Alcoa reports net income of $135 mln, revenue declines due to closed operations

Leading aluminium maker Alcoa reported its second quarter 2016 results on July11 2016. The company has separated its upstream and downstream business and the process is going to be complete by H2 2016. The separation seems promising for the company as its Arconic (Value-Add) segments grew year-over-year significantly and Alcoa Corporation (upstream) segment grew sequentially.

Highlights:

• Reported net income of $135 million and adjusted net income of $213 million excluding special items
• Revenue of $5.3 billion, down 10 per cent from the same period of 2015
• 4 per cent rise in revenue from recent growth & acquisitions but offset by a 14 percent revenue decline
• Announced sales of non-essential assets expected to generate a cash of $1.2 billion during 2016
• cash on hand $1.9 billion
• Production gain of $375 million across all segments year –on -year

As Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer said, "As markets ever more rapidly evolve, we have made Alcoa increasingly agile; results continue to improve,”… “In the face of a transforming aerospace market, we moved quickly to bring our costs down while capturing new opportunities. Contract wins continued as did our innovation leadership with the opening of a state-of-the-art metals powder plant geared toward rising demand for 3D-printed parts. Our automotive sheet revenue hit an all-time high. After substantially reshaping our Upstream segments they are now performing well even in a low pricing environment; we are building out our bauxite business and continue to win new supply contracts. Exceptional productivity and monetization of non-essential assets has put us in an excellent cash position. Our separation is on track for later this year.”

Alcoa reported a net income of $135 million in the second quarter of 2016. The second quarter 2016 results report a drop compared to the net income of $140 million in the same period of 2015 because of its reconstruction and separation related costs.

Despite the dropping alumina and aluminium pricing, all segments put together contributed $375 million as productivity gains. Excluding the extra cost impacts, 2nd quarter adjusted net income was $213 million.

Alcoa 2nd quarter revenue was $5.3 billion, which is 10 per cent lower than the $5.9 billion in the 2nd quarter of 2015 primarily caused by low alumina aluminium pricing and capacity closure.

2Q 2016 Alcoa Corporation Segments (Upstream):

• Total revenue of $2.3 billion, up 7 percent sequentially
• Despite organic growth revenue slightly offset by the impact of curtailed, divested and closed operations
• Third-party revenue of $1.8 billion, up 9 percent sequentially
• Profit after tax of $150 million, up sequentially, due to Alumina and Primary Metals segments profits
• Alcoa World Alumina and Chemicals secured $60 million of new third-party bauxite sales over the next two years
• Power agreement for Intalco smelter in Washington State and curtailment in Pt. Comfort, Texas refinery
• $199 million in productivity savings ($379 million year-to-date