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Industryweek 12132 Alcoa

Cost-cutting Boosts Alcoa Profits Despite Lower Sales

Oct. 11, 2016
Net earnings more than tripled due to cost-cutting efforts as the company continued to absorb the impact of shuttered smelters.

On the brink of its split into two separate companies, aluminum giant Alcoa reported on Oct. 11 a drop in third-quarter revenues on lower commodity prices and sluggish business activity.

Net earnings more than tripled due to cost-cutting efforts as the company continued to absorb the impact of shuttered smelters.

But investors were still disappointed as profits missed analyst forecasts, and the company's shares sank 9.5% in opening trade.

Alcoa continues to struggle with the global industrial slump and overcapacity in the aluminum industry.

That has meant an ongoing drag on sales in its alumina and primary metals business, which will keep the "Alcoa" name when the 128-year old company splits in two on November 1.

Revenues dropped 6.5% to $5.2 billion, but net income for the quarter ending September 30 was $166 million, compared with $44 million in the year-ago period.

Premium value-added businesses aimed at aerospace and other growing industries -- which will be hived off into the new "Arconic" unit -- were hit by softness in the North American commercial transportation business. Alcoa also cited delays in aerospace industry deliveries.

Offsetting those problems was a solid performance in its North American automotive industry sales.

"Fundamentals in key markets remain very solid; commercial aerospace demand is strong with an order book in excess of nine years and the aluminization in automotive continues," said Alcoa CEO Klaus Kleinfeld.

"We are well positioned to further increase our market position and profitably grow."

The higher profits reflect a series of cost-cutting measures and moves to cut capacity at less-efficient industrial facilities. Alcoa said it has achieved more than $1.1 billion in productivity savings in 2016 so far.

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