ARCONIC TO STOP SALES OF FLAMMABLE PANELS
NEW YORK • Arconic Inc. plans to stop some sales of the type of flammable panels used on London’s Grenfell Tower following a deadly inferno at the highrise apartment building this month. The manufacturer is under scrutiny after media reports said Arconic was aware that the material, known as Reynobond PE, was a fire hazard before supplying it for a renovation of the 24-storey structure. The shares fell the most since the company spun off from Alcoa Inc. eight months ago.
“Arconic is discontinuing global sales of Reynobond PE for use in highrise applications,” the New York- based com- pany said by email Monday. “We believe this is the right decision because of the inconsistency of building codes across the world and issues that have arisen in the wake of the Grenfell Tower tragedy regarding code compliance of cladding systems.” The company said it would “continue to fully support” authorities investigating the June 14 blaze, which killed at least 79 people. Arconic’s shares fell 6 per cent to US$24 in New York after dropping as much as 11 per cent, the most intraday since Nov. 2. The volume of shares changing hands was almost four times the 10-day moving average in just the first three hours of trading, Reuters reported.
On Saturday, Reuters cited six emails from 2014 between Deborah French, Arconic’s U. K. sales manager, and executives at the contractors involved in the bidding process for Grenfell Tower’s refurbishment contract.
The scrutiny expands the challenges for Arconic, which was mired in one of corporate America’s biggest proxy battles this year. The company, which specializes in metal manufacturing for the aerospace, building and automotive industries, ousted its chief executive officer and agreed to give Elliott Management Corp. three board seats after the New York hedge fund took a stake and began agitating for changes.
Arconic supplied alumi num- a nd- pol yet hyl e ne panels that were among the components in the cladding for the Grenfell project in 2015 while acknowledging in its marketing brochure that the substance can be unsafe for facades on tall buildings, Reuters reported June 24. The company also offers non- flammable versions of Reynobond. Arconic’s U. K. sales manager sent emails as early as 2014 questioning the decision to sell the product for the building, according to the report.
The use of c ombustible cladding has become a focal point for investigators. As the U. K. looks to hold someone responsible, Arconic could be subject to significant liabilities, Seaport Global analyst Josh Sullivan said in an interview.
“The political sentiment on the ground in the U. K. is very aggressive right now,” he said. “Whether or not they are ultimately culpable, they are going to be a part of the inquiry process.”
While it’s too early to determine the possible financial impact, the situation could make it more difficult for Arconic to find a permanent CEO, Cowen & Co. analyst Gautam Khanna said in a note. David Hess has been serving on an interim basis since April, when Klaus Kleinfeld left the company.
The Association of British Insurers said on Sunday it had warned in May that combustible external cladding on high rises could cause fire to spread and that it has been calling on the U.K. government to review building fire safety regulations since 2009, Reuters reported.
Cladding panels are often added to the exterior of buildings to insulate them and, particularly in the case of aging tower blocks, to improve their external appearance. The panels vary in terms of their fire resistance depending on their intended use. Separately, Celotex said in a statement that it would stop selling its RS5000 insulation boards for rainscreen cladding systems in buildings taller than 18 meters (59 feet) “pending further clarity.”
ARCONIC COULD BE SUBJECT TO SIGNIFICANT LIABILITIES.