BA Boeing Co

By Robert Tita 

Arconic Inc. boosted its profit outlook for the year, as strong growth in its aerospace business propels the aluminum-components manufacturer towards a break up by the middle of 2020.

Arconic said profit in its aerospace-components unit was up 28% in the quarter, aided by cost cuts and price increases that raised the unit's sales by 6% from last year. The company reported strong demand for parts from jet-engine manufacturers and customers in the defense industry.

Arconic's shares fell 3.7% to $23.44. Arconic reported a second-quarter loss of $121 million. That reflected at a $357 million non-cash impairment charge on a product line acquired as part of the company's purchase of Firth Rixson in 2014.

Gains in Arconic's aerospace business came despite some softer demand for components Arconic makes for jet engines that General Electric Co. builds for Boeing Co.'s grounded 737 MAX. The extended grounding of the MAX following two fatal crashes has put a strain on the aerospace industry's production plans.

"If the engine rate is lower, then we will be moving some of that production capacity to meet demand for other engines in other areas, particularly for the military," Arconic Chief Executive John Plant told analysts on Friday during a conference call.

Arconic's aluminum-rolling unit, its second-largest business after aerospace, posted a 31% increase in profit even as sales remained essentially flat with last year. The company said cost reductions, favorable prices for raw aluminum and higher prices on its finished products for industrial and commercial-transportation customers contributed to the profit growth. Arconic has ceased production of aluminum sheet for beverage cans to make higher-margin products for the automotive industry

Arconic's board opted to pursue a breakup earlier this year after rejecting a $10 billion takeover offer from private-equity firm Apollo Global Management LLC crafted with input from the company's largest shareholder, activist hedge fund Elliott Management Corp. Mr. Plant, an Arconic director, was installed as chief executive officer to lead the dismantling of the company, which was hived out of aluminum giant Alcoa Inc. in 2016.

Arconic said its aerospace-components business will be known as Howmet Aerospace Inc. after a forgings and castings company acquired several years ago provided the foundation of the company's current aerospace business. The aluminum-rolling business will continue to be called Arconic.

The company said that the split is on track to be completed in the second quarter of 2020 and that it is recruiting board members and managers for the two companies.

Mr. Plant said he would lead the company through the breakup, rather than departing next February as planned when he was hired. Mr. Plant wouldn't say which company he will work at after the breakup.

"The important thing is to make sure we have continuity through the separation," he said.

Pittsburgh-based Arconic said it expects full-year adjusted earnings a share between $1.95 and $2.05. That was up from a previous forecast for earnings between $1.75 and $1.90 a share. The company maintained its revenue guidance of $14.3 billion to $14.6 billion.

Excluding the one-time charges, earnings were 58 cents a share. Analysts were expecting adjusted earnings of 50 cents a share. Overall sales were $3.7 billion, up from $3.5 billion in last year's second quarter.

--Michael Tobin contributed to this article.

Write to Robert Tita at robert.tita@wsj.com

(END) Dow Jones Newswires

August 02, 2019 13:13 ET (17:13 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.