Alcoa Shares Drop as Tariff Impacts Add Up
July 19 2018 - 3:47PM
Dow Jones News
By Austen Hufford
Alcoa Corp. said it would continue to import aluminum from
Canada even as new tariffs make the metal more expensive.
The aluminum-maker said Wednesday that it incurred $15 million
of costs last month for the newly implemented tariffs on imports
from its foreign operations, primarily from Canada. Tariffs on
steel and aluminum imported into the U.S. went into effect at the
start of June.
Going forward, the company expects to pay $12 million to $14
million a month while the tariffs are in place.
Shares dropped 12% Thursday as the company cut its profit
outlook for the year, citing the tariffs and increased energy
costs.
Alcoa, which made about 14% of the aluminum it produced globally
last year in the U.S., reiterated its opposition to the blanket
tariffs, saying they are not the right way to help the U.S.
industry. The Pittsburgh-based company has been critical of
companies in China overproducing aluminum and supports reining them
in through negotiated reductions.
Industry watchers say that the U.S. dependence on aluminum from
Canada is unlikely to change as not enough aluminum is made
domestically and U.S. smelters are some of the oldest and most
expensive in the world.
Alcoa recently restarted a portion of its idle smelter in
southern Indiana, but Chief Executive Roy Harvey said the company
has no immediate plans to bring other curtailed smelters in the
U.S. back into service.
"Shielding uncompetitive smelters from the realities of global
supply and demand has resulted in frequent oversupply in the global
market for the last decade," Mr. Harvey said on a call with
analysts. "Tariffs will not solve the challenges facing the
aluminum industry."
Conversely, Mr. Harvey said that U.S. producers are benefiting
from higher domestic aluminum prices caused by the tariff. Alcoa
saw its average realized price on primary aluminum rise 19% from
the year before.
Nucor Corp., the largest U.S.-based steelmaker, said Thursday
that it has benefited from the rising prices. The company's average
sale price per ton in its second quarter rose 17% from a year
earlier as the company ramped up production.
Alcoa also wants to get Canada exempt from the tariff as the
company operates three smelters there.
For its second quarter, revenue at Alcoa rose 25% to $3.58
billion. The company brought in $75 million in earnings in the
quarter, the same as a year before. On a per-share basis, earnings
fell to 39 cents from 40 cents, as the average number of shares
rose. Adjusted for certain items, earnings per share came in at
$1.52, above the $1.32 expected by analysts.
For adjusted earnings before interest, taxes, depreciation, and
amortization, known as Ebitda, the company expects $3.0 billion to
$3.2 billion this year, down from $3.5 billion to $3.7 billion
previously.
Bob Tita contributed to this article.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
July 19, 2018 15:32 ET (19:32 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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