Alcoa reports losses from challenging 2019 aluminum market

Alcoa reports losses from challenging 2019 aluminum market

Company continues portfolio review and work to strengthen its balance sheet, offers 2020 outlook.

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January 16, 2020

Alcoa Corp., the aluminum producer based in Pittsburgh, has reported financial results for the fourth quarter and the full year. 

Alcoa reported a net loss of $303 million in the fourth quarter of 2019 compared with a net loss of $221 million in the third quarter of 2019. For 2019, Alcoa reported a net loss of $1,125 million compared with a net income of $250 million in 2018.

The company’s fourth-quarter revenue of $2.4 billion was down 5 percent due primarily to lower alumina and aluminum prices, according to an Alcoa news release. Revenue for the year was $10.4 billion, down 22 percent from 2018.

In the fourth quarter of 2019, the company took several actions in alignment with its strategic priorities, including taking the first steps in a multiyear portfolio review and continuing work to strengthen its balance sheet.

In October, Alcoa announced a review of its assets to drive lower costs and sustainable profitability. The review includes an analysis of existing production capacities, focusing on 1.5 million metric tons of global smelting capacity and 4 million metric tons of global alumina refining capacity. Conducted over the next five years, the analysis of production capacity will consider opportunities for significant improvement, potential curtailments and closures or divestitures, the company says.

In addition, Alcoa announced in December the closure of its Point Comfort alumina refinery in Texas. The closure is expected to result in an annual net income improvement of $15 million.

“In 2019, we acted to further strengthen Alcoa, completing the divestiture of uncompetitive assets, modernizing labor agreements in three countries, implementing a new operating model and making quick progress on the asset review process we announced last quarter,” says Alcoa President and Chief Executive Officer Roy Harvey.

He adds, “While the market in alumina and aluminum challenged us, we maintained a strong cash balance of nearly $900 million and drove operational stability. Also, our low-cost, top-tier bauxite and alumina segments both set new annual production records based on our current portfolio.”

For 2020, Alcoa projects a global aluminum surplus ranging between 600,000 to 1 million metric tons with global demand growth in a range of 1.4 percent to 2.4 percent.

Compared with 2019, the bauxite market is projected to be in a smaller surplus in 2020, with Chinese stockpile projected to continue, ranging between 8 million and 12 million metric tons, the company says.

In the first quarter of 2020, Alcoa says it expects lower quarterly results in the bauxite segment primarily due to lower pricing and seasonally lower volumes. In the alumina segment, the company expects benefits from lower costs for raw materials and the announced portfolio decision to be mostly offset by lower volumes and higher operating costs due to seasonal maintenance.

In the aluminum segment, the company expects performance to be flat, as improvements from lower alumina costs are expected to be offset by higher energy costs, lower rolled products shipments and unfavorable price and mix.