Actions continue to drive competitiveness of Upstream operations
Lightweight metals leader Alcoa (NYSE:AA) today announced it is taking further action to increase the competitiveness of its Upstream business amid prevailing market conditions. In 2015, the Midwest transaction aluminum price dropped approximately 30 percent, and the Alumina Price Index fell approximately 40 percent.
Alcoa will permanently close its 269,000 metric ton Warrick Operations smelter in Evansville, Indiana by the end of the first quarter 2016. By the end of the second quarter 2016, the Company will reduce alumina production by one million metric tons, which includes curtailing the remaining 810,000 metric tons of refining capacity at its Point Comfort operations in Texas.
The rolling mill and power plant at Warrick Operations will continue to operate.
“We recognize how deeply this decision impacts employees and we are committed to work closely with our employees, unions and community stakeholders to support them through this transition,” said Roy Harvey, President of Alcoa’s Global Primary Products. “Despite the hard work of employees, these assets are not competitive. We’re confident that these actions are the right ones in face of these challenging market conditions. We are committed to creating a resilient business ready for launch as an independent company in 2016.”
Once the actions announced today and in the fourth quarter are implemented, Alcoa will have curtailed or closed 812,000 metric tons of smelting capacity and 3.3 million metric tons of refining capacity since its announced review in March 2015 of 500,000 metric tons of smelting capacity and 2.8 million metric tons of refining capacity.
Alcoa forecasts improving supply-demand balances in both the alumina and aluminum markets for 2016, and is focused on positioning the business for success throughout market cycles. The company is on target to meet or exceed its 2016 goals of moving to the 38th percentile on the aluminum cost curve and 21st percentile on the alumina cost curve.
As a result of today’s announcement, the Company will record an associated charge in the fourth quarter of approximately $120 million after-tax, or $0.09 per share, of which approximately 45 percent will be non-cash. Additional charges in the first quarter of 2016 related to these actions are expected to be between $50 million and $60 million after-tax, or $0.04 to $0.05 per share, of which almost 80 percent will be non-cash.
As previously announced, Alcoa will separate into two, industry-leading publicly traded companies in the second half of 2016 – an Upstream-focused company including its Mining, Refining, Smelting, Energy and Casting businesses, and a Value-Add company including its Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions businesses.
Pt. Comfort is part of the Alcoa World Alumina and Chemicals group of companies owned 60 percent by Alcoa Inc., and 40 percent by Alumina Limited.