Actions continue to drive competitiveness of Upstream operations
Lightweight metals leader Alcoa (NYSE:AA) today announced it is taking
further action to increase the competitiveness of its Upstream business
amid prevailing market conditions. In 2015, the Midwest transaction
aluminum price dropped approximately 30 percent, and the Alumina Price
Index fell approximately 40 percent.
Alcoa will permanently close its 269,000 metric ton Warrick Operations
smelter in Evansville, Indiana by the end of the first quarter 2016. By
the end of the second quarter 2016, the Company will reduce alumina
production by one million metric tons, which includes curtailing the
remaining 810,000 metric tons of refining capacity at its Point Comfort
operations in Texas.
The rolling mill and power plant at Warrick Operations will continue to
operate.
“We recognize how deeply this decision impacts employees and we are
committed to work closely with our employees, unions and community
stakeholders to support them through this transition,” said Roy Harvey,
President of Alcoa’s Global Primary Products. “Despite the hard work of
employees, these assets are not competitive. We’re confident that these
actions are the right ones in face of these challenging market
conditions. We are committed to creating a resilient business ready for
launch as an independent company in 2016.”
Once the actions announced today and in the fourth quarter are
implemented, Alcoa will have curtailed or closed 812,000 metric tons of
smelting capacity and 3.3 million metric tons of refining capacity since
its announced review in March 2015 of 500,000 metric tons of smelting
capacity and 2.8 million metric tons of refining capacity.
Alcoa forecasts improving supply-demand balances in both the alumina and
aluminum markets for 2016, and is focused on positioning the business
for success throughout market cycles. The company is on target to meet
or exceed its 2016 goals of moving to the 38th percentile on
the aluminum cost curve and 21st percentile on the alumina
cost curve.
As of result of today’s announcement, the Company will record an
associated charge in the fourth quarter of approximately $120 million
after-tax, or $0.09 per share, of which approximately 45 percent will be
non-cash. Additional charges in the first quarter of 2016 related to
these actions are expected to be between $50 million and $60 million
after-tax, or $0.04 to $0.05 per share, of which almost 80 percent will
be non-cash.
As previously announced, Alcoa will separate into two, industry-leading
publicly traded companies in the second half of 2016 – an
Upstream-focused company including its Mining, Refining, Smelting,
Energy and Casting businesses, and a Value-Add company including its
Global Rolled Products, Engineered Products and Solutions, and
Transportation and Construction Solutions businesses.
Pt. Comfort is part of the Alcoa World Alumina and Chemicals group of
companies owned 60 percent by Alcoa Inc., and 40 percent by Alumina
Limited.
About Alcoa
A global leader in lightweight metals technology, engineering and
manufacturing, Alcoa innovates multi-material solutions that advance our
world. Our technologies enhance transportation, from automotive and
commercial transport to air and space travel, and improve industrial and
consumer electronics products. We enable smart buildings, sustainable
food and beverage packaging, high performance defense vehicles across
air, land and sea, deeper oil and gas drilling and more efficient power
generation. We pioneered the aluminum industry over 125 years ago, and
today, our approximately 60,000 people in 30 countries deliver value-add
products made of titanium, nickel and aluminum, and produce
best-in-class bauxite, alumina and primary aluminum products. For more
information, visit www.alcoa.com,
follow @Alcoa on Twitter at www.twitter.com/Alcoa
and follow us on Facebook at www.facebook.com/Alcoa.
Forward Looking Statement
This release contains statements that relate to future events and
expectations and as such constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include those containing such words as
“anticipates,” “expects,” “plans,” “should,” “will,” “would,” or other
words of similar meaning. All statements that reflect Alcoa’s
expectations, assumptions or projections about the future other than
statements of historical fact are forward-looking statements, including,
without limitation, statements regarding Alcoa’s goal to create a
globally competitive Upstream business, including moving down the
alumina and aluminum cost curves at the targeted rate and timing; the
expected timing for completing, and the expected financial impact of,
the closure and curtailment; forecasts of supply-demand in the alumina
and aluminum markets; Alcoa’s separation transaction; and the expected
timing of the completion of the separation. Forward-looking statements
are not guarantees of future performance and are subject to risks,
uncertainties, and changes in circumstances that are difficult to
predict. Such risks and uncertainties include, but are not limited to:
(a) material adverse changes in aluminum industry conditions, including
global supply and demand conditions and fluctuations in London Metal
Exchange-based prices and premiums, as applicable, for primary aluminum,
alumina, and other products, and fluctuations in indexed-based and spot
prices for alumina; (b) Alcoa’s inability to successfully realize goals
established in each of its business segments, at the levels or by the
dates targeted for such goals (including moving its alumina refining and
aluminum smelting businesses down on the industry cost curves and
increasing revenues and improving margins in its Global Rolled Products,
Engineered Products and Solutions, and Transportation and Construction
Solutions segments); (c) Alcoa’s inability to realize expected benefits,
in each case as planned and by targeted completion dates, from
acquisitions, divestitures, facility closures, curtailments, or
expansions, or international joint ventures; (d) political, economic,
and regulatory risks in the countries in which Alcoa operates, including
unfavorable changes in laws and governmental policies, tax rates, civil
unrest, or other events beyond Alcoa’s control; (e) changes in
preliminary accounting estimates due to the significant judgments and
assumptions required; (f) the outcome of contingencies, including legal
proceedings and environmental remediation; (g) uncertainties as to the
timing of the separation and whether it will be completed; (h) the
impact of the separation on the businesses of Alcoa; (i) Alcoa’s
inability to realize expected benefits from the separation or the risk
that the separation may be more difficult, time-consuming or costly than
expected, which could result in additional demands on Alcoa’s resources,
systems, procedures and controls, disruption of its ongoing business and
diversion of management’s attention from other business concerns; (j)
the potential failure to retain key employees while the separation
transaction is pending or after it is completed; (k) deterioration in
global economic and financial market conditions generally; and (l) the
other risk factors discussed in Alcoa’s Form 10-K for the year ended
December 31, 2014, and other reports filed with the U.S. Securities and
Exchange Commission. Alcoa disclaims any obligation to update publicly
any forward-looking statements, whether in response to new information,
future events or otherwise, except as required by applicable law. Market
projections are subject to the risks discussed above and other risks in
the market.
Alcoa
Investors
Nahla Azmy, 212-836-2674
Nahla.Azmy@alcoa.com
or
Media
Sonya Elam Harden, 864-357-1258
Sonya.Harden@alcoa.com
or
Sofina Mirza-Reid, 212-836-2720
Sofina.Mirza-Reid@alcoa.com