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Arconic Selling Italian Rolling Mill to Slim Aluminium

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ArconicARNC said that it is selling its rolling mill in Fusina, Italy to Slim Aluminium. The move follows a detailed review process and is part of the company's Global Rolled Products ("GRP") business's efforts to convert the business from a commodity producer to a high-margin aerospace and automotive supplier.

Slim Aluminium, an Italy-based rolling mill business, has an annual production capacity of around 92,000 metric tons. It is owned by funds managed by German private equity firm, Quantum Capital Partners.

Arconic expects to register restructuring-related charges representing the loss on sale of around $60 million (post tax) or 12 cents per share in the first quarter of 2017. The charges are mainly associated with a non-cash impairment of the net book value of the business and a $10 million cash injection into it before its divestiture.

Arconic's GRP unit has increased its adjusted EBITDA margin to 11.9% in 2016 from 3% in 2008 through portfolio optimization, manufacturing excellence and commercializing innovations. The division, which makes and markets aluminum plate and sheet for the aerospace, automotive, commercial transportation, brazing and industrial markets, recorded sales of $1.1 billion in fourth-quarter 2016.

Arconic outperformed the Zacks categorized Mining-Non Ferrous industry year to date, aided by strong demand for its products across aerospace and automotive markets and its efforts to improve cost structure through company-wide productivity actions. The company's shares have gained around 42.8% over this period, compared with roughly 13.3% gain recorded by the industry.

Arconic is seeing healthy demand trends in the aerospace market and is well placed to gain from major contract wins in this market. Arconic is also well positioned to capture the growing demand for aluminum sheet stemming from the transition of the North American auto industry to lightweighting. It is the market leader in providing aluminum sheet to the North American automotive market.

Arconic is also focusing on cost reduction and productivity improvements across its businesses, which should lend support to its bottom line. The company delivered $710 million in gross productivity savings in 2016. The company, in its fourth-quarter call, said that it will remain focused on cost cutting and improving margin and return on net assets in 2017.

Arconic is a Zacks Rank #2 (Buy) stock.

Arconic Inc. Price and Consensus

Arconic Inc. Price and Consensus | Arconic Inc. Quote

Other Stocks to Consider

Other well-placed companies in the basic materials space include Amerigo Resources Ltd. ARREF , United States Steel Corporation X and Ternium S.A. TX , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Amerigo Resources has an expected earnings growth rate of 325% for the current year.

U.S. Steel has an expected long-term EPS growth rate of 8%.

Ternium has an expected long-term EPS growth rate of 18.4%.

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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.


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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