The leaders of Alcoa Corp. are planning to spend more in 2022 to maintain their existing plants while they keep an eye out for possible acquisitions and wait for the projected returns of growth projects to improve.
Alcoa CFO Bill Oplinger on Tuesday told attendees of the Jefferies Virtual Base Metals & Battery Materials Summit that he, CEO Roy Harvey and their team view sustaining the company’s bauxite, alumina and aluminum operations as their top capital allocation program. The Pittsburgh-based company is on pace to spend $375 million this year on sustaining capital work (as well as $50 million on growth projects) but Oplinger told Jefferies analyst Chris LaFemina and other attendees that number will grow next year.
“We are making the choice to invest in stability in some of our plants so that will be an upward creep,” Oplinger said, adding that the Alcoa executives will detail their 2022 spending plans around the turn of the year. “We’re not talking a huge magnitude and we’re working through those numbers today. I think it’s the right thing [for] where we are in the market.”
Oplinger told the Jefferies summit he sees Alcoa as well-positioned in the current cycle despite various expense pressures because of its relatively lower cost of doing business. Its executives, he added, have some midsized growth projects on the table for their refining division but, with projected returns of between 10% and 15%, they “don’t excite us enough” to invest at this point.
Alcoa shares (Ticker: AA) were changing hands Wednesday at about $48. They have risen about 60% over the past six months and are about 10% below their post-2008 highs set in late in 2017.
