Jan. 22, 2014
Alcoa's Loss Belies Performance
Alcoa, New York, reported a net loss of $2.3 billion for both the fourth quarter and the full year primarily due to a one-time $1.7 billion impairment charge in its Primary Metals division. This compares to net income of $24 million in the previous quarter and income of $242 million in the same quarter last the previous year. Without the special charge, the aluminum giant would have seen $40 million in net income in the fourth quarter. All of the company’s business segments reported productivity gains.
"We delivered strong operating performance in the fourth quarter led by record downstream profitability as our strategy to build out the value-add businesses and lower the cost base in the commodity segment gained traction," Klaus Kleinfeld, Alcoa chairman and CEO, told investors and analysts during the company’s quarterly conference call. "In addition, we put a number of legacy matters behind us, clearing a path for Alcoa’s continued transformation in 2014."
Among its most noteworthy moves was Alcoa’s decision to take 16 percent of its global smelting capacity offline. Alcoa claims $1.1 billion in year-over-year productivity gains as a result.
"We started growing our value-add businesses and lowering the cost base of our commodity businesses at the height of the economic crisis. Today, this transformation is paying off, with the value-add businesses driving 57 percent of our revenues and 80 percent of our segment profits," Kleinfeld said.
Alcoa's revenue in the fourth quarter totaled $5.6 billion, a decline from both the same quarter in 2012 and the previous quarter. Sales for full-year 2013 totaled $23.0 billion, down 3.0 percent as aluminum prices declined 4 percent year over year.
In the company's global rolled products segments, income in the fourth quarter totaled $21 million, down 77 percent from the previous quarter and 70.4 percent from the same quarter in 2012. Sequentially, seasonal volume and pricing headwinds in packaging, aerospace and industrial were somewhat offset by record automotive shipments.
In 2014, Alcoa projects global growth of 7-8 percent in aerospace; 1-4 percent in automotive; 2-3 percent in packaging; and 4-6 percent in building and construction. Alcoa projects flat to modest growth in commercial transportation and an 8-12 percent decline in the industrial gas turbine market.
Overall, Alcoa forecasts global aluminum demand growth of 7 percent in 2014, following similar growth in 2013.