Alcoa Counters Weak Demand With Cost Cuts

By Bob Tita 

Alcoa Corp. said job cuts and other cost reductions helped trim losses from lower aluminum prices as the coronavirus pandemic pushed the industrial economy into a deep trough.

The Pittsburgh-based company on Wednesday said those measures helped generate better-than-expected results for its latest quarter. "We realized gains in productivity, cost savings and also increased our cash balance," Chief Executive Roy Harvey said.

The company is scheduled to release results next Wednesday.

Alcoa's shares were down 2.4% at $10.97 in midday trading.

Alcoa in April said it would curtail production at its smelter in Ferndale, Wash., cutting about 700 jobs there. The company also has shifted production to more commodity-grade aluminum ingots sold by distributors in the wake of falling demand for higher-cost custom aluminum products and alloys used by the automotive and construction industries.

The reduction at the Ferndale smelter is the latest cost-cutting step taken by Alcoa in recent years. The company has sold some overseas operations, including two smelters in Spain. Alcoa also has another smelter in Washington that has been idle for several years.

Alcoa said its raw aluminum production increased approximately 3% in the second quarter, compared with the first quarter, even as the pandemic caused widespread outages at factories. The company said the first quarter is typically its weakest quarter for production.

Alcoa said it is continuing to restart operations at its smelter in Québec, a move that the company said should partially offset declining prices for aluminum with higher production. The restart is about 90% complete. Alcoa operates two smelters in Canada and is a partner in a third.

Alcoa is opposed to efforts by other aluminum manufacturers to urge the Trump administration to reinstate a 10% tariff on imported aluminum from Canada. The tariff would allow domestic producers to raise their own prices, but would raise Alcoa's costs for shipping its Canadian-made aluminum into the U.S. The duty on Canadian aluminum was lifted last year as a condition for negotiations to move forward on the new U.S. trade agreement with Canada and Mexico.

Alcoa has opposed the administration's tariffs on imported aluminum. Mr. Harvey has argued that duties don't address excess aluminum production in China, which drives down global aluminum prices.

Alcoa forecast second-quarter revenue of between $2.1 billion and $2.18 billion. Analysts had pegged revenue at $2.09 billion. The company expects a second-quarter loss of between $205 million and $190 million. On an adjusted per-share basis, Alcoa said it expects to record between an 8 cent loss and break-even.

Analysts polled by FactSet had expected an adjusted loss for the company of 58 cents a share.

--Matt Grossman contributed to this article.

Write to Bob Tita at [e-mail]

(END) Dow Jones Newswires

July 08, 2020 12:30 ET (16:30 GMT)

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