Company will have 21% of smelting capacity offline when actions complete
NEW YORK & SÃO PAULO--(BUSINESS WIRE)--Alcoa (NYSE: AA) today announced it will curtail 147,000 metric tons of smelting capacity at its São Luís (Alumar) and Poços de Caldas smelters in Brazil due to challenging global market conditions in primary aluminum and increased costs that have made the smelters uncompetitive. The curtailments are expected to be complete by the end of May 2014.
In 2013, the Company curtailed 34,000 metric tons at Poços and 97,000 metric tons at São Luís. The new curtailments will include the remaining 62,000 metric tons of capacity from the Poços smelter, resulting in a full curtailment of its three potlines. Another 85,000 metric tons will be curtailed at São Luís.
“Across the globe, we are taking measures to curtail high-cost smelting capacity that is not competitive and reshape our cost profile,” said Bob Wilt, President of Alcoa Global Primary Products. “These are difficult but necessary actions in support of Alcoa’s strategy to lower the cost base of our upstream businesses.”
As a result of the smelter curtailment, the Poços refinery will also reduce production accordingly. The mine, aluminum powder plant and casthouse at Poços will continue normal operations, as will the refinery at São Luís. Other Alcoa operations in Brazil are not affected.
“We know how deeply this decision affects our employees, our contractors and our communities,” said Aquilino Paolucci, President of Alcoa Latin America and the Caribbean. “While our teams have worked incredibly hard to make these facilities more competitive, we must take steps regarding our primary metal production in Brazil given the market conditions we are facing. We appreciate the support of governments at all levels, and will actively work in partnership with our employees, unions, and community stakeholders to manage through this transition and minimize the impact.”
In May 2013, Alcoa placed 460,000 metric tons of smelting capacity under review. Once all announced curtailments and closures are complete, Alcoa will have approximately 800,000 metric tons, or 21 percent, of smelting capacity offline.
Total restructuring-related charges associated with the Brazil curtailments in the first quarter are expected to be between $40 million and $50 million after-tax, or $0.04 to $0.05 per share, of which approximately 30 percent would be non-cash.
Alcoa’s review of its primary metals operations is consistent with the Company’s goal of lowering its position on the world aluminum production cost curve to the 38th percentile and the alumina cost curve to the 21st percentile, by 2016.
About Alcoa in Brazil
Alcoa operates in Brazil throughout the aluminum production chain, from bauxite mining to the production of transformed and value-add products. Alcoa has 5,700 employees and six production units and offices in the states of Maranhão, Minas Gerais, Pará, Pernambuco, Santa Catarina, São Paulo and Federal District. Alcoa owns 100% of the Poços smelter, and the São Luís smelter is owned 60% by Alcoa Alumínio and 40% by BHP Billiton. The Company also has shareholdings in Mineração Rio do Norte (MRN) and in four hydroelectric power plants: Machadinho, Barra Grande, Serra do Facão and Estreito. In 2013 it was considered the most sustainable company in its industry and in the category of Relationship with Suppliers of the Guia EXAME de Sustentabilidade [EXAME Magazine’s Sustainability Guide]. In the same year, it was recognized for the twelfth time as one of the Best Companies to Work and for the second consecutive year the Best Company for Women to Work in Brazil, by the Great Place to Work Institute.
A global leader in lightweight metals engineering and manufacturing, Alcoa innovates multi-material solutions that advance our world. Our technologies enhance transportation, from automotive and commercial transport to air and space travel, and improve industrial and consumer electronics products. We enable smart buildings, sustainable food and beverage packaging, high-performance defense vehicles across air, land and sea, deeper oil and gas drilling and more efficient power generation. We pioneered the aluminum industry over 125 years ago, and today, our 60,000 people in 30 countries deliver value-add products made of titanium, nickel and aluminum, and produce best-in-class bauxite, alumina and primary aluminum products. For more information, visit www.alcoa.com, follow @Alcoa on Twitter at www.twitter.com/Alcoa and follow us on Facebook at www.facebook.com/Alcoa.
This release contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those containing such words as “estimates,” “expects,” “goal,” “plans,” “will,” or other words of similar meaning. All statements that reflect Alcoa’s expectations, assumptions or projections about the future other than statements of historical fact are forward-looking statements, including, without limitation, statements about Alcoa’s strategies, outlook, and business and financial prospects. Forward-looking statements are subject to a number of known and unknown risks, uncertainties, and other factors and are not guarantees of future performance. Important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices and premiums, as applicable, for primary aluminum, alumina, and other products, and fluctuations in indexed-based and spot prices for alumina; (b) deterioration in global economic and financial market conditions generally, or unfavorable changes in the markets served by Alcoa; (c) Alcoa’s inability to successfully realize goals established in each of its four business segments, at the levels or by the dates targeted for such goals (including moving its alumina refining and aluminum smelting businesses down on the industry cost curves and increasing revenues and improving margins in its Global Rolled Products and Engineered Products and Solutions segments); (d) changes in preliminary accounting estimates due to the significant judgments and assumptions required; and (e) the other risk factors discussed in Alcoa’s Form 10-K for the year ended December 31, 2013, and other reports filed with the Securities and Exchange Commission. Alcoa disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law.