don't see -- we don't foresee any change on the fundamentals of the positive outlook of aluminum metal for the midterm. Okay?

Yes, understood, understood. Management, over to you.

Our next audio question comes from the line of Aakarsh Tomar from SICO.

This is Aakarsh Tomar from SICO Investment Bank. Congratulations on a good set of results. Just 1 question from my end. Can you give us an update on the replacement line project? Or do you have some time lines, if there's no update currently do you have some time lines which you can share regarding the replacement line?

As I stated during the presentation, the new replacement line is replacing Line 7 because our division has to replace or to do the line -- the new replacement line inside Alba and not outside Alba. And by that, we have to close Line 1, 2 and 3. The time frame for the feasibility study, as I mentioned, 6 to 8 months and after that, if we go for the bankability study and feed study, it will take another also 6 to 8 months, then by -- and if everything go as normal I mean it will take the project only take it 3 years from beginning to the end to make it easy for you.

Aakarsh, of course as our CEO mentioned, I mean, for every part or every milestone we do, we usually publicly announce it. So definitely, you will get to know more about the time line should we proceed with the project. As it currently stands, we are having approval to progress with the full feasibility study. The feasibility study will be conducted by Bechtel and as pointed out by our CEO, it will take from 6 months to 8 months. So you can expect hearing more about it probably in the Board meeting in September for the third quarter, and we will be keeping you all updated as we progress with this particular matter.

Just 1 thing I wanted to get a clarification if I heard it right. So will it be at the same place that you have Line 1, 2 and 3? Or will it be a separate -- like it will be in a separate locality or will you use the same line that you are operating your current lines? I just wanted to understand.

Yes, Akash, it will be replacing Line 1, 2, 3. Definitely on Alba site, within Alba fence.

There are no further audio questions at this time. So I'll hand back to the speakers.

On behalf of SICO, I'd like to thank Alba management for the call and thanks to everyone for their participation. Eline, any closing remarks from your side?

Thank you, Anoop. As always, on behalf of the management, we thank you and SICO for hosting the call. Again, we would like to apologize to all the participants today because we were not able to connect on time. We're still facing the technical issue, but I hope we've managed to answer your questions. You heard us clearly through my mobile. And if you have any other question, please feel free and drop us a note, and then we will address it immediately. And until next time, next quarter in May, have a lovely day and keep well. Thank you.

This concludes today's webcast. Thank you for participating. You may now disconnect. Speakers, please stand by.