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Lightweight metals leader Alcoa
today announced that it is taking
decisive action to curtail uncompetitive smelting and refining capacity to
ensure continued competitiveness amid prevailing market conditions. The
Company will reduce aluminum smelting capacity by 503,000 metric tons and
alumina refining capacity by 1.2 million metric tons. Alcoa will begin the
curtailments in the fourth quarter of 2015 and will complete them by the end
of the first quarter of 2016.
The reductions will further improve the cost position of the Upstream
business and ensure competitiveness in a lower pricing environment,
including a 30 percent drop in the Midwest transaction aluminum price
year-to-date. Alcoa has been aggressively reshaping its Upstream portfolio
as part of a successful multi-year strategy to position itself as a low-cost
global leader in alumina and aluminum production. Once today's actions are
complete, Alcoa will have closed, divested or curtailed 45 percent of total
smelting operating capacity since 2007.
"Alcoa has consistently taken decisive actions to create a commodity
business that is positioned to succeed throughout the cycle," said Klaus
Kleinfeld, Chairman and Chief Executive Officer. "We have closed or
curtailed unprofitable capacity, repowered key assets at lower energy
prices, built-up a profitable value-add casthouse network, established the
foundation for a strong commercial bauxite business, and made substantial
productivity improvements. In the face of continued adverse market forces,
we are once again not standing still. These difficult, but necessary
measures will further strengthen our Upstream portfolio, reducing our cost
position and driving greater resilience as we prepare to launch this
business as a strong standalone company in the second half of 2016."
In its aluminum business, Alcoa will idle the Intalco and Wenatchee primary
aluminum smelters in Washington State, and the Massena West smelter in New
York. The Company will not modernize the New York Massena East smelter and
will permanently close the facility; potlines at Massena East have been
closed since March 2014. The casthouses at Intalco and Massena West, which
produce value-add shaped products, will continue to operate. The Alcoa
Forgings and Extrusions facility in Massena is unaffected.
In its alumina business, Alcoa will partially curtail refining capacity at
its Pt. Comfort, Texas facility by about 1.2 million metric tons.
"Across the globe, we have been taking measures to curtail smelting and
refining capacity that is not competitive to improve our cost profile," said
Roy Harvey, Executive Vice President and President, Global Primary Products.
"Alcoa has a long, proud history at the affected locations and our dedicated
employees have worked hard to keep our facilities competitive in the face of
challenging market conditions. Unfortunately, today's pricing environment
necessitates very difficult decisions. We recognize how deeply these
decisions affect our Alcoa family and communities and are committed to
working closely with our employees and unions and local stakeholders to
support them through this transition."
Once these actions are implemented, Alcoa will have curtailed or closed
673,000 metric tons of uncompetitive smelting capacity and 2.5 million
metric tons of uncompetitive refining capacity since its announced review of
500,000 metric tons of smelting capacity and 2.8 million metric tons of
refining capacity in March 2015.
Total restructuring-related charges in the fourth quarter of 2015 associated
with today's announcement are expected to be between $160 million and $180
million after-tax, or $0.12 to $0.14 per share, of which approximately 30
percent would be non-cash.
As previously announced, Alcoa will separate into two, industry-leading
publicly-traded companies in the second half of 2016 -- an Upstream-focused
company including its Mining, Refining, Smelting, Energy and Casting
businesses, and a Value-Add company including its Global Rolled Products,
Engineered Products and Solutions, and Transportation and Construction
Solutions businesses.
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