Alumina Ltd. (AWC.AU) said Tuesday that first half net profit for the period ended June 30 jumped to US$44.2 million from US$4.2 million a year earlier.

On an underlying basis, it recorded a US$22.2 million profit compared to a US$10.4 million loss in the first half of 2009. A consensus of three analysts had forecast the figure at US$36 million, with a wide range from US$28 million to US$43 million.

The company attributed the improvement to higher sales volumes and prices and good cost control, offset by the impact of a stronger Australian dollar and costs associated with ramping up its Brazilian operations.

Chief Executive John Bevan forecast that global alumina demand would grow 12% this year.

"Profit is up and the major turnaround in cash flow and market conditions has enabled the board to reinstate the interim dividend," he said.

Alumina, whose sole significant asset is a 40% stake in the Alcoa World Alumina and Chemicals joint venture with Alcoa Inc. (AA), will pay a dividend of 2 U.S. cents per share. It didn't pay a dividend in the previous corresponding period.

Revenue for AWAC rose 55% to US$2.65 billion, compared to US$1.71 billion during the first half of 2009.

The company was still suffering last year from the effects of the global financial crisis, during which market aluminum prices averaged below US$1,400/ton compared to an average of US$2,160/ton in the first six months of this year.

The Australian dollar has also strengthened against the U.S. dollar since the previous year to a first half average of US$0.8930 from US$0.7130 the previous year.

However, the effect of that change no longer shows up in Alumina's results, after the company changed its reporting currency to U.S. dollars in February.

AWAC is the world's largest producer of alumina, an intermediate material used in the production of aluminum from bauxite ore. It operates bauxite mines and alumina refineries near Perth, Western Australia, and smelters on the coast of Victoria, as well as owning assets in the U.S., Brazil, Spain, Guinea, Suriname and Jamaica.

During the first half of the year Alumina received US$94.9 million in dividends from AWAC--its main form of cash income--compared to US$79.8 million in the first six months of 2009.

Bevan said the company was seeing signs that the market was moving toward shorter term, index-based pricing of alumina, in line with changes that have taken place over the past year in the pricing of iron ore and coking coal.

"The industry trend toward shorter and spot contracts for alumina has continued," he said. "We see this providing continued momentum for index-based pricing of alumina."

Alumina has traditionally been priced around 12%-17% of the market aluminum price, a convention that ties it to swings in the metal markets and smoothes over the material's own supply-demand balance.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com
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