| Cost Pressures and Lower Premiums Hit Alcoa’s 1Q 2015 Earnings | |
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Alcoa in 1Q 2015: Transforming with the Times (Part 3 of 5) (Continued from Part 2) Global rolled products
Previously in this series, we learned how strong demand from the aerospace sector boosted Alcoa’s (AA) downstream revenues in 1Q 2015. Now, we’ll analyze the 1Q performance of its GRP (global rolled products) segment. This segment supplies rolled products to the automotive, aerospace, and packaging industries. The GRP segment after-tax operating income dropped by more than half compared to 4Q 2014.
Currently, Alcoa forms 3.5% of the SPDR S&P Metals and Mining ETF (XME). Century Aluminum (CENX) and Allegheny Technologies (ATI) respectively form 2.5% and 3.9% of XME.
Lower premiums
The previous chart shows the Alcoa GRP segment 1Q financial performance. As you can see, income has dropped substantially from the previous quarter. Despite record auto sheet shipments and productivity gains, the after-tax operating income has dropped ~42% year-over-year, or YOY. This segment was negatively impacted by the fall in physical aluminum premiums.
Cost pressures
Alcoa faced cost pressures in its packaging segment. Crown Holdings (CCK) is among the leading manufacturers of packaging products.
Alcoa also faced higher operating costs, as it ramped up production at its Saudi Arabia rolling mill. Higher research and development expenses for the new Micromill technology also dragged down its 1Q earnings.
Alcoa expects the after-tax operating GRP segment income to fall by 30% in 2Q 2015, YOY. It faces challenges in passing aluminum premiums on to its buyers in Russia. Aluminum prices have corrected over the last few months. However, the GRP segment still holds some high-cost inventories. Alcoa expects its 2Q earnings to be off by $15 million because it will offload higher-cost inventories first.
Alcoa took several portfolio actions in its upstream business. How have these impacted its 1Q earnings? We’ll find out in the next part on our series.
Continue to Part 4 Browse this series on Market Realist:
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Century Aluminum is a producing company based in United states of america. Century Aluminum is listed in United States of America. Its market capitalisation is US$ 1.5 billions as of today (€ 1.4 billions). Its stock quote reached its lowest recent point on March 06, 2009 at US$ 1.06, and its highest recent level on October 14, 2024 at US$ 17.41. Century Aluminum has 87 260 000 shares outstanding. |