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Alcoa Unveils New Wheel Alloy

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Aluminum giant Alcoa Inc. (AA - Analyst Report) has launched the most advanced alloy for aluminum wheels. The new alloy called MagnaForce is lighter and is on an average 16.5% stronger than the industry standard 6061 alloy, also made by Alcoa. The new material also provides the same corrosion-resistance as compared with this industry standard.

Alcoa will utilize the new material to make wheels for commercial transportation, where demand for lightweight material is high, and to increase fuel efficiency. According to Alcoa, MagnaForce will ensure the strongest and lightest wheels as required to increase fleet payload and enhance stability along with reduced fuel utilization.

Alcoa invented the forged aluminum wheel in 1948 and has been the industry leader for the last 65 years. Alcoa launched the 6061 alloy about 45 years ago which is still used by all major forged aluminum wheel makers. Alcoa expects that MagnaForce will make its first commercial appearance as a new Alcoa forged aluminum truck wheel early next year.  

Alcoa serves the transportation market through its business unit Alcoa Wheel and Transportation Products. The unit is part of Alcoa’s downstream business, Engineered Products and Solutions. In the third quarter of 2013, Engineered Products and Solutions contributed 25% of the company’s total revenues.

A few days ago, Alcoa released its third quarter results. The company posted a profit of $24 million or 2 cents per share in the quarter compared with a loss of $143 million or 13 cents per share in the year-ago quarter. The results include restructuring and other one-time charges/gains of $96 million.

Excluding one-time special items, earnings were $120 million or 11 cents a share in the quarter, much ahead of the year-ago earnings of $76 million or 7 cents per share and Zacks Consensus Estimate of 6 cents. Productivity gains, strong demand from auto makers, healthy operating performance and cost cutting supported the results despite lower metal prices.

Revenues dropped roughly 1.2% to $5,765 million from $5,833 million in the year-ago quarter but exceeded the Zacks Consensus Estimate of $5,713 million. The decline was due to weak aluminum prices, offset by strong demand in the aerospace and automotive end markets.
Alcoa reiterated its global aluminum demand growth expectation of 7% for 2013.

Alcoa, a prominent player in the mining industry along with Aluminum Corporation of China Ltd , Atlatsa Resources Corp. (AT - Snapshot Report)L) and BHP Billiton Ltd (BHP - Analyst Report), is a world leader in production and management of primary aluminum, fabricated aluminum, and alumina. The company is also the world’s largest miner of bauxite and refiner of alumina.

Alcoa currently retains a short-term Zacks Rank #3 (Hold).

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