Aluminum giant, Alcoa Inc. AA said that it will permanently shut down its Pocos de Caldas primary aluminum smelter in Brazil on Jun 30, 2015. Operations at the smelter have been curtailed since May 2014 due to a lack of improvement in market conditions.
The share price of the company fell 1.8% to close at $11.15 on Tuesday.
With the closure of the smelter, Alcoa’s global smelting capacity will be reduced by 96,000 metric tons to 3.4 million metric tons. The company expects to incur restructuring-related charges in second-quarter 2015 between $100 million and $110 million (post-tax), or 8 cents to 9 cents per share, of which roughly 60% is non-cash.
Closure of this smelter will also improve the competitiveness of the company’s Primary Products business. The company has been making capital investments and remains on track to move down the cost curve and curtail capacities in its upstream business.
Also, Alcoa is focused on 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.
Alcoa topped earnings estimates in the first quarter of 2015 on the back of healthy demand from the aerospace and automotive markets, backed by its ongoing portfolio transformation initiatives. However, the company’s revenues lagged estimates.
The New York-based company logged a profit, as reported, of $195 million or 14 cents per share in the first quarter as against a loss of $178 million or 16 cents per share in the year-ago quarter. The results mark an increase from income of $159 million or 11 cents per share in the fourth quarter of 2014.
Alcoa recorded $158 million in restructuring charges in the reported quarter, primarily related to portfolio optimization.
Excluding one-time special items, earnings came in at $363 million or 28 cents per share in the reported quarter, much ahead of the year-ago earnings of $98 million or 9 cents per share. Earnings per share also surpassed the Zacks Consensus Estimate of 26 cents.
Revenues rose 7% to $5,819 million in the first quarter from $5,454 million in the year-ago quarter. The increase can mainly be attributed to organic growth, backed by strong automotive and aerospace volume. Revenues, however, missed the Zacks Consensus Estimate of $5,852 million.
Alcoa currently carries a Zacks Rank #3 (Hold).
Better-ranked companies in the mining space include Amerigo Resources Ltd. ARREF, Energy Fuels Inc. UUUU and Richmont Mines Inc. RIC. All of these hold a Zacks Rank #2 (Buy).
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