Aluminium Bahrain B.S.C. ($ALBH)

Good day, and thank you for standing by. Welcome to the Aluminium Bahrain Update Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Anoop Fernandes. Please go ahead.

Hello, everyone. Hope you are all well and safe. This is Anoop Fernandes. And on behalf of SICO, I welcome you all to Alba's webcast focusing on the Lines 1, 2, 3 shutdown. With us today, we have Alba management, Ali Al Baqali, CEO; Ricardo Santana, CFO; and Eline Hilal, Director, Investor Relations. Before we begin, I'd like to highlight that this call is strictly for the investor community only, and we request any media personnel dialing in via call or webcast to kindly disconnect now. Without further ado, let me hand over to Eline.

Thank you, Anoop, and good afternoon to everyone joining us from this region, and good morning to our colleagues tuning in from Europe. To all our participants across the GCC, we hope you are keeping well and safe. It's a pleasure to reconnect with you for our second interaction of 2026. Thanks are also extended to Anoop and the SICO team for hosting today's call. As stated by Anoop, this call will be led by our CEO. And to reiterate what Anoop has mentioned, this call is strictly for the financial community, shareholders as well as investors. So we kindly ask all reporters from the good outlets to disconnect from this call. This is not a press conference. This call is strictly for the investors community. And without further ado, I will request the CEO to walk us through his presentation.

Good afternoon, and thank you, Eline, and thank you also for everybody joining us today. We are holding this call to provide more clarity on the recent operational step taken by Alba, a response to the closures of Strait of Hormuz. Transparency and timely engagement with our shareholders remain central to how we operate, especially in the moment where there is regional tensions. Over the past several days, as you are aware, the regional situation has introduced increasing pressure on the supply chain flows. Our response was initiated last Sunday, a controlled and safe shutdown of our Reduction Lines 1, 2 and 3, and we keep them under care and maintenance. As part of the controlled shutdown, we will carry out essential asset care to enable safely start once the conditions improve. This is a proactive measure action designed to preserve the stability of our operations. Let me emphasize again, this is not a shutdown driven by an operational incidence. Rather, it is a strategic move and disciplined adjustment to align the production with the available raw material in our hands. While maintaining a steady output across Lines 4, 5 and 6, by acting early, we protect our long-term capabilities and ensure we remain in a good position when supply conditions normalize. Our priorities at this stage are in 3 situations. One is the safety of our people and contractors, workers. Second, we want to protect Alba assets that's why we are doing a controlled shutdown of the Line 1, 2, 3. And definitely the continuity of supply to our global customer base. Today, we are closely monitoring the development, and we are in active dialogue with our suppliers and logistics partners to secure material flows and assess alternative sourcing options. At the same time, we are working hand-in-hand with our customers to manage commitments and minimize any disruption. You can expect from us the same discipline, transparency and operational focus that we are guided Alba through past challenges. We remain confident in the resilience of our operations and our ability to navigate temporary disruptions with foresight. And with that, Eline, she will be reading your questions from the screen, and I will be trying to answer the question. And if necessary, maybe Ricardo, our CFO, will add some of his answers. Thank you very much.

Thank you, [ sir ]. And Nadia, if you don't mind, if you can start reading the questions from that -- questions that you have received from the call.

[Operator Instructions] And the first question comes from Shashi Shekhar from Citi.

Can you hear me?

Yes.

So I have 3 questions. The first one is, how long can you continue to operate at 80% capacity with the raw materials inventories that you currently have? My second question is, what will be the impact of this incident on the overall sales in the first quarter? And is there any alternative shipping routes you are exploring? And my last question is when situation normalizes, how long would it take to restart the Reduction Lines 1 and 3 -- 1, 2, 3, sorry?

Okay. About the length of the inventory because we are also screening the possibility of importing the major raw material through other ports and other channels, okay? We have almost 1 month consumption at this stage. And the impact in quarter 1, I think the impact, it will be very minimum because the shutdown has happened in March. And normally, we have already January, February results. So I think the impact in quarter 1 will be minimum. And what is the third question?

If the Lines 1, 2, 3 situation normalize, how long it will take?

Yes, we have an experience to restart the [ post ]. And based on our plan to do a soft closure or the controlled closure, I think minimum, it will take from 2 to 3 months to normalize a line. But because we have 3 lines in controlled shutdown, we will do it in parallel. I think it will take minimum 3 to 4 months to have -- maximum -- to have a full capacity in [ place ].

[Operator Instructions] I think we do not have any further audio questions. I would now like to hand the conference over to the management team for any written questions.

Okay. Thank you, Nadia. So I will start first with the first question from Jwala Saini. What is the estimated cost of transporting alumina and aluminum via the Red Sea, if that was an option or the other land option per ton? Are there any constraints in terms of availability of power supply to Alba?

Definitely, the estimated cost of transportation will go up definitely because of the situation. And normally, because of the situation, normally, the shipping line, logistics lines are taking advantage of as usual. So we are expecting the cost will be increasing and we saw that also this increasing. At this stage, there is -- we are not importing anything through the Red Sea, okay? But in terms of exporting, we are exporting the metal, and we didn't see that cost is increasing that much, which is reasonable based on our transportation from Bahrain to we are using Jeddah Port, for example, for exporting our metals. We are incurring the land cost. However, but we are able to meet our commitment to our customers on time. Power, actually, we don't have any issue with the power. Actually, we are -- because we are closing Line 1, 2, 3, actually, we are reducing our consumption from the gas. This also will impact our EBITDA, which will be the cost will be lower for the gas consumption.

Thank you. Another question from Jwala. How long can Alba run its operation at the current capacity utilization? And given the current alumina availability?

I already answered this question. And I said approximately 1 month, but we are doing a lot of separation in order to import the major raw material to extend that [ year ].

One question from [ Abdellah ] [indiscernible]. Does the significant increase in alumina price offset the decrease in production capacity?

Definitely, this is one of the elements. The LME price, which is above $3,500 definitely will offset the cost and the decrease in the production, especially the premium also in the higher side. This is another also element will improve the bottom line.

Another question from [ Abdulrahman ] [indiscernible]. How many tons of capacity will be taken offline?

Around -- as I mentioned that around the 300,000 metric tons, which is 19% of the total production.

A question from [ Bilal Sabah ]. How much is your running production and sales quantity now compared with the previous?

The running production actually, as we mentioned, now we are below by 19%, okay? But in terms of sales, we are pushing the sales as much as we can. But because of the disruptions of the Strait of Hormuz, we are not able to send our export by bulk, by container to that area, and we are using road. We have some inventory at the ground, but it's not that big.

A question from [ William ] [indiscernible]. Can you walk us through insurance policies at the group? Is there any political violence or business interruption?

Actually, maybe I should not see any answers at all. But normally, in such situations, the insurance does not cover such political violence because the business interruption will be counted once you have a damage in your assets. That's why that time you will struggle the business interruption coverage.

A question from [ Julius ] [indiscernible]. Are you able to ship the products to customers? And have you been able to send these products through the Strait of Hormuz to customers? Do you have any established route established?

Actually, we are already shipping to our customers via road, via sea, but not through Strait of Hormuz, through the Egypt Port, and we are also exploring to ship our metals through Sohar Port. At this stage, we don't have any issue.

One more question from Jwala Saini. Is there any possibility of any association given Ma'aden has excess alumina?

Actually, I would like to thank Ma'aden actually, they are supporting us in this difficult time. And yes, we are getting some extra alumina from Ma'aden.

A question from [ Bryan Bradshaw ]. Given your current alumina inventories, when would you consider closing further [ production ] lines to manage shut-ins in a controlled manner?

We are closely monitoring the situation, and we will see in the future if we need to do some revise our plan, then definitely we'll do that in order to sustain the operation of the other [ lines ].

One more question from [ Abdulrahman ] [indiscernible]. In terms of raw material supply, are there any major concerns in terms of procurement?

We don't have any issue with the procurement. Actually, all the materials are available. Only the logistics part is challenging.

A question from Yousef Husseini. How many months of inventory do you have on hand post the shutdown of Line 1, 2, 3? And realistically, how much of your alumina supply or aluminum export in percentage terms could be redirected via West Coast [ entirely ]?

Yes, this is actually, we are keeping very minimum inventory in the ground, okay? And that's why in an earlier question, I mentioned that we don't have agreed quantity on the ground as an inventory because we are shipping to a port.

Alumina company.

How much your supply of aluminum export in percentage...

Alumina supply?

Aluminum export in percentage together. Now around maybe around, 40% to 60% together, that is in Bahrain.

One question from [ Abdulrahman ]. If I remember correctly, Lines 1, 2, 3, are labor and headcount intensive? What are your plans regarding the work on those lines?

Actually, this is a temporary shutdown, temporary closed shutdown. We are expecting the situation will improve in the future. And definitely, once we get our major raw materials, the alumina mainly, definitely was going to restart. And the workers at this stage now, they are deploying to other lines to support to do some maintenance in the same line, keeping -- housekeeping in the same line, also line 1, 2, 3, and the rest are shift to other lines to support.

If the situation -- a question from Shashi, if situation does not improve, which spot lines you are targeting for the next shutdown?

Definitely, our strategy is to go by inefficient spot lines. We closed Lines 1, 2, 3. Definitely if necessary in the future, we will look at Line 4.

A question from Julius [ Bouchard ]. Are you getting support from your Saudi -- from your shareholder Ma'aden in Saudi? They do have primary aluminum production.

Yes. As I mentioned earlier, yes, they are supporting us and they are trying their best to support.

Does -- a question from Abdellah [indiscernible]. Does the current situation impact the company cash flow? And should the company delay paying dividends until the picture with the current situation?

No, actually, we have a healthy cash. I don't see any necessity to defer a dividend and our cash flow is healthy for the coming few months.

A question from Jwala Saini. From your presentation, I understand so far, you have been able to sell normally via Jeddah and as a result, no impact on revenue and on profit. Is my understanding correct?

You are correct, but there is some delay in the sales, but there is no impact on revenue. So what I see in March. Maybe there is a challenge, but hopefully, we are going to achieve our target -- the monthly target or below the target by lower percentage.

A question from [ Abdulrahman ] [indiscernible]. Could there be some sort of collaboration with Ma'aden to assist in transporting and selling the metal?

It's already done, and we have that port already established for that.

A question from Julius. In terms of regional premium, is there now a GCC discount to LNG price for aluminum?

There is nothing like this.

Another question from Jwala Saini. What is the cost of transporting or shipping from Jeddah and Sohar Port, extra cost per ton?

I don't have actual figures, but it's definitely slightly increase than normal transportation methods.

A question from [indiscernible]. Would this be a good time to see consolidation options once again with Ma'aden?

No comments. This is a shareholder answer.

One question from [ Varuna ]. How much alumina can you source from Ma'aden per month, the maximum possible?

Actually, Ma'aden, if you noticed that they build their refinery to suit their production. They have a minimum quantity to support. And whatever extra, we are trying to take as much as we can.

Thank you, [indiscernible]. A question from [ Bilal Sabah ]. Can you give feedback regarding the recent European acquisition of Aluminum Dunkerque? What's the profitability levels in terms of EBITDA and net income?

Actually, the transaction, as you are aware, just has concluded. And we are the winning bid on the competitive bidding. It's too early now to consolidate because we have to do a lot of paperworks in Europe in [ FDI ] and a lot of things. This is too early. I think the consolidation will be started maybe from next year.

A question from [ Yousef El Husseini ] . Can you share some color on the next shipment of alumina? Where does it come from? And how long it takes to procure?

Actually, I have a few couple of shipments waiting outside the Strait of Hormuz. Just we want to get the green light to open the Strait of Hormuz and plenty of alumina, it will come to Alba [ Jetty ].

A question from Nishit. How much alumina is being provided by Ma'aden? Is it significant? And can it be further increased?

We received actually -- I will not mention the tonnage, but we received one shipment already, and we are in a process to receive another shipment, and we are also in discussion of the third shipment.

One question from [ Ahmad Kamal ]. How is the company prioritizing its customers given the curtailment of production?

With this situation actually because of closures of Strait of Hormuz, our strategy of sales definitely should be flexible and to be changed. Definitely, we are supporting our customers with us as much as we can. Any effect, it will be across all the customers. We have to be fair with everybody. But the problems because of the situation, we have to -- we are not expecting to produce value-added products as before, and we have to convert to standard [ ingot ] to be more agile and flexible in terms of sales. Any other question? This is the final question.

Yes, Ali, this is, Anoop. Actually, I have a couple of questions. But before that, I'd like to express thanks from the entire investor community for this call and for the color that you're providing. I mean, it is much appreciated. My question is on -- firstly, on the trucking capacity. I mean, right now, every company that is operating on the Eastern side, on the Arabian Sea side wants to use road transport. Do you see that as a big constraint, especially trucking capacity to get to the port?

Actually, you are very correct. We are facing a challenge in securing the trucks, okay? And the cost of these transportation of trucks to be available is challenging or expensive. But overall, what I see it's manageable. You can find that quantity. I know everybody, not only the aluminum, also other products like steel, food, everything they are running out of these trucks. We are seeing the challenge. But so far, I see my logistics team, they are securing these stacks.

Okay. The next one is regarding the Dunkerque acquisition, not specifically to that, but does this whole dynamic sort of change anything in terms of how the stakeholders there perceive the riskiness of Alba. And do you see -- I mean, is there a possibility that these things could get delayed because they reassess the situation? Or if -- should we assume that the deal goes through regardless of what happens?

There is no link between what's happening now in the geopolitics with the transaction. Transaction is already secured, already secured the financing, the underwriting every year. I don't expect anything surprise. Just we are waiting for the regulatory approval from France and from European Commission, and we are proceeding. And from what I see, actually, it will be the closure of this transaction, it will be bring forward rather than the plan actually.

Ali, there are some questions on the written side as well.

If there are any questions...

Yes. Let me read it out. So there is a question from [ Varuna ] on what is the additional cost of exporting via Jeddah per ton? I think you've already mentioned that you don't have the numbers.

Yes, I don't have the cost, but definitely, it's higher than before, but I don't have the right cost. This is too deep for logistic guy to answer this, I don't have the number how many they have done at this stage.

One question from Jwala. What is the valuation in terms of [ EBIT ] to EBITDA multiple for Aluminum Dunkerque and the leverage for the new European acquisition?

This is actually we cannot disclose this information at this stage while we are not disclosing this.

A question from Julian. How much are you paying for Aluminum Dunkerque? Will you pay cash or shares?

It will be cash, definitely. And as we mentioned also earlier in the press release, the enterprise value was around $2.2 billion.

One question from [ Abdulrahman ]. Is the reason for the shutdown of Lines 1, 2, 3 more of a cost control measure or due to logistics?

Due the main decision to shut down Lines 1, 2, 3 is to utilize their alumina in more efficient line. This is the main purpose of this decision to sustain Line 4 price for longer period...

More question. One question from [ Mohammad Hashim ] . How much percentage of export goes to Sohar and Jeddah?

For Sohar, just we are exploring. But for Jeddah, as I mentioned, that's around 40% to 60% it comes in different range. But majority, any export outside Bahrain at the moment goes from Jeddah Port.

Do you expect -- a question from [ Sabik ]. Do you expect any pressure on working capital or trade lines if this situation continues?

Working capital, yes, because -- maybe because of the inventory at the ground, this is one. But it is manageable by getting higher LME price also. This is offset that challenge. And...

Are there any synergies with Dunkerque?

Are there any synergies? Yes, definitely, we are working on that one. But first, we have to wait for the closures of the transaction. Then definitely there's an synergy committee, there is dictated group with Dunkerque, [ Alba, AIP ].

And then we will also say as your director, we will be having another call with the financial community to discuss the proposed acquisition of Aluminum Dunkerque? And we're going to have that so hopefully once...

Or maybe you can have it once we close the deal. That will be better also. Any other questions? We're done?

Nadia, just advised that there are no additional questions on the audio line. And I believe the last question we have received was from Julius about the synergies with Dunkerque, which our CEO has answered. With that, we thank you, everyone, for the continued trust. And with this, our call will come to an end. Thank you very much for participating. And if you have any questions, please don't hesitate to drop us an email on the Investor Relations e-mail that you guys have. Thank you very much, and stay safely.

Thank you.

Thank you.

This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.