Alcoa results disappoint ahead of demerger
Revenue fell in Alcoa’s faster-growing businesses, while overall earnings increased less than expected.
Alcoa, less than a month away from splitting itself in two, said revenue fell in what it deems its faster-growing businesses, and the firm cut revenue targets for those units, citing “near-term industry challenges.”
The company also said overall earnings in the latest quarter grew less than expected, as revenue also disappointed on lower alumina pricing and changes to aerospace delivery schedules. Shares fell 4.2 per cent to $US30.20 in premarket trading.
The company is splitting its raw-aluminium operations, which will keep the Alcoa name, from the firm that will house the company’s faster-growing businesses supplying the aerospace and automotive markets, called Arconic. The split is slated for Nov. 1. Klaus Kleinfeld, now chief executive of Alcoa, will be CEO of Arconic.
The New York-based aluminium maker, by tradition the first major US company to report its third-quarter results, again broke down its overall results as they are expected to appear after the split.
At the units that will form Arconic, revenue fell 1 per cent from a year earlier to $US3.4 billion, reflecting adjustments to delivery schedules in the aerospace industry and softness in North America commercial transportation and pricing pressures.
The company lowered revenue targets for all three units at Arconic this year, hurt by “unprecedented industry ramp-up to new platforms, destocking and supply chain optimisation in airframes” in the aerospace industry. The Arconic segments are global rolled products, engineered products and solutions, and transportation and construction solutions.
Mr Kleinfeld, in prepared remarks, said the cuts reflect “current economic realities.” However, he added that “fundamentals in key markets remain very solid; commercial aerospace demand is strong with an order book in excess of nine years and the aluminization in automotive continues.”
As for Alcoa’s traditional metals operations — which include smelting, mining and refining — the company reported revenue of $US2.3 billion, which it said was roughly the same as the year-ago quarter, reflecting continued low alumina prices and the impact of curtailed and closed operations.
Over all, Alcoa reported a profit of $US166 million, or 33 cents a share, compared with $US44 million, or 6 cents a share, a year ago. Excluding certain items, the company earned 32 cents a share, up from 21 cents a year ago. Analysts polled by Thomson Reuters expected 35 cents a share.
Revenue fell 6 per cent to $US5.21 billion, below analysts’ projections of $US5.31 billion.
Alcoa’s raw aluminium business has been hammered this decade by an oversupply of aluminium generated largely by China that has caused prices on the London Metal Exchange to fall to around $US1,600 a ton, down from around $US2,500 a ton five years ago. To cope with weak prices, Alcoa has been closing high-cost smelters in the US
The earnings report Tuesday was slated to be Alcoa’s last as a single firm.
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