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Alcoa Gains Control of Evermore

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Aluminium giant Alcoa Inc. (AA - Analyst Report) has announced that it has gained full control of Evermore Recycling, effective August 31, 2012. Evermore Recycling was part of the joint venture between Alcoa and Novelis.

Evermore recycling, which is a used beverage container recycling specialist, has now become a part of Alcoa’s Global Packaging group and will remain headquartered in Nashville, USA.

Alcoa sees a great prospect in recycling and believes that aluminum cans are the most easily recycled containers. The company believes that full control of Evermore Recycling will make its stake stronger in the scrap markets.

Aluminum cans take less than two months to be converted into new cans.  Moreover, the energy requirement of the recycled cans is almost 95% lesser than the cans using primary metals. Aluminum has the unique ability of being recycled quite a number of times and about two thirds of the aluminum that was first produced in 1888 is still in the market.

Alcoa is a leading producer of primary and fabricated aluminum as well as the world’s largest miner of bauxite and refiner of alumina. The company released its second-quarter 2012 results in July 2012. It posted a loss of $2 million (break-even on a per-share basis) in the quarter compared with a profit of $322 million (or 28 cents a share) in the year-ago quarter. The bottom line was hit by lower aluminum prices.

Excluding one-time special items (including restructuring and other charges, litigation expenses and tax-related items), Alcoa earned 6 cents a share in the quarter, in line with the Zacks Consensus Estimate but below the year-ago earnings of 32 cents a share.

Revenues decreased 9.4% year over year to $5,963 million, surpassing the Zacks Consensus Estimate of $5,828 million. Though weak aluminum prices dragged down revenues, the company witnessed increased demand across aerospace and automotive markets in the quarter. Aluminum prices dropped 18% year over year and 4% sequentially in the second quarter.

Alcoa witnessed strong performances across all its businesses during the quarter, driven by higher utilization rates, process innovations, lower scrap rates and usage reductions. The company expects higher demand for aluminum from automobile, aerospace, packaging and commercial transportation end markets in the near term.

Alcoa, which competes with Aluminum Corporation of China Limited and RioTinto plc. (RIO - Analyst Report), retains a short-term Zacks #3 Rank (Hold). We currently have a long-term Neutral recommendation on the stock.

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