Alcoa Corporation reports increased sequential revenue for Q2 2017; remains profitable despite low alumina price

Alcoa Corporation reported financial results for Q2 2017 on July 19. The Company increased revenue on higher shipments and grew its cash balance sequentially. Alcoa remains profitable despite lower alumina prices.

“Alcoa generated solid profitability in the second quarter with strong cash flow that grew our cash balance to more than $950 million,” said Roy Harvey, President and Chief Executive Officer.

“We are pursuing a simple set of strategic priorities to reduce complexity, drive returns and strengthen the balance sheet, and we will continue to base each of our decisions on these three key levers for the benefit of our stockholders,” he added.

In Q2 2017, Alcoa reported net income of $75 million compared to Q1 2017 net income of $225 million. Results include the negative impact of $41 million in special items, primarily for certain tax items and additional restructuring charges. Excluding the impact of special items, Q2 2017 adjusted net income was $116 compared to adjusted net income of $117 million in Q1 2017.

Adjusted EBITDA excluding special items was down 9% to $483 million from $533 million in Q1 2017. The decline was primarily due to lower alumina prices, which improved late in the quarter, partially offset by higher aluminium prices and other factors.

Reported revenue was $2.9 billion, up 8% sequentially, driven by higher shipments across its product portfolio.  Q2 cash from operations was $311 million and free cash flow was $223 million. Alcoa ended second quarter 2017 with cash reserve of $954 million and $1.4 billion of debt.

The Company has squeezed its outlook for full-year adjusted 2017 EBITDA excluding special items, to $2.1 to $2.2 billion, from the earlier projection of $2.1 to $2.3 billion, based on current market assumptions.  

“Through the first half of the year, our adjusted EBITDA topped $1 billion, and we expect improvements in the second half of 2017, despite higher input costs,” said Mr Harvey.

On July 11, 2017, Alcoa announced plans to restart three of five potlines at its Warrick Operations smelter to supply the co-located rolling mill based on its ability to increase capacity utilization of its integrated assets and the smelter’s ability to supply molten metal to the mill directly. The mill’s projection on production increase of flat-rolled aluminium products for the food and beverage packaging industry also helped in this decision. .

Alcoa projects relatively balanced global markets for bauxite and alumina with a modest surplus for aluminium in 2017. For alumina, Alcoa projects the market to range from being in balance to a slight deficit of 800 thousand metric tons in 2017.

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The Company expects a modest global surplus between 300 thousand to 700 thousand metric tons. Alcoa forecasts global aluminium demand to growth in a range of 4.75% to 5.25%, up from 4.5% to 5% in Q1 2017.