Aluminum giant Alcoa Inc. (AA) announced that it will permanently shut down the remaining two potlines at its Massena East smelter in New York in the first quarter of 2014. The step has been taken by Alcoa as the potlines were no longer competitive.
The move will reduce Alcoa's smelting capacity by 84,000 tons. The company’s Massena West facility will not be affected and Alcoa will work with the New York Power Authority and others to ensure its continuing success at Massena West. Alcoa’s strategy of curtailments is consistent with its previously announced 2016 goal of lowering its position on the world aluminum production cost curve to the 38th percentile and the alumina cost curve to the 21st percentile.
Alcoa has already closed one of the three potlines at the Massena facility in Aug 2013. Including the closure of the remaining two potlines at Massena East, the company has announced closures or curtailments representing 361,000 metric tons of the 460,000 metric tons that were placed under review in May 2013.
After the completion of the closures of the two Massena East potlines, Alcoa will have a total smelting operating capacity of 3,950,000 metric tons, with roughly 655,000 metric tons of capacity idle. The company expects to incur restructuring-related charges of between $60 and $70 million (after-tax) or 6 cents per share, of which around 40% is non cash, in the first quarter of 2014.
Recently, Alcoa released its fourth quarter 2013 results. The company posted a loss of $2.3 billion or $2.19 per share in the fourth quarter of 2013 compared with a profit of $242 million or 21 cents per share in the year-ago quarter. The loss was mainly due to the sizable goodwill impairment charges of $1.7 billion related to acquisitions in the Primary Metals business.
Excluding one-time special items, earnings came in at $40 million or 4 cents per share in the reported quarter, below the year-ago earnings of $64 million or 6 cents. It also missed the Zacks Consensus Estimate of 6 cents.
Revenues dropped roughly 5.3% to $5,585 million in the fourth quarter from $5,898 million in the year-ago quarter but exceeded the Zacks Consensus Estimate of $5,391 million. The decline was primarily due to weak aluminum prices which declined 7% year over year.
Alcoa is a Zacks Rank #3 (Hold) stock.
Other companies in the mining industry worth considering include General Moly, Inc. (GMO), Atlatsa Resources Corp. (ATL) and Tahoe Resources Inc. (TAHO). All of them retain a Zacks Rank #2 (Buy).
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