Alcoa Corp.
Aa Blocks 62a226274cc0f

Supply Chain Woes Will Hurt Alcoa’s Q2

June 9, 2022
The company’s CFO said its shipping situation is improving but not as quickly as previously expected.

Shares of Alcoa Corp. fell more than 7% June 9 after the aluminum giant’s CFO said second-quarter shipments and prices will be below previous forecasts because supply chain snags have taken longer than expected to fix.

Speaking to a conference hosted by Deutsche Bank, Bill Oplinger said Alcoa’s Q2 profits are still on track to top those from the first three months of the year, when the Pittsburgh-based company posted a net profit of $469 million (and adjusted EBITDA of nearly $1.1 billion) on sales of nearly $3.3 billion but saw “unfavorable” volumes at all three of its segments in part because a lack of railcars to ship product from facilities in Australia and Quebec. Those problems are being resolved, Oplinger said, just not at the pace the Alcoa team had expected in late April.

“We still expect it to be a very strong quarter,” Oplinger said, before adding that, “given current pricing dynamics – prices are lower than what we had back at the beginning of the quarter – we would expect that overall EBITDA is lower in the second quarter than in the first.”

Oplinger added that demand for Alcoa’s products remains healthy for the most part. The COVID-related lockdowns in China affected business there and some auto industry customers are showing a bit of weakness. But in Alcoa’s important North American and European markets, the situation remains free of worries.

“I keep coming back to, ‘What does our order book look like?’” Oplinger said. “The order book is strong.”

Deutsche analyst Sathish Kasinathan asked Oplinger about Alcoa’s capital spending plans, including on possible acquisitions that would add capacity after the company’s push in recent years to shed some higher-cost operations. Oplinger didn’t sound very eager to allocate some of Alcoa’s dollars there.

“We look at all of it,” he said, speaking of companies or facilities brought to market. “But we’re really not focused on picking up high-cost assets […] If we’re going to acquire something, we want good, quality assets.”

At about 1 p.m. Eastern June 9, Alcoa shares (Ticker: AA) were changing hands at $57.70. Year to date, they’re now off about 4%.

About the Author

Geert De Lombaerde | Senior Editor

A native of Belgium, Geert De Lombaerde has been in business journalism since the mid-1990s and writes about public companies, markets and economic trends for Endeavor Business Media publications, focusing on IndustryWeek, FleetOwner, Oil & Gas JournalT&D World and Healthcare Innovation. He also curates the twice-monthly Market Moves Strategy newsletter that showcases Endeavor stories on strategy, leadership and investment and contributes to other Market Moves newsletters.

With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati in 1997, initially covering retail and the courts before shifting to banking, insurance and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in early 2008. He led a team that helped grow the Post's online traffic more than fivefold before joining Endeavor in September 2021.

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