Alcoa Corp.
Aa Blocks

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%.

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