Alcoa posts Q4 loss due to charges from shuttering capacity

[CHICAGO] Metals company Alcoa Inc on Monday reported a quarterly net loss after charges related to shuttering parts of its traditional smelting business.

The New York-based company has been curtailing smelting capacity as the industry endures tumbling prices amid rising trade tensions with China. Alcoa said last week it would close a plant in Evansville, Indiana, which would bring US aluminum output to its lowest level in more than 65 years.

London Metal Exchange aluminum prices, CMAL3, which fell 18.6 per cent in 2015, are hovering near 6-1/2 year lows as demand wanes in top-consumer China. The Midwest premium AL-PREM paid to producers on top of the LME price has fallen more than 60 per cent to about 8.9 cents a pound from record highs last year.

In September, Alcoa announced it would split in two, spinning off its value-added aerospace and car parts business from its traditional aluminum smelting business that includes bauxite and alumina. The split will take place in the second half of this year and questions remain on how the company will divide up debt and pension liabilities between the two new entities.

Earlier on Monday, in good news for the added-value portion of Alcoa's business, the company announced a US$1.5 billion long-term contract with General Electric Co's aviation unit to supply components used in aircraft engines.

That follows several other major contracts in the aerospace industry the company announced during the last quarter. "These contracts demonstrate that the push toward value-added business continues to show good results," Chief Executive Klaus Kleinfeld told Reuters in an interview after the results were announced.

But Kleinfeld said Alcoa's traditional business still faced"massive headwinds" from falling aluminum prices.

Alcoa on Monday posted a fourth-quarter loss of US$500 million or 39 cents per share, compared with a net profit of US$159 million or 11 cents a share a year earlier.

Excluding charges for shuttering capacity and income tax charges, Alcoa would have posted a profit of US$65 million or 4 cents a share, above analyst expectations of 2 cents per share.

Alcoa said it expected global aluminum demand to rise 6 per cent in 2016 versus 2015. The company said global aerospace sales should increase between 8 per cent and 9 per cent this year, while global automotive production should rise between 1 per cent and 4 per cent.

REUTERS