Alcoa releases second quarter results

"As markets ever more rapidly evolve, we have made Alcoa increasingly agile,” says Klaus Kleinfield, chairman and CEO. “Results continue to improve. In the face of a transforming aerospace market, we moved quickly to bring our costs down while capturing new opportunities. Contract wins continued as did our innovation leadership with the opening of a state-of-the-art metals powder plant geared toward rising demand for 3D-printed parts. Our automotive sheet revenue hit an all-time high. After substantially reshaping our Upstream segments they are now performing well even in a low pricing environment. We are building out our bauxite business and continue to win new supply contracts. Exceptional productivity and monetization of nonessential assets has put us in an excellent cash position. Our separation is on track for later this year.”

 

Collectively, Alcoa reports a net income of $135 million, or 9 cents per share, including $78 million in special items primarily related to separation costs, restructuring-related charges and associated tax impacts. It also reported an adjusted net income of $213 million (15 cents per share). 

 

Year over year, a 4 percent revenue increase from recent acquisitions and organic growth was more than offset by a 14 percent revenue decline primarily because of lower aluminum and alumina pricing and the impact of curtailed, divested and closed operations. As a result of these combined factors, Alcoa reported second quarter 2016 revenue of $5.3 billion, down 10 percent from $5.9 billion in the second quarter of 2015.

 

Alcoa also reports that asset sales are expected to generate total cash proceeds of $1.2 billion during 2016, of which $815 million has been received year to date. The company says it ended the quarter with $1.9 billion on hand and strong productivity gains of $375 million, year over year, across all segments. 

 

Parts manufacturer Arconic will include Global Rolled Products (excluding the rolling mill operations in Warrick, Indiana, and in Saudi Arabia, which will move to Alcoa Corp.), Engineered Products and Solutions and Transportation and Construction Solutions. In second quarter 2016, these Value-Add segments reported combined revenue of $3.5 billion, after-tax operating income (ATOI) of $294 million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $567 million.

 

ATOI and adjusted EBITDA increased 3 percent and 6 percent, respectively, year over year. The combined segments also generated $176 million in productivity ($360 million year to date) as part of their business improvement programs announced in the first quarter. All Arconic segments are on track to deliver a combined $650 million in productivity savings in 2016, the company says.

 

In addition, in the second quarter, the future Arconic signed a long-term contract valued at approximately $470 million with aircraft manufacturer Embraer for aluminum sheet and plate for Embraer’s new E2 jet airliners. 

Arconic also opened a state-of-the-art, 3D printing metal powder production facility at the Alcoa Technology Center to develop and produce proprietary titanium, nickel and aluminum powders optimized for 3D printed aerospace parts.

 

Alcoa Corp. will comprise Bauxite, Alumina, Aluminum, Cast Products and Energy (currently Alumina and Primary Metals segments), as well as the rolling mill operations in Warrick and in Saudi Arabia that are currently part of the Global Rolled Products segment. In second quarter 2016, the Alumina and Primary Metals segments reported revenue of $2.3 billion, ATOI of $150 million and adjusted EBITDA of $358 million. These segments generated $199 million in productivity in the second quarter ($379 million year to date) as part of its business improvement program and are on track to deliver a combined $550 million in productivity savings for 2016, Alcoa says

 

In the second quarter, Alcoa Corp. continued to successfully build its third-party bauxite business. Alcoa World Alumina and Chemicals (AWAC) signed new third-party bauxite contracts valued at $60 million over the next two years for a total of $410 million in the first half of 2016. Under the contracts, AWAC will supply bauxite to external customers from four of its global mines. The new contracts, which will triple Alcoa Corp.’s third-party bauxite sales in 2016 from 2015, serve customers in China, the United States, Europe and Brazil. 

 

Alcoa Corp. also reached a new power agreement for its Intalco smelter in Washington state and completed the curtailment of the Point Comfort, Texas, refinery.

 

As a result of these activities, Alcoa Corp. says it remains on target to meet or exceed its 2016 goals of moving to the 38th percentile on the global aluminum cost curve and 21st percentile on the global alumina cost curve.