Arconic reports revenue increase in Q2 of 2019

Pittsburgh-based Arconic Inc. has reported second-quarter 2019 financial results, which show $3.7 billion in revenue, a 3 percent increase compared with second-quarter results in 2018. Organic revenue grew 10 percent year over year on strong volumes across all segments and all key markets, as well as favorable pricing in Engineered Products and Solutions and Global Rolled Products, the company says.

Arconic reports a net loss of $121 million, or 27 cents per share, in the second quarter of 2019 versus net income of $120 million, or 24 cents per share, in the second quarter of 2018. Net income excluding special items was $269 million, or 58 cents per share, in the second quarter of 2019 compared with $185 million, or 37 cents per share, in the second quarter of 2018. Special items in the second quarter of the current year were $390 million, principally related to charges associated with noncash asset impairments of $357 million, cost reduction initiatives, environmental remediation related to Grasse River, and separation costs, partially offset by discrete and special tax items.

The company’s second-quarter 2019 operating loss was $81 million versus operating income of $324 million in the second quarter of 2018. Operating income excluding special items was $484 million, up 27 percent year over year, as higher volumes, favorable product pricing, favorable aluminum prices and net cost reductions more than offset operational challenges in aluminum extrusions and the continued costs associated with the transition of Tennessee’s North American packaging business to more profitable industrial products, Arconic says.

“In the second quarter 2019, the Arconic team delivered improved quarterly revenue, adjusted operating income, adjusted operating income margin and adjusted earnings per share on both a year-over-year and sequential basis,” Arconic Chairman and Chief Executive Officer John Plant says. “Arconic’s second-quarter 2019 RONA (return on net assets) improved by 450 basis points year over year and 340 basis points from the first-quarter 2019. We expect this positive year-over-year trend to continue in the third quarter. Based on our first-half performance and our outlook for the remainder of 2019, we are increasing our full-year adjusted earnings per share and adjusted free cash flow guidance for the second time in 2019.”

Arconic ended the second quarter of the current year with $1.4 billion in cash on hand. Cash provided from operations was $106 million; cash used for financing activities totaled $201 million, reflecting the impact of the accelerated share repurchase program of $200 million; and cash provided from investing activities was $129 million. Adjusted free cash flow for the quarter was $227 million.

The company’s Engineered Products and Solutions (EP&S) reported revenue of $1.6 billion, an increase of 6 percent year over year. Organic revenue grew 8 percent, driven by aerospace engine and defense growth. Segment operating profit was $286 million, up $62 million, or 28 percent, year over year, driven by net cost reductions, favorable pricing and volume increases. Segment operating margin was 18.3 percent, up 310 basis points year over year.

Its Global Rolled Products (GRP) division reported revenue of $1.6 billion, relatively flat year over year. Organic revenue increased 11 percent. Segment operating profit was $145 million, an increase of $34 million, or 31 percent year over year, driven by favorable pricing in industrial and commercial transportation; volume growth in aerospace, automotive and commercial transportation; favorable aluminum prices; and net cost reductions. These impacts partially were offset by operational challenges in aluminum extrusions and continued costs associated with the transition of Tennessee’s North American packaging business to more profitable industrial products. Segment operating margin was 9.2 percent, up 210 basis points year over year.

Arconic’s Transportation and Construction Solutions (TCS) segment reported revenue of $548 million, a decrease of 2 percent year over year. Organic revenue grew 3 percent. Segment operating profit was $107 million, an increase of $10 million, or 10 percent, year over year, driven by net cost reductions and growth in commercial transportation and building and construction. Segment operating margin was 19.5 percent, up 220 basis points year over year.

The company also says its portfolio separation remains on track to be completed in the second quarter of 2020. The entity that will comprise Arconic’s GRP division (rolled aluminum products and aluminum extrusions) and building and construction systems will be named Arconic Corp. The entity that will comprise EP&S (engine components, fastening systems and engineered structures) and forged aluminum wheels will be named Howmet Aerospace Inc.