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Released April 11, 2014 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Aluminum producer Alcoa Incorporated (NYSE:AA) (Pittsburgh, Pennsylvania) reported mixed overall results in the first quarter of 2014, as record downstream profits and solid improvement in the midstream businesses were offset by a drop in shipments in the Primary Metals segment and exceptional expenses tied to companywide restructuring. Alcoa reported a net loss of $178 million for the quarter, compared with net income of $149 million in first-quarter 2013.
Alcoa executives said that results were more representative of the company's performance when excluding restructuring charges, including $276 million in special items mostly related to smelter and rolling mill capacity reductions, as well as interest expense; income taxes; depreciation; depletion; amortization; income and losses attributable to non-controlling interests; and some other unique income and expenses. Using this measurement, called "adjusted EBITDA," the quarter saw income of $672 million, a 2.61% decrease from the same period last year.
Total sales were reported to be $5.45 billion, a 6.5% decrease from first-quarter 2013. The Primary Metals segment reported an 8% drop in third-party realized prices and faced pressure from higher alumina costs and taxes, and costs related to two smelter closures. Alcoa also plans to permanently close its rolling operations in Australia by the year's end, resulting in a charge of $11 million in the Global Rolled Products segment for the quarter. The Australian and Asian can sheet markets are affected by excess capacity.
However, the company benefited from stronger pricing and productivity in its Alumina segment. As the North American auto industry continues to improve, Alcoa recently began operations at a $300 million expansion at its facility in Davenport, Iowa, to meet rising demand for automotive sheet; it also is continuing to expand operations at a sheet plant in Alcoa, Tennessee. In Brazil, the company is spending $40 million to boost production of specialty packaging foils at a rolling mill.
Capital expenditures for the quarter were reported to be $209 million, compared with $235 million in the same period in 2013.
Industrial Info is tracking more than $5.6 billion in active projects involving Alcoa, including a $150 million casthouse optimization at an aluminum smelter in Baie-Comeau, Quebec. The project involves rebuilding seven furnaces, refurbishing two casting pits, and installing a new sow caster at the 400,000-ton-per-year facility to increase aluminum output used for automotive production. The project is expected to be completed late in the first quarter or in the second quarter of 2015.
"Since the Australian plants will be closed during the course of 2014, further restructuring charges are expected to be between $100 million and $125 million, after tax, for the remainder of 2014," said William Oplinger, the executive vice president and chief financial officer for Alcoa, in a conference call. "Approximately 85% of these charges are expected to be non-cash. In addition, we experienced unfavorable impacts related to the restart of a potline at the Saudi joint-venture smelter, amounting to $13 million in the quarter."
As in the past several quarters, Alcoa executives expect a 7% growth in global aluminum demand throughout the year. Among the key end markets, executives continue to expect 4% to 6% growth in building and construction; 1% to 4% growth in automotive; and a sharp 7% to 8% global growth in aerospace, as demand increases for large commercial aircraft and business jets. However, the industrial gas turbines market is expected to contract between 8% and 12% due to weaker orders for new gas turbines and spare parts.
"Looking toward the second quarter, we expect the aerospace market to remain strong, but see lower U.S. defense spare-parts demand," Oplinger said in the conference call. "Regarding our non-residential construction business, we'll continue to see a decline in Europe, but we expect to see a continual gradual recovery in North America. Heavy-duty truck will remain strong in North America, but it will be partially offset by declines in Europe."
For more information, visit Industrial Info's International Metals & Minerals Project Database.
View Plant Profile - 1057479 1520654 1502185 3119421
View Project Report - 300156139 300120893
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Alcoa executives said that results were more representative of the company's performance when excluding restructuring charges, including $276 million in special items mostly related to smelter and rolling mill capacity reductions, as well as interest expense; income taxes; depreciation; depletion; amortization; income and losses attributable to non-controlling interests; and some other unique income and expenses. Using this measurement, called "adjusted EBITDA," the quarter saw income of $672 million, a 2.61% decrease from the same period last year.
Total sales were reported to be $5.45 billion, a 6.5% decrease from first-quarter 2013. The Primary Metals segment reported an 8% drop in third-party realized prices and faced pressure from higher alumina costs and taxes, and costs related to two smelter closures. Alcoa also plans to permanently close its rolling operations in Australia by the year's end, resulting in a charge of $11 million in the Global Rolled Products segment for the quarter. The Australian and Asian can sheet markets are affected by excess capacity.
However, the company benefited from stronger pricing and productivity in its Alumina segment. As the North American auto industry continues to improve, Alcoa recently began operations at a $300 million expansion at its facility in Davenport, Iowa, to meet rising demand for automotive sheet; it also is continuing to expand operations at a sheet plant in Alcoa, Tennessee. In Brazil, the company is spending $40 million to boost production of specialty packaging foils at a rolling mill.
Capital expenditures for the quarter were reported to be $209 million, compared with $235 million in the same period in 2013.
Industrial Info is tracking more than $5.6 billion in active projects involving Alcoa, including a $150 million casthouse optimization at an aluminum smelter in Baie-Comeau, Quebec. The project involves rebuilding seven furnaces, refurbishing two casting pits, and installing a new sow caster at the 400,000-ton-per-year facility to increase aluminum output used for automotive production. The project is expected to be completed late in the first quarter or in the second quarter of 2015.
"Since the Australian plants will be closed during the course of 2014, further restructuring charges are expected to be between $100 million and $125 million, after tax, for the remainder of 2014," said William Oplinger, the executive vice president and chief financial officer for Alcoa, in a conference call. "Approximately 85% of these charges are expected to be non-cash. In addition, we experienced unfavorable impacts related to the restart of a potline at the Saudi joint-venture smelter, amounting to $13 million in the quarter."
As in the past several quarters, Alcoa executives expect a 7% growth in global aluminum demand throughout the year. Among the key end markets, executives continue to expect 4% to 6% growth in building and construction; 1% to 4% growth in automotive; and a sharp 7% to 8% global growth in aerospace, as demand increases for large commercial aircraft and business jets. However, the industrial gas turbines market is expected to contract between 8% and 12% due to weaker orders for new gas turbines and spare parts.
"Looking toward the second quarter, we expect the aerospace market to remain strong, but see lower U.S. defense spare-parts demand," Oplinger said in the conference call. "Regarding our non-residential construction business, we'll continue to see a decline in Europe, but we expect to see a continual gradual recovery in North America. Heavy-duty truck will remain strong in North America, but it will be partially offset by declines in Europe."
For more information, visit Industrial Info's International Metals & Minerals Project Database.
View Plant Profile - 1057479 1520654 1502185 3119421
View Project Report - 300156139 300120893
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
