Key Takeaways from Aluminum Stocks’ 2016 Performance



Aluminum stocks in 2016

Previously in this series, we looked at aluminum stocks’ 2016 production profiles. In addition to production, it’s also important to follow profitability metrics. We should remember that while net profit is widely used to measure a company’s profitability, for companies in the commodities space (XLB), EBITDA (earnings before interest, tax, depreciation, and amortization) is generally used.

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Alcoa’s 2016 EBITDA

Alcoa (AA) reported an adjusted EBITDA of $355 million in 4Q16—compared to $284 million in 3Q16. The bauxite and alumina segments contributed the most to Alcoa’s 4Q16 profitability. They generated $102 million and $167 million of EBITDA in the quarter. The company generated adjusted EBITDA of $1.1 billion in 2016. Note that we don’t have comparable data for 2015 due to Alcoa’s split.


  • Rio Tinto’s (RIO) Aluminum segment generated EBITDA of $2.47 billion in 2016—compared to $2.74 billion in 2015.
  • Century Aluminum (CENX) posted adjusted EBITDA of $29 million last year—compared to $100 million in 2015. The company’s 2016 earnings were impacted negatively due to higher alumina costs. Century Aluminum produces aluminum by sourcing alumina from outside parties. As a result, Century Aluminum’s profitability tends to fall when alumina prices rise.
  • Norsk Hydro’s (NHYDY) underlying EBITDA was 11.4 billion Norwegian krone (~$1.32 billion) in 2016—compared to 14.7 billion krone (~$1.71 billion) in 2015.

With aluminum prices showing strength in 2016, aluminum producers should post incrementally higher profitability in 2017. Meanwhile, investors also have to keep an eye on cash flows. In the next part, we’ll look at different aluminum producers’ 4Q16 cash flows.


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