Back to top

Image: Bigstock

Alcoa (AA) Combines Business Units, Appoints New Unit Head

Read MoreHide Full Article

Alcoa Corporation (AA - Free Report) said that it is consolidating its business units to increase operational agility, cut costs and improve internal coordination. The move is also in sync with the company’s strategic goals of reducing complexity, strengthening the balance sheet and driving shareholder returns.

The company said that its aluminum smelting, cast products and rolled products businesses along with the majority of the energy segment assets will be merged into a new aluminum business unit. This will result in three business units – Alcoa Bauxite, Alcoa Alumina and Alcoa Aluminum. Alcoa noted that it will continue to review its business structure and processes to make sure that it remains resilient through all market cycles.

Alcoa also appointed Tim Reyes –  President of Alcoa Cast Products since 2015 – as President of the new aluminum business unit. Reyes has a strong track record of commercial, operational and strategic success and has led a number of commercial functions since joining the former parent company, Alcoa Inc., back in 1999.

Alcoa also noted that Martin Briere –  President of Aluminum since 2014 –  will be leaving the company due to the business restructuring.  

Moreover, the company said that its segment reporting will remain aligned with the business units. Starting with first-quarter 2017, its operating and reportable segments will both be Bauxite, Alumina and Aluminum and most of the former Energy segment will be included in Aluminum. The business units will also use adjusted EBITDA to measure and report segment profitability starting with the first quarter.

Alcoa has outperformed the Zacks categorized Metal Products - Distributor industry over the past three months. The company’s shares have gained around 16.9% over this period, compared with a 38% decline recorded by the industry.


Alcoa recorded a net loss of $125 million or 68 cents per share for fourth-quarter 2016. The results include one-time items mainly associated with the closure of Suralco alumina refinery and mines in Suriname and the impairment of Alcoa of Australia Limited’s interests in a Western Australia gas field. Adjusted earnings of 14 cents per share missed the Zacks Consensus Estimate of 22 cents.

Revenues of $2,537 million for the quarter, however, beat the Zacks Consensus Estimate of $2,211 million. Alcoa gained from higher alumina and aluminum prices and increased volumes in its rolled products business in the quarter.

Alcoa remained focused on building its third-party bauxite business and streamlining its portfolio during the fourth quarter. The company clinched its first major bauxite export contract out of Western Australia during the quarter. Alcoa was also granted approval to export up to 2.5 million metric tons of bauxite annually for five years to third-party customers.

Alcoa, in its fourth-quarter call, said that it sees relatively balanced global bauxite and alumina markets and a modest global aluminum surplus of 400,000 to 800,000 metric tons for 2017. The company expects global aluminum demand growth of 4% year over year in 2017.

Alcoa currently carries a Zacks Rank #2 (Buy).
 

Alcoa Corp. Price, Consensus and EPS Surprise

 

Alcoa Corp. Price, Consensus and EPS Surprise | Alcoa Corp. Quote

Other Stocks to Consider

Other well-placed companies in the basic materials space include BHP Billiton Limited (BHP - Free Report) , Rio Tinto plc (RIO - Free Report) and Ternium S.A. (TX - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BHP Billiton has an expected long-term growth of 5.6%.

Rio Tinto has an expected earnings growth of 75.4% for the current year.

Ternium has an expected long-term growth of 18.4%.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Alcoa (AA) - free report >>

BHP Group Limited Sponsored ADR (BHP) - free report >>

Rio Tinto PLC (RIO) - free report >>

Ternium S.A. (TX) - free report >>

Published in