Alcoa Q4 2015 and Full-year Results: Upstream posts profit despite price free-fall

Lightweight metals leader Alcoa announced full-year 2015 results yesterday, ending the year on solid operational footing. In fourth quarter 2015, the Upstream remained profitable despite lower alumina and aluminium prices. Every segment delivered productivity gains. The company also undertook restructuring to further strengthen the Upstream portfolio and streamline overhead ahead of its planned separation in the second half of 2016.

Q4 Results:

In fourth quarter 2015, Alcoa reported a net loss of $500 million, or $0.39 per share. Results include $565 million in special items related primarily to closures or curtailments of capacity in the Upstream business and discrete income tax charges. Fourth quarter 2015 results compare to net income of $159 million, or $0.11 per share, in fourth quarter 2014.

Excluding special items, fourth quarter 2015 net income was $65 million, or $0.04 per share, compared to net income of $432 million, or $0.33 per share, in the year-ago period. Strong productivity gains were more than offset by lower alumina and aluminium prices. In 2015, the Midwest transaction price for primary aluminium fell $657 per metric ton, or 28 percent, and the Alumina Price Index dropped $154 per metric ton, or 43 percent.

Fourth quarter 2015 revenue was $5.2 billion, down 18 percent from $6.4 billion in fourth quarter 2014. Organic growth in aerospace and acquisitions increased revenue 7 percent, which was more than offset by a 25 percent revenue decline from lower alumina and aluminium prices, the impact of divested, curtailed or closed facilities, and unfavorable currency.

Full-year Results:

In 2015, Alcoa reported a net loss of $121 million, or $0.15 per share, compared to net income of $268 million. Strong productivity and favorable currency impacts were more than offset by lower metal prices and cost increases. Revenue in 2015 was $22.5 billion, down 6 percent from $23.9 billion in 2014.

In 2015, Alcoa delivered strong performance against its financial targets- the company achieved $1.2 billion in productivity savings, exceeding a $900 million annual target. For full-year 2015, Alcoa’s cash from operations totaled $1.6 billion, resulting in $402 million in positive free cash flow.

"2015 was a pivotal year for Alcoa,” said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer. Turning to the current quarter, Kleinfeld continued, "In the Upstream, alumina prices dropped a further 24 percent and aluminum prices stayed stubbornly low. We took aggressive actions: closed and curtailed more unprofitable capacity, accelerated productivity and weathered the storm with Upstream remaining profitable. To further boost resilience we launched a $600 million Upstream business improvement program. We ended the year in an excellent cash position, with all businesses delivering strong productivity.”