Alcoa to Curtail Smelting Capacity in Brazil as Reshaping of Upstream Portfolio Continues
By Business Wire News
By Business Wire News
NEW YORK & SÃO PAULO
Lightweightmetals leaderAlcoa (NYSE: AA) today announced that it will curtail the remaining 74,000 metric tons of smelting capacity at its São Luís (Alumar) facility in Brazil. The decision is aligned with the Company’s recent announcement to evaluate upstream capacity for possible curtailment, closure or sale as Alcoa further optimizes its commodity portfolio. The curtailment is expected to be complete by April 15, 2015.
“We continue to take decisive steps to create a globally competitive commodity business and are executing against our upstream capacity review,” said Bob Wilt, President of Alcoa’s Global Primary Products. “These are difficult but necessary actions in support of Alcoa’s strategy to lower the cost base of our upstream businesses.”
This curtailment adds to the 85,000 metric tons of capacity idled at São Luís in May 2014 and the 12,000 metric tons curtailed in October 2014. Challenging global market conditions in primary aluminum production and increased costs have made the smelter uncompetitive. The refinery at São Luís is unaffected and will continue normal operations.
“We understand how deeply this decision affects our employees, our contractors and our communities,” said José A. Drummond, President of Alcoa Latin America. “Our teams have worked extremely hard to make the plant competitive, and we will actively consult with our employees, unions and community stakeholders to minimize the impact of this action. We will continue working to achieve the competitive conditions necessary for aluminum production in the region.”
The curtailment is in line with Alcoa’s announcement on March 6, 2015 to evaluate 500,000 metric tons of smelting capacity and 2.8 million metric tons of refining capacity for possible curtailment, closure or sale. Once the São Luís facility is curtailed, Alcoa will have approximately 740,000 metric tons, or 21 percent, of its smelting capacity offline.
As a result of today’s announcement, Alcoa will record a restructuring-related charge in the first quarter expected to be between $10 million and $15 million after-tax, or $0.01 per share.
By curtailinghigh-cost smelting and refining capacity, Alcoa supports its goal of lowering its position on the global aluminum cost curve to the 38th percentile and the global alumina cost curve to the 21st percentile, by 2016.
A global leader in lightweight metals technology, engineering and manufacturing, Alcoa innovates multi-material solutions that advance our world. Our technologies enhance transportation, from automotive and commercial transport to air and space travel, and improve industrial and consumer electronics products. We enable smart buildings, sustainable food and beverage packaging, high-performance defense vehicles across air, land and sea, deeper oil and gas drilling and more efficient power generation. We pioneered the aluminum industry over 125 years ago, and today, our approximately 59,000 people in 30 countries deliver value-add products made of titanium, nickel and aluminum, and produce best-in-class bauxite, alumina and primary aluminum products. For more information, visit www.alcoa.com, follow @Alcoa on Twitter at www.twitter.com/Alcoa and follow us on Facebook at www.facebook.com/Alcoa.
This release contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “estimates,” “expects,” “goal,” “plans,” “will,” or other words of similar meaning. All statements that reflect Alcoa’s expectations, assumptions or projections about the future other than statements of historical fact are forward-looking statements, including, without limitation, statements about Alcoa’s goal to create a globally competitive commodity business, the expected timing for completing the curtailment of the smelting capacity at its São Luís facility, and other statements about Alcoa’s strategies, outlook, and business and financial prospects. Forward-looking statements are subject to a number of risks, uncertainties, and other factors and are not guarantees of future performance. Important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices and premiums, as applicable, for primary aluminum, alumina, and other products, and fluctuations in indexed-based and spot prices for alumina; (b) deterioration in global economic and financial market conditions generally, or unfavorable changes in the markets served by Alcoa; (c) Alcoa’s inability to successfully realize goals established in each of its four business segments, at the levels or by the dates targeted for such goals (including moving its alumina refining and aluminum smelting businesses down on the industry cost curves and increasing revenues and improving margins in its Global Rolled Products and Engineered Products and Solutions segments); (d) changes in preliminary accounting estimates due to the significant judgments and assumptions required; and (e) the other risk factors discussed in Alcoa’s Form 10-K for the year ended December 31, 2014, and other reports filed with the Securities and Exchange Commission. Alcoa disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law.