Production curtailments of 503,000 metric tons
of aluminum and 1.2 million metric tons of alumina
Lightweight metals leader Alcoa (NYSE:AA) today announced that
it is taking decisive action to curtail uncompetitive smelting and
refining capacity to ensure continued competitiveness amid
prevailing market conditions. The Company will reduce aluminum
smelting capacity by 503,000 metric tons and alumina refining
capacity by 1.2 million metric tons. Alcoa will begin the
curtailments in the fourth quarter of 2015 and will complete them
by the end of the first quarter of 2016.
The reductions will further improve the cost position of the
Upstream business and ensure competitiveness in a lower pricing
environment, including a 30 percent drop in the Midwest transaction
aluminum price year-to-date. Alcoa has been aggressively reshaping
its Upstream portfolio as part of a successful multi-year strategy
to position itself as a low-cost global leader in alumina and
aluminum production. Once today’s actions are complete, Alcoa will
have closed, divested or curtailed 45 percent of total smelting
operating capacity since 2007.
“Alcoa has consistently taken decisive actions to create a
commodity business that is positioned to succeed throughout the
cycle,” said Klaus Kleinfeld, Chairman and Chief Executive Officer.
“We have closed or curtailed unprofitable capacity, repowered key
assets at lower energy prices, built-up a profitable value-add
casthouse network, established the foundation for a strong
commercial bauxite business, and made substantial productivity
improvements. In the face of continued adverse market forces, we
are once again not standing still. These difficult, but necessary
measures will further strengthen our Upstream portfolio, reducing
our cost position and driving greater resilience as we prepare to
launch this business as a strong standalone company in the second
half of 2016.”
In its aluminum business, Alcoa will idle the Intalco and
Wenatchee primary aluminum smelters in Washington State, and the
Massena West smelter in New York. The Company will not modernize
the New York Massena East smelter and will permanently close the
facility; potlines at Massena East have been closed since March
2014. The casthouses at Intalco and Massena West, which produce
value-add shaped products, will continue to operate. The Alcoa
Forgings and Extrusions facility in Massena is unaffected.
In its alumina business, Alcoa will partially curtail refining
capacity at its Pt. Comfort, Texas facility by about 1.2 million
metric tons.
“Across the globe, we have been taking measures to curtail
smelting and refining capacity that is not competitive to improve
our cost profile,” said Roy Harvey, Executive Vice President and
President, Global Primary Products. “Alcoa has a long, proud
history at the affected locations and our dedicated employees have
worked hard to keep our facilities competitive in the face of
challenging market conditions. Unfortunately, today’s pricing
environment necessitates very difficult decisions. We recognize how
deeply these decisions affect our Alcoa family and communities and
are committed to working closely with our employees and unions and
local stakeholders to support them through this transition.”
Once these actions are implemented, Alcoa will have curtailed or
closed 673,000 metric tons of uncompetitive smelting
capacity and 2.5 million metric tons of uncompetitive
refining capacity since its announced review of 500,000 metric tons
of smelting capacity and 2.8 million metric tons of refining
capacity in March 2015.
Total restructuring-related charges in the fourth quarter of
2015 associated with today’s announcement are expected to be
between $160 million and $180 million after-tax, or $0.12 to $0.14
per share, of which approximately 30 percent would be non-cash.
As previously announced, Alcoa will separate into two,
industry-leading publicly-traded companies in the second half of
2016 – an Upstream-focused company including its Mining, Refining,
Smelting, Energy and Casting businesses, and a Value-Add company
including its Global Rolled Products, Engineered Products and
Solutions, and Transportation and Construction Solutions
businesses.
About Alcoa
A global leader in lightweight metals technology, engineering
and manufacturing, Alcoa innovates multi-material solutions that
advance our world. Our technologies enhance transportation, from
automotive and commercial transport to air and space travel, and
improve industrial and consumer electronics products. We enable
smart buildings, sustainable food and beverage packaging, high
performance defense vehicles across air, land and sea, deeper oil
and gas drilling and more efficient power generation. We pioneered
the aluminum industry over 125 years ago, and today, our more than
60,000 people in 30 countries deliver value-add products made of
titanium, nickel and aluminum, and produce best-in-class bauxite,
alumina and primary aluminum products. For more information,
visit www.alcoa.com, follow @Alcoa on Twitter at
www.twitter.com/Alcoa and follow us on Facebook at
www.facebook.com/Alcoa.
Forward-Looking Statements
This release contains statements that relate to future events
and expectations and as such constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include those containing such
words as “estimates,” “expects,” “goal,” “plans,” “should,”
“target,” “will,” “would,” or other words of similar meaning. All
statements that reflect Alcoa’s expectations, assumptions or
projections about the future, other than statements of historical
fact, are forward-looking statements, including, without
limitation, statements regarding Alcoa’s goal to create a globally
competitive commodity business, the expected timing for completing
the curtailments, and the expected financial impact of the
curtailments. Forward-looking statements are subject to risks,
uncertainties and other factors, and are not guarantees of future
performance. Important factors that could cause actual results to
differ materially from those expressed or implied in the
forward-looking statements include: (a) material adverse changes in
aluminum industry conditions, including global supply and demand
conditions and fluctuations in London Metal Exchange-based prices
and premiums, as applicable, for primary aluminum, alumina, and
other products, and fluctuations in indexed-based and spot prices
for alumina; (b) Alcoa’s inability to successfully realize goals
established in each of its business segments, at the levels or by
the dates targeted for such goals (including moving its alumina
refining and aluminum smelting businesses down on the industry cost
curves and increasing revenues and improving margins in its Global
Rolled Products, Engineered Products and Solutions, and
Transportation and Construction Solutions segments); (c) Alcoa’s
inability to realize expected benefits, in each case as planned and
by targeted completion dates, from acquisitions, divestitures,
facility closures, curtailments, or expansions, or international
joint ventures; (d) political, economic, and regulatory risks in
the countries in which Alcoa operates, including unfavorable
changes in laws and governmental policies, tax rates, civil unrest,
or other events beyond Alcoa’s control; (e) changes in preliminary
accounting estimates due to the significant judgments and
assumptions required; (f) the outcome of contingencies, including
legal proceedings and environmental remediation; (g) uncertainties
as to the timing of the separation and whether it will be
completed; (h) the possibility that various closing conditions for
the separation may not be satisfied; (i) the impact of the
separation on the businesses of Alcoa; (j) the risk that the
businesses will not be separated successfully or such separation
may be more difficult, time-consuming or costly than expected,
which could result in additional demands on Alcoa’s resources,
systems, procedures and controls, disruption of its ongoing
business and diversion of management’s attention from other
business concerns; (k) the potential failure to retain key
employees while the separation transaction is pending or after it
is completed; and (l) the other risk factors summarized in Alcoa’s
Form 10-K for the year ended December 31, 2014, and other reports
filed with the Securities and Exchange Commission. Alcoa disclaims
any obligation to update publicly any forward-looking statements,
whether in response to new information, future events or otherwise,
except as required by applicable law.
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version on businesswire.com: http://www.businesswire.com/news/home/20151102006393/en/
AlcoaInvestor ContactNahla Azmy,
212-836-2674Nahla.Azmy@alcoa.comorMedia ContactsSonya Elam Harden,
864-357-1258Sonya.Harden@alcoa.comorMonica Orbe,
212-836-2632Monica.Orbe@alcoa.com
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