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Message from the Managing Director
Alcoa of Australia endured challenging times with low metal prices and a strong Australian dollar in 2013 and so tough decisions had to be made during this period. However, we also celebrated our 50th anniversary of operations in Australia. Reaching this milestone allowed us to look back over the years and celebrate our successes and, most importantly, our people.
The quality and dedication of our people has been central to our success and their health and wellness remains the number one priority. Since 2010, our Total Recordable Incident Rate (TRIR) and Lost Workday Incident and Days Away Restricted Transfer (DART) rates have steadily decreased, with the TRIR at 2.10 for 2013. We still have some work to do to be at the Alcoa target rate of 0.68 by 2020, but we are confident we are on track to achieve this goal.
In 2013 many of our employees took the opportunity to look after their own health by participating in various corporate wellness initiatives. More than 1200 people, including myself, took part in the Global Corporate Challenge, a 16-week active lifestyle event, and 74 per cent of us walked more than the recommended 10,000 steps a day. Given the event’s popularity we plan to build on this success in 2014.
Despite confronting economic conditions during the year, we still delivered against our production targets. However, our Point Henry operations in Victoria remained under review. In February 2014, we announced that the review had determined the smelter was no longer competitive and had no prospect of becoming financially viable into the future. Our forecasts showed if we continued to operate the smelter we would suffer significant losses – and that was without the capital investment needed to keep the plant operating. This was an extremely difficult time for all employees and support for our Point Henry based employees will continue throughout 2014.
These tough times also had an impact on our Kwinana alumina refinery. Kwinana ran at a loss during 2012 and with current market conditions the trend looks set to continue. To ensure the operation was cash flow positive in 2014 we established a team to identify sustainable cost savings. Pleasingly, more than $35 million in savings were identified by the end of December 2013.
Energy remains a significant strategic issue for our operations. As Western Australia’s single largest user of natural gas (Alcoa of Australia consumes approximately 25 per cent of the state’s total domestic gas supply) we remain very concerned that domestic gas supplies will be insufficient to meet domestic demand in 2020, when our key gas contracts expire. Limited competition and a focus on exporting the state’s gas as LNG has made it increasingly difficult for us to secure new long-term competitively priced contracts for the volume of gas we need. This will remain a key focus in 2014.
As we have done for 50 years, we remained committed to the communities in which we operate. We continue to manage our successful partnerships with Sculpture by the Sea, Greening Australia, the Swan River Trust Alcoa Landcare Program as well as numerous local site-based sponsorships.
As we head into 2014 our strategic focus remains on operational improvement, reducing our position on the global alumina and aluminium cost curves and managing the portfolio. I am proud of what we achieved during 2013 and I am extremely confident this will continue during 2014.
Please take the time to read our report carefully and if you have any feedback on this report or on our sustainability performance please email your comments to
Alan Cransberg
Chairman and Managing Director
Alcoa of Australia