
Arconic has reported its fourth quarter and full year 2016 results. This is Arconic’s first independent quarter reporting earnings following the separation of Alcoa Corporation and Arconic.
Commenting on the results, Klaus Kleinfeld, Arconic Chairman and CEO said, “In the fourth quarter we completed the successful separation of Alcoa Inc., which has unlocked substantial value for all shareholders. ..We also strengthened our balance sheet, paid down $750 million of debt and ended the year with a strong cash balance of $1.9 billion.”
Kleinfeld continued with his outlook for 2017, “In 2017 we are squarely focused on operational improvements, margin expansion, and capital efficiency to drive shareholder returns. We will continue to cut cost through productivity and corporate overhead reduction. Beyond our stated targets, our retained interest in Alcoa Corporation provides an additional lever for value creation.”
Arconic will continue to focus on margin expansion and Return on Net Assets (RONA) improvement as well as cost cutting in 2017. As a cost cutting drive, the Company expects to cut $45 million in corporate overhead, decreasing such overhead as a percentage of revenue from 1.5 per cent as our run rate at the end of 2016 to 1.1 percent in 2017.
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From the first quarter of 2017, Arconic’s segment reporting metric will change from ATOI to adjusted EBITDA. For Q1 2017, Arconic sets its target Revenue of $2.8 billion to $3.0 billion, including the impact of the Tennessee packaging ramp down and adjusted EBITDA of $420 million to $450 million.
For full year 2017, Arconic sets its target Revenue of $11.8 to $12.4 billion, including $400 million of negative impact from the Tennessee packaging ramp down, adjusted EBITDA margin of approximately 15 per cent, free cash flow of $350 million or more and $1 billion of debt reduction.
Additionally, the company has set an approximate RONA target of 9 percent, with a target of 11-12 percent in 2019. The company sets adjusted net income target, excluding special items, of $1.10 to $1.20 per share.
It is to be noted that both 2017 full year and first quarter guidance exclude any potential future monetization of the Company’s 19.9 percent retained interest in Alcoa Corporation.
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