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Released July 10, 2015 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Aluminum producer Alcoa Incorporated (NYSE:AA) (Pittsburgh, Pennsylvania) weathered weak aluminum prices in second-quarter 2015 to post record profits in its downstream businesses amid continued growth in its aerospace and automotive segments, while the alumina business posted its strongest first-half in eight years. The company is directing its investments toward a leading status in the aerospace and automotive markets. Net income was reported to be $140 million, a 1.45% increase from second-quarter 2014.
Industrial Info is tracking $5.8 billion in projects involving Alcoa. Among them is the site study for a proposed, $750 million aluminum rolling mill. Among the sites being considered is San Antonio, Texas. Alcoa is developing its "Micromill" technology to produce lightweight aluminum for the transportation sector. According to a press release from Alcoa in December, "automotive parts made with Micromill material will be twice as formable and 30% lighter than parts made from high-strength steel." If approved, the project could begin construction in 2016.
Total sales stood at $5.9 billion, a 1.04% increase from the same period last year. In addition to the process improvement and procurement savings implemented in each of the company's major businesses, Alcoa benefited from the ongoing expansion of its existing automotive-sheet facility in Davenport, Iowa, which shipped record volumes during the quarter and nearly tripled automotive-sheet revenues. Alcoa also continued to benefit from the November 2014 acquisition of Firth Rixson and the March 2015 acquisition of TITAL, both manufacturers of jet-engine components; in particular, Firth Rixson alone has doubled Alcoa's revenues from jet-engine programs.
In addition to expanding its prosperous aerospace, automotive and alumina segments, Alcoa continued to close and divest its lower-margin businesses, including the 443,000-metric-tonne Suralco alumina refining facility in Suriname and the 74,000-metric-tonne Pocos de Caldas smelter in Brazil. Alcoa expects to lower its position on the global aluminum cost curve, largely in response to China's booming aluminum exports, which have pummeled global prices.
Capital expenditures were reported to total $514 million for the first six months of the year, compared with $467 million in the first half of 2014.
"Lower regional premiums drove the vast majority of the negative price impact," said William Oplinger, the executive vice president and chief financial officer of Alcoa, in a conference call. "Also, we delivered $209 million of after-tax productivity gains across all of our segments, which more than offset cost headwinds of $187 million from higher maintenance costs, labor and benefits, and some growth projects. The unfavorable energy impact of $56 million was driven by higher energy costs in Spain and lower energy sales in Brazil. This was offset partially by lower energy costs in refining."
Alcoa executives expect to see global sales growth of between 8% and 9% this year in the Aerospace segment, a notch lower than previously predicted due to slowing ramp-up for A350 and Bombardier C products; however, sales growth expectations have nearly doubled to 8% and 13% for 2016 and 2017, respectively. The company also expects to see demand grow in the North American heavy-duty truck and trailer market by between 9% and 11% in 2015, although global sales are expected to slightly decline due to slowing economies in Brazil and China.
"We expect strong global demand growth for alumina of 6.5% in 2015, or 57 million metric tons, led by China and growth in the North American automotive [market]," Oplinger said in the conference call. "We are adjusting our aluminum outlook to a global surplus of 760,000 metric tons. This is roughly 4,000 metric tons higher than our previous forecast, driven by our expectation of lower Chinese curtailments. We now expect a surplus in China of 2.2 million metric tons, compared to a forecast of 1.8 million metric tons last quarter. This is largely driven by the lack of follow-through on curtailments on unprofitable operating capacity--even with the recent pressure on metal prices both in and outside of China."
Alcoa also is continuing with its acquisition of RTI International Metals (NYSE:RTI) (Pittsburgh, Pennsylvania), which is expected to add a significant number of multi-material products to meet the growing demand for titanium from the aerospace industry.
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.
Industrial Info is tracking $5.8 billion in projects involving Alcoa. Among them is the site study for a proposed, $750 million aluminum rolling mill. Among the sites being considered is San Antonio, Texas. Alcoa is developing its "Micromill" technology to produce lightweight aluminum for the transportation sector. According to a press release from Alcoa in December, "automotive parts made with Micromill material will be twice as formable and 30% lighter than parts made from high-strength steel." If approved, the project could begin construction in 2016.
Total sales stood at $5.9 billion, a 1.04% increase from the same period last year. In addition to the process improvement and procurement savings implemented in each of the company's major businesses, Alcoa benefited from the ongoing expansion of its existing automotive-sheet facility in Davenport, Iowa, which shipped record volumes during the quarter and nearly tripled automotive-sheet revenues. Alcoa also continued to benefit from the November 2014 acquisition of Firth Rixson and the March 2015 acquisition of TITAL, both manufacturers of jet-engine components; in particular, Firth Rixson alone has doubled Alcoa's revenues from jet-engine programs.
In addition to expanding its prosperous aerospace, automotive and alumina segments, Alcoa continued to close and divest its lower-margin businesses, including the 443,000-metric-tonne Suralco alumina refining facility in Suriname and the 74,000-metric-tonne Pocos de Caldas smelter in Brazil. Alcoa expects to lower its position on the global aluminum cost curve, largely in response to China's booming aluminum exports, which have pummeled global prices.
Capital expenditures were reported to total $514 million for the first six months of the year, compared with $467 million in the first half of 2014.
"Lower regional premiums drove the vast majority of the negative price impact," said William Oplinger, the executive vice president and chief financial officer of Alcoa, in a conference call. "Also, we delivered $209 million of after-tax productivity gains across all of our segments, which more than offset cost headwinds of $187 million from higher maintenance costs, labor and benefits, and some growth projects. The unfavorable energy impact of $56 million was driven by higher energy costs in Spain and lower energy sales in Brazil. This was offset partially by lower energy costs in refining."
Alcoa executives expect to see global sales growth of between 8% and 9% this year in the Aerospace segment, a notch lower than previously predicted due to slowing ramp-up for A350 and Bombardier C products; however, sales growth expectations have nearly doubled to 8% and 13% for 2016 and 2017, respectively. The company also expects to see demand grow in the North American heavy-duty truck and trailer market by between 9% and 11% in 2015, although global sales are expected to slightly decline due to slowing economies in Brazil and China.
"We expect strong global demand growth for alumina of 6.5% in 2015, or 57 million metric tons, led by China and growth in the North American automotive [market]," Oplinger said in the conference call. "We are adjusting our aluminum outlook to a global surplus of 760,000 metric tons. This is roughly 4,000 metric tons higher than our previous forecast, driven by our expectation of lower Chinese curtailments. We now expect a surplus in China of 2.2 million metric tons, compared to a forecast of 1.8 million metric tons last quarter. This is largely driven by the lack of follow-through on curtailments on unprofitable operating capacity--even with the recent pressure on metal prices both in and outside of China."
Alcoa also is continuing with its acquisition of RTI International Metals (NYSE:RTI) (Pittsburgh, Pennsylvania), which is expected to add a significant number of multi-material products to meet the growing demand for titanium from the aerospace industry.
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.
