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Alcoa under the scanner – surviving in poor market conditions

Aug. 21, 2019 - Since Alcoa launched as an independent company – (after spinning off its downstream segment in November 2016, now rebranded as Arconic, the company has continued to fight tough market conditions to secure growth. The split was not a surprise to market watchers, as it came after the average LME cash price for 2016 hit the lowest level since 2003 (US$ 1605/tonne). But 2019 has registered some success for Alcoa, in the way the company has rationalised and increased production, while further lowering costs.

Alcoa posted a net loss of $402 million (US$ 2.17/share), which includes a $319 million one-off cost to divest from its 25.1% minority interest in the Ma’aden Rolling Company (MRC) in Saudi Arabia. The remaining US$ 81 million were earmarked for other special items (including a tax provision of US$ 22 million, US$ 8 million for the USW master agreement negotiation and other Becancour lockout related costs). With these move, Alcoa has been released from all future MRC obligations, including Alcoa’s support for MRC debt, and its share in any future MRC cash contributions. Excluding the impact and costs of special items, Q2 2019 adjusted net loss amounts to US$ 2 million, or $0.01 per share.

Alcoa continues to hold a a 25.1% stake in the joint ventures with Ma’aden on bauxite mining, alumina refining and aluminum smelting. Alcoa reached two new competitive labour agreements at smelters in Québec, where it agreed to six-year contracts at the Baie Comeau (May 31) and Bécancour (July 2) smelters in Canada. Ending an 18-month labour dispute, the Bécancour restart began on July 26. The full restart will be completed in the second quarter of 2020.

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