Alcoa lowers forecast, company to split month end
ALCOA INC, which is posting its last quarterly earnings report before its split into two companies, announced softer-than-expected third-quarter results, stung partly by lower alumina prices.
The company also lowered revenue forecasts for some segments of Arconic, which will become the new company.
Alcoa Inc has been on a long quest to shrink its aluminium-smelting business, which has been hurt by stubbornly low prices. The company is splitting that segment off and creating a new public company to make and sell speciality lightweight products for aerospace, autos and other industries.
The separation will see Alcoa Inc renamed Arconic Inc, whose businesses will include global rolled products, engineered products and transportation and construction solutions; and the creation of another company called Alcoa Corporation, which will capture the bauxite, alumina and aluminium operations.
Alcoa said Tuesday that the separation is set to take effect before the market open on November 1. Klaus Kleinfeld will serve as Arconic’s chairman and CEO, while Michael Morris will be the non-executive chairman of Alcoa Corporation and Roy Harvey will be CEO. Morris has been a director of Alcoa since 2008 while Harvey is currently the group president of Alcoa Global Primary Products.
Arconic will hold a 19.9 per cent stake in Alcoa Corp. Both companies will trade on the New York Stock Exchange.
For the period ended September 30, the company earned US$166 million, or 33 cents per share. A year earlier Alcoa earned US$44 million, or six cents per share.
Stripping out certain items, earnings were 32 cents per share. That’s a penny below what analysts polled by FactSet were looking for.
Revenue dropped to US$5.21 billion from US$5.57 billion, as shipments of aluminium products declined. Analysts were calling for revenue of US$5.33 billion, according to a FactSet survey.
Alcoa’s results are watched closely as a barometer of the economy because its products are used in so many industries.
Alcoa said that it now foresees full-year revenue in a range of US$4.8 billion to US$5 billion for global rolled products. That’s down from its prior guidance of US$5 billion to US$5.2 billion.
For engineered products and solutions, Alcoa now anticipates full-year revenue between US$5.6 billion and US$5.8 billion. Its previous outlook was for US$5.9 billion to US$6.1 billion in revenue.
The company now expects US$1.7 billion to US$1.8 billion in revenue for the year for transportation and construction solutions. It previously predicted US$2.1 billion in revenue. The segments are all part of Arconic. In this file photo, finshed rolls of aluminium as they come off the last stage of the production line at an Alcoa plant. Aluminium will now fall under split-off company Alcoa Corp.