Alcoa posts lower profits for first quarter of 2016

The company is set to split in the second half of this year.

Alcoa Inc., a company which deals in metals, has reported a lower quarterly profit thanks to low commodity prices. Plant closures and disinvestments along with a strong U.S. dollar have compounded its problems. However the company’s top executives are confident that the demand for aluminum will far exceed the supply for 2016.

As a result of this shortfall in quarterly profits, Alcoa has lowered its 2016 outlook for global sales in the aerospace industry. Its shares have fallen by 5% in after-hours trading.

Of significant note is the fact that Alcoa is set to split in the second half of this year. Its traditional smelting business will retain the Alcoa brand and a new firm with the name of Arconic will be created for the value-added aerospace and automotive business which employs strong and light alloys that the company has worked hard to build in recent years.

However, this traditional business is being hurt by falling aluminum and alumina prices. Klaus Kleinfeld said during an interview with Reuters that he expects global aluminum demand to grow at 5% while supply is likely to grow by only 2%.

“That should create additional price support” for aluminum, said Kleinfeld.

He went on to add that the upcoming split will act as a vehicle to “achieve the profitability that we want to get to.”

Alcoa expects the global sales of aluminum to the aerospace industry to grow in the range of 6% to 8% in a year. This is down from its earlier forecast which it made during the fourth quarter of 2015 wherein it had said it expects it to grow at 8% to 9%.

Revising the forecast, Kleinfeld said he was confident of his revised outlook citing long backlogs for orders in the airline industry. He expects the global automotive production industry to grow in the range of 1% to 4% in 2016.

New York based Alcoa has posted its first quarter net profit of $16 million, equivalent to 0 cents a share, which is down from its comparative $195 million, 14 cents a share, profit in the same period, last year.

Analysts had expected an EPS of 2 cents a share. The company said excluding one-time items, its EPS is 7 cents a share.

Revenues for the first quarter have also fallen by 15% to $4.95 billion from its comparative amount of $5.82 billion in the previous year. Analysts had expected it to be in the vicinity of $5.14 billion.


Categories: Economy & Finance, HR & Organization, Strategy, Uncategorized


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