Alcoa to Cut Capacity in Brazil - Analyst Blog
March 31 2014 - 12:00PM
Zacks
Aluminum giant, Alcoa
Inc. (AA) announced that it will cut 147,000 metric tons
of smelting capacity at its Sao Luis (Alumar) and Pocos de Caldas
smelters in Brazil. The company is cutting capacity to address the
challenging market conditions as well as increasing costs that made
the smelters uncompetitive.
At the Poços smelter, Alcoa will
curtail 62,000 metric tons of capacity and 85,000 metric tons will
be curtailed at Sao Luis. The curtailments are expected to be
complete by the end of May 2014.
As a result of the cutbacks, the
three potlines of the Pocos smelter will be fully curtailed and the
Pocos refinery will also reduce production. However, the mine,
aluminum powder plant and casthouse at Poços will carry on with
their normal operations. The refinery at Sao Luis will also
continue with the normal operations.
The company expects to incur restructuring charges in the range of
$40 million and $50 million after-tax, or 4 cents to 5 cents per
share in the first quarter related to the curtailments in Brazil.
30% of the expense incurred will be non cash.
In May 2013, Alcoa announced that it will review 460,000 metric
tons of smelting capacity over the next 15 months for potential
curtailment. Once the company completes all the curtailments and
closures, it will have about 80,000 metric tons or 21% of smelting
capacity offline.
Earlier in Feb 2014, Alcoa announced that it will permanently shut
down its Point Henry aluminum smelter and two rolling mills in
Australia by the end of 2014. Alcoa had put the Point Henry smelter
under strategic review since 2012 due to the challenging market
conditions and found that the smelter had no prospect of becoming
financially viable.
Alcoa remains on track to move down the cost curve and curtailed
capacities in its upstream business. The curtailments will improve
the competitiveness of the company’s Primary Products business.
Alcoa, a prominent player in the
mining industry along with Aluminum Corporation of China
Ltd. (ACH) , Atlatsa Resources Corp.
(ATL) and BHP Billiton Ltd. (BHP), is a world
leader in production and management of primary aluminum, fabricated
aluminum, and alumina. The company currently retains a short-term
Zacks Rank #2 (Buy).
ALCOA INC (AA): Free Stock Analysis Report
ATLATSA RESRCS (ATL): Free Stock Analysis Report
BHP BILLITN LTD (BHP): Free Stock Analysis Report
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