Alcoa Expanding Virginia Plant to Make Jet Engine Blades - Analyst Blog


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In a move to address increasing demand for next-generation aircraft engine parts, aluminum giant Alcoa ( AA ) is investing $25 million to beef up capacity at its power and propulsion facility in Hampton, VA. The investment is in sync with Alcoa's strategy to profitably grow its aerospace business.

The investment has been geared at developing a state-of-the-art process technology dubbed - enhanced equiax (EEQ) casting - which will reduce the weight of highest-volume jet engine blades by 20% and boost aerodynamic performance for improved fuel efficiency.

Alcoa said that it will add equipment for a new production line and modify existing machinery at the Virginia facility to make lighter, nickel-based airfoil blades for top selling jet engines. These blades can be used to retrofit existing or build next-generation aircraft engines. Alcoa will utilize the most advanced manufacturing technologies such as robotics and digital x-ray for enhanced product inspection.

The expansion project will start this month and is expected to wrap up by fourth-quarter 2015. The expansion is expected to add at least 75 new, full-time employees over three years. Alcoa will get roughly $2 million in state and local incentives and another $1.3 million exemption on sales and use tax for choosing Hampton for the project.

Alcoa, which derived $4 billion in sales from its aerospace business last year, makes lightweight metallic solutions for the aerospace industry. It holds leading market positions in aerospace forgings, extrusions, jet engine airfoils and fastening systems made by its downstream business, and aerospace sheet and plate made by its midstream business.

Alcoa, last month, broke ground on its new $100 million aerospace expansion in La Porte, IN, where it will produce nickel-based superalloy jet engine parts for large commercial aircraft, including narrow and wide-body and military airplanes.

The 32,000 square-foot plant will increase Alcoa's capacity to supply engines for narrow-body aircraft. It will also enable Alcoa to produce parts about 60% larger than components it already produces, thus expanding its market presence to wide-body airplanes.

Alcoa is witnessing healthy airline fundamentals. The company, in Apr 2014, bumped up its global aerospace growth expectations for 2014 to 8%-9% from 7%-8% factoring in strong demand for both large commercial aircraft and regional jets and sustained growth in the business jet market.

Alcoa is a Zacks Rank #3 (Hold) stock.

Other mining companies worth considering include Hi-Crush Partners LP ( HCLP ), BHP Billiton Limited ( BHP ) and First Quantum Minerals Ltd. ( FQVLF ). While Hi-Crush Partners carries a Zacks Rank #1 (Strong Buy), both BHP Billiton and First Quantum hold a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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