Alcoa Counters Weak Demand With Cost Cuts
July 08 2020 - 12:45PM
Dow Jones News
By Bob Tita
Alcoa Corp. said job cuts and other cost reductions helped trim
losses from lower aluminum prices as the coronavirus pandemic
pushed the industrial economy into a deep trough.
The Pittsburgh-based company on Wednesday said those measures
helped generate better-than-expected results for its latest
quarter. "We realized gains in productivity, cost savings and also
increased our cash balance," Chief Executive Roy Harvey said.
The company is scheduled to release results next Wednesday.
Alcoa's shares were down 2.4% at $10.97 in midday trading.
Alcoa in April said it would curtail production at its smelter
in Ferndale, Wash., cutting about 700 jobs there. The company also
has shifted production to more commodity-grade aluminum ingots sold
by distributors in the wake of falling demand for higher-cost
custom aluminum products and alloys used by the automotive and
construction industries.
The reduction at the Ferndale smelter is the latest cost-cutting
step taken by Alcoa in recent years. The company has sold some
overseas operations, including two smelters in Spain. Alcoa also
has another smelter in Washington that has been idle for several
years.
Alcoa said its raw aluminum production increased approximately
3% in the second quarter, compared with the first quarter, even as
the pandemic caused widespread outages at factories. The company
said the first quarter is typically its weakest quarter for
production.
Alcoa said it is continuing to restart operations at its smelter
in Québec, a move that the company said should partially offset
declining prices for aluminum with higher production. The restart
is about 90% complete. Alcoa operates two smelters in Canada and is
a partner in a third.
Alcoa is opposed to efforts by other aluminum manufacturers to
urge the Trump administration to reinstate a 10% tariff on imported
aluminum from Canada. The tariff would allow domestic producers to
raise their own prices, but would raise Alcoa's costs for shipping
its Canadian-made aluminum into the U.S. The duty on Canadian
aluminum was lifted last year as a condition for negotiations to
move forward on the new U.S. trade agreement with Canada and
Mexico.
Alcoa has opposed the administration's tariffs on imported
aluminum. Mr. Harvey has argued that duties don't address excess
aluminum production in China, which drives down global aluminum
prices.
Alcoa forecast second-quarter revenue of between $2.1 billion
and $2.18 billion. Analysts had pegged revenue at $2.09 billion.
The company expects a second-quarter loss of between $205 million
and $190 million. On an adjusted per-share basis, Alcoa said it
expects to record between an 8 cent loss and break-even.
Analysts polled by FactSet had expected an adjusted loss for the
company of 58 cents a share.
--Matt Grossman contributed to this article.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
July 08, 2020 12:30 ET (16:30 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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