Alcoa's Split Comes Amid Weak Aerospace Market

Researched by Industrial Info Resources (Sugar Land, Texas)--A slowdown in the U.S. aerospace industry threatens to hinder the pending split of aluminum producer Alcoa Incorporated (NYSE:AA) (New York, New York), which was already facing a tough environment amid weak commodity prices and a cascade of imports. Still, the company enjoyed strong profit results in third-quarter 2016, due in part to large asset sales and heavy cost-cutting. Industrial Info is tracking $5.83 billion in projects involving Alcoa and its subsidiaries, including about $1.06 billion in the U.S.

Although sales slightly declined at Alcoa, from $5.57 billion in third-quarter 2015 to $5.21 billion in third-quarter 2016, net income improved from $44 million to $166 million. Capital expenditures at Alcoa totaled $803 million for the first three quarters of 2016, slightly up from $782 million for the same period in 2015.

Starting November 1, "Alcoa Corporation" actually will be the name of the new company, which will comprise the legacy metal-processing business, while Acronic Incorporated will comprise the value-added parts operations. The move was spurred, in part, by increased imports of cheaper metals, which put a tremendous financial strain on the metal-processing business. The current Alcoa is no longer a blue-chip stock and has long since lost its status as the leading U.S. aluminum producer.

Other metals-related companies have been affected by imports and have been taking action against what they see as unfair trade practices. For more information, see September 26, 2016, article - U.S. Steel Producers Say Chinese Rivals Ducking Anti-Dumping Fees.

In addition to cheap imports, Alcoa executives cited curtailed and closed operations and lower alumina pricing as the biggest contributors to the challenging market. Nonetheless, automotive demand remains strong, and could boost business at Arconic, which will consist of much of Alcoa's global rolled products, engineered products and solutions, and transportation and construction solutions businesses. The new Alcoa might get a boost from rising aluminum demand. For more information, see July 14, 2016, article - Alcoa CEO: Growth of Aluminum in North American Vehicles Continues.

Alcoa's largest proposed project in the U.S. is the $750 million expansion of the San Antonio Aluminum Plant in Elmendorf, Texas. The company hopes to add a full-scale micromill plant to manufacture advanced aluminum sheet product for automotive, industrial and packaging applications. Alcoa is currently evaluating equipment. For more information, see Industrial Info's project report.

The largest Alcoa project under construction in the U.S. is the $190 million expansion of the Davenport Aluminum Works facility in Riverdale, Iowa. Alcoa plans to install a new thick plate stretcher to enhance the performance of thick aluminum and aluminum-lithium plate in various applications for the aerospace industry. The Riverdale plant will become part of Arconic. For more information, see Industrial Info's project report.

Globally, low commodity prices make it unlikely that Alcoa's largest proposed project, the $2.3 billion construction of the Maniitsoq Aluminium Smelter in Nuuk, Greenland, will move forward anytime in the near future. The 340,000-ton-per-year smelter would include hydropower developments and transmission lines connecting it to the hydroelectric facilities, as well as an industrial harbor. For more information, see Industrial Info's project report.

Alcoa executives expect global automotive production will rise 1% to 4% in 2016, and that aircraft deliveries will be flat to 3% higher this year.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.