Alcoa reports profit for third quarter 2015

Lightweight metals leader Alcoa reported a third quarter profit as its value-add and upstream portfolios delivered solid results in the face of strong market and currency headwinds. Alcoa has been transforming by building its value-add portfolio for profitable growth and creating a globally competitive upstream business. The company’s successful multi-year transformation will culminate with the launch of two Fortune 500 companies, one value-add focused and the other upstream focused, expected in the second half of 2016.

Alcoa reported third quarter 2015 net income of $44 million, or $0.02 per share, including $65 million in net unfavourable special items. Special items included restructuring-related costs to optimize the upstream portfolio and transaction costs, partially offset by gains on asset sales. Third quarter 2015 results compare to net income of $149 million, or $0.12 per share, in third quarter 2014.

Excluding special items, third quarter 2015 net income was $109 million, or $0.07 per share, led by strong productivity gains and solid midstream and downstream profitability, offset by lower metal prices. The Midwest transaction price was down $641 per metric ton, or 27.2 percent, year-to-date through September 30, 2015. Third quarter 2015 results, excluding special items, compare to net income of $370 million, or $0.31 per share, in third quarter 2014.

Third quarter 2015 revenue totalled $5.6 billion, down approximately 11 percent year-over-year. Divesting and closing lower-margin businesses and market headwinds caused third quarter revenue to fall 21 percent. This decrease was partially offset by a 10 percent third quarter revenue increase from organic growth in aerospace, automotive and alumina, combined with acquisitions.

3Q 2015 Highlights:

• Net income of $44 million, or $0.02 per share; excluding special items, net income of $109 million, or $0.07 per share
• $5.6 billion revenue down approximately 11 percent year-over-year, reflecting a 21 percent decline from divestitures, closures and market headwinds, partially offset by a 10 percent revenue increase from aerospace and automotive organic growth, acquisitions and Alumina sales
• $3.4 billion revenue, after-tax operating income of $257 million, and adjusted EBITDA of $508 million for combined Value-Add businesses
• Engineered Products and Solutions record revenue of $1.4 billion;
• aerospace revenue up 39 percent year-over-year
• Global Rolled Products automotive revenue up 133 percent year-over-year
• $2.2 billion revenue, after-tax operating income of $153 million, and adjusted EBITDA of $379 million for combined Upstream businesses
• Best Alumina profitability year-to-date since 2007, offset by Primary Metals as Midwest transaction price declined $641 per metric ton, or 27.2 percent, year-to-date
• $287 million year-over-year productivity gains; year-to-date productivity gains of $849 million, as compared to annual 2015 target of $900 million
• $420 million cash from operations and free cash flow of $152 million; $1.7 billion cash on hand.

“Our productivity performance was strong combined with good cash generation. While we cannot control external factors, we do remain focused on what we can control—making our businesses more resilient,” said Klaus Kleinfeld, Chairman and Chief Executive Officer, Alcoa.