), the largest U.S. aluminum producer, posted a loss of $2.3
billion or $2.19 per share in the fourth quarter of 2013 compared
with a profit of $242 million or 21 cents per share in the
year-ago quarter. The loss resulted mainly due to sizable
goodwill impairment charges of $1.7 billion related to
acquisitions in the Primary Metals business.
Excluding one-time special items, earnings came in at $40
million or 4 cents per share in the reported quarter, below the
year-ago earnings of $64 million or 6 cents. It also missed the
Zacks Consensus Estimate of 6 cents.
For full year 2013, Alcoa posted a net loss of $2.3 billion,
or $2.14 per share compared with a net income of $191 million, or
$0.18 per share in 2012.
Excluding one-time items, the company posted a net income of
$357 million or 33 cents per share, ahead of the year-ago
earnings of $262 million or 24 cents per share. It, however,
missed the Zacks Consensus Estimate of 35 cents.
Revenues dropped roughly 5.3% to $5,585 million in the fourth
quarter from $5,898 million in the year-ago quarter but exceeded
the Zacks Consensus Estimate of $5,391 million. The decline was
primarily due to weak aluminum prices which declined 7% year over
For full year 2013, revenues edged down 2.8% year over year to
$23,032 million due to a 4% year-over-year decline in realized
aluminum prices. It also beat the Zacks Consensus Estimate of
Alcoa expects global aluminum demand growth to be 7% for 2014.
Its shares fell as much as 4.6% in after-hours trading
- Shipments in the reported quarter were 2.6 million metric tons
on production of 4.25 million metric tons. After Tax Operating
Income (ATOI) was $70 million, up from $41 million in the
year-ago quarter and $67 million in the sequentially preceding
quarter. The results were driven by strong productivity savings
and energy efficiency improvements, benchmark production levels,
and sales at Alumina Price Index-based pricing, partly offset by
lower LME prices and higher energy costs.
- Shipments in the quarter were 0.72 million metric tons, down
6.6% from the year-ago quarter. Production in the quarter was
0.87 million metric tons, down 5% from the year-ago quarter. ATOI
was negative $35 million compared with a profit of $316 million
(including a $275 million gain on the Tapoco Hydroelectric
Project asset sale) in the year-ago quarter and a profit of $8
million in the prior quarter.
The sequential decline was led by lower LME and regional
premium prices coupled with a potline outage at the Ma'aden-Alcoa
joint venture. However, strong productivity improvements and
broad cost cutting measures offset higher seasonal energy and
other price increases.
Global Rolled Products
- Shipments in the quarter were 0.45 million metric tons, down
1.3% year over year. Third-party revenues were $1.64 billion,
down 7.1% year over year. The segment posted ATOI of $21 million,
down 72.7% year over year and 70.4% sequentially. The sequential
decline was due to lower volumes in aerospace and mix and lower
seasonal volume along with lower industrial volumes and
Engineered Products and Solutions
- Shipments in the quarter were 0.06 million metric tons, up 7.7%
year over year. The segment posted fourth quarter ATOI of $168
million, up 20% year over year but down 12.5% sequentially. The
sequential decline was due to seasonal cost increases and
unfavorable volume and price/mix.
Alcoa's cash and cash equivalents stood at $1.44 billion as of
Dec 31, 2013, compared with $1.86 billion as of Dec 31, 2012.
Alcoa had a debt-to-capital ratio of 38.1% in 2013 versus 34.8% a
Alcoa World Alumina LLC (AWA), which is owned 60% by Alcoa
Inc. and 40% by Alumina Ltd., reached a settlement with the U.S.
Department of Justice (DOJ) and the U.S. Securities and Exchange
Commission (SEC) regarding certain legacy alumina contracts with
Aluminium Bahrain B.S.C. (Alba).
As per the DOJ settlement, AWA will pay a total of $223
million, including a fine of $209 million payable in five equal
installments over a four year period. AWA has been pleaded
guilty, under the terms of the DOJ resolution, to one count of
violating the anti-bribery provisions of the Foreign Corrupt
Practices Act (FCPA).
Alcoa also reached another settlement with the SEC. Alcoa
agreed to a settlement amount of $175 million. However, the
company will be given credit for the $14 million one-time
forfeiture payment, which is part of the DOJ resolution, leading
to a total cash payment of $161 million to the SEC, payable in
five equal installments over four years.
Alcoa's strategic re-positioning of its value and commodities
businesses is working very well. The company is making capital
investments and remains on track to move down the cost curve and
curtail capacities in its upstream business. The curtailments
will improve the competitiveness of the company's Primary
Alcoa started growing its value-added businesses
(comprising Engineered Products and Solutions and Global
Rolled products) and lowering the cost base of its commodity
businesses during the time of peak economic crisis. The company's
value-added businesses are now driving 57% of its revenues and
80% of segment profits.
Alcoa has realized $1.1 billion year-over-year productivity
savings, surpassing a $750 million annual goal. It has also
managed growth capital expenditures of $407 million against an
annual plan of $550 million and controlled sustaining capital
expenditures of $786 million against a 2013 goal of $1 billion.
The company is also progressing on the Saudi Arabia joint venture
project with $159 million already invested in 2013 against a $350
million annual plan.
Alcoa is optimistic for 2014 and expects global demand for
aluminum to increase 7%. The company envisions 7%-8% global
growth in the aerospace sector in 2014. Alcoa's growth forecast
for other markets are - automotive (1%-4%), packaging (2%-3%),
commercial building and construction (4%-6%).
Alcoa expects the transportation market to remain steady (-1%
to 3%) in 2014 after witnessing a strong 2013. The company
forecasts a decline in the industrial gas turbine market (-8% to
-12%) on lower orders for new gas turbines and spare parts.
Alcoa is a world leader in production and management of
primary aluminum, fabricated aluminum, and alumina. The company
is also the world's largest miner of bauxite and refiner of
Alcoa is divesting underperforming assets through its
restructuring program and is aggressively pursuing cost-cutting
actions. However, the company continues to compete with
Alcoa currently retains a short-term Zacks Rank #3 (Hold).
Other companies in the mining industry worth considering are
Tahoe Resources Inc.
Alexco Resource Corporation
Denison Mines Corp.
). While both Tahoe and Alexco carry a Zacks Rank #1 (Strong
Buy), Denison holds a Zacks Rank #2 (Buy).
ALCOA INC (AA): Free Stock Analysis Report
ALEXCO RESOURCE (AXU): Free Stock Analysis
DENISON MINES (DNN): Free Stock Analysis
TAHOE RESOURCES (TAHO): Free Stock Analysis
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