Alcoa's Transformation Is Delivering

PUBLISHED: Oct 09 2014 @ 10:49 | Comments (0) | More info about Lou Gutheil

Aluminum giant, Alcoa Inc. (NYSE:AA) released its third quarter results this morning, driving the share price to 16.33. That is more than a 100% increase over the 8.10 closing price as at 09 October 2013. This may indicate a growing confidence in the company as a result of both the implementation of its transformation plan and the results it seems to be generating.

Founded in 1888, the company that pioneered the aluminum industry, invented aluminum foil and manufactured the first aluminum tea kettle, is a world leader in lightweight metal technology, engineering and manufacturing. Alcoa is everywhere that aluminum is, from reclaiming the bauxite from the ground to aerospace applications and everything in between.

The company’s has implemented multiple strategic activities and portfolio transformations. They include:

Opening the world’s largest Aluminum-Lithium plant. Contracts are already in place for $100 million for 2017 delivery.
Expanding production in Davenport (Iowa) and Alcoa (Tennessee) for automotive and light truck applications.
Introducing the Ultra ONE with MagnaForce alloy lightweight, heavy-duty truck for the European market.
Acquiring Firth Rixson, a manufacturer of jet engine parts, a move that is expected to add $1.6 billion in incremental revenues and $350 million in EBITDA by 2016.
Signing contracts with Boeing and Pratt & Whitney worth a combined $2.0 billion.
Closing smelting operations in Italy and Australia.
Initiating strategic reviews of other operating units to drive costs down and curtail capacities in upstream operations to improve the company’ competitive position.

2013 – 2014 Q3 Comparisons (Year-on year)

Sales of $6.2 billion surpassed same quarter 2013 sales of $5.7 billion by 8.7%.
Net income of $131 million nearly tripled the $44 million generated in Q3 2013.
Earnings per share climbed from 2 cents in Q3 2013 to 13 cents for Q3 2014.

2014 Q3 – Q2 Comparisons (Sequential)

Sales of $6.2 billion was an increase of 7% from $5.8 billion.
Net income was up 1.5% from $129 million to $131 million.
Earnings per share of 13 cents was up one cent from Q2.

In a conference call following the release of the quarterly results, Chairman and CEO Klaus Kleinfeld remarked that, “There’s no other way to describe it. It’s a standout quarter. All businesses are firing. Downstream again hit a new profitability high. Midstream maintained disciplined cost controls. Primary metals performed at levels not seen since before the (economic) downturn. This quarter is a clear data point that Alcoa’s transformation is delivering.”

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