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  • Alcoa's Strong Operational Performance 1 comment
    Aug 6, 2013 8:52 AM | about stocks: AA

    Alcoa (NYSE: AA) is one of the world leaders in producing aluminum. The company is also involved in the refining of alumina and is the largest bauxite miner in the world. Alcoa has been an aluminum provider for the aerospace, packaging, commercial transportation and automotive industries for over 100 years. It offers flat rolled sheets, forgings, and alloys. The company also deals in other light-weight and super-strong metals such as nickel alloys and titanium. AA currently employs over 60,000 people worldwide.

    Alcoa announced its results for the second quarter of the current year and reported a strong performance in operations, which compensated for the expenses of a legal issue and restructuring. Alcoa suffered a $119 million loss which was inclusive of $195 million in special expenses. The company actually had a net income of $76 million after a loss was incurred after paying off special expenses. The sturdy operational performance was the result of a boost in productivity across Alcoa's multiple business segments.

    The company reported that it has good cash flow and a significant amount of the debts have been settled in spite of the 8% drop in the cash price for LME (London Metal Exchange). In the first quarter of the previous year, the company had a $2 million loss as compared to the $119 million loss in the second quarter of 2013. During the first quarter of this year, the company had an income of $149 million.

    In a recent trading session, the company experienced a drop in price as its shares took a 1.71% dive and came down to $8.07. This is a $0.14 decrease. The 52-week high is $9.93 and the 52-week low is $7.63, with a price to earnings ratio of 84.19. Alcoa's current market cap is $8.63 billion.

    In an attempt to keep up with the competitive pricing it has been offering, the company has decided to reduce its smelting capacity by 460,000 metric tons. It will be closing down two Soderberg potlines in Quebec and the Fusina smelter located in Italy. The closure of these facilities will cut down the company's smelting capacity by 11% to 13%.

    In addition, Alcoa has announced that it will be investing $275 million in its rolling mill. The $275 million will be invested in the upcoming years so that the company can keep up with the ever growing demand for sheet aluminum in the automotive industry. Alcoa had made a previous investment of $300 million towards the expansion of the plant located in Iowa. The plant is expected to be completed and fully operational by the end of 2013.

    The company's Birmingham facility has also been successfully expanded to cope with the demand for aluminum-lithium alloy that the company produces. Furthermore, the company's Pittsburgh facility has also expanded its production capacity by 30%. Lastly, the company had invested $90 million on the construction of an aluminum-lithium casting facility at Indiana and it is expected to be operational by 2014. The company expects that its revenue will expand four fold in the upcoming six years.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Themes: long-ideas Stocks: AA
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  • chongkim74
    , contributor
    Comments (1318) | Send Message
     
    Thanks for the summary of AA. I feel the global swing from China to US for aluminum might be a fluke..but today's AA's impressive trade volume is making me wonder.....can u explain beyond AA...such as the global demand? Why AA (demand wise) will continue this bump? Thanks.
    9 Aug 2013, 06:33 PM Reply Like
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