Alcoa to Clean Up Grasse River

Aluminum giant Alcoa Inc. (AA - Analyst Report) announced that it will assist the U.S. Environmental Protection Agency (EPA) for the Proposed Remedial Action Plan (PRAP) to clean up the Grasse River, polluted by an Alcoa aluminum plant near New York's northern border. Alcoa has collaborated with the EPA to assess alternative remedies to deal with increased levels of polychlorinated biphenyls (PCBs) in fishes in the lower Grasse River.

Alcoa submitted an Analysis of Alternatives (A of A) report, which was prepared under the guidance of the EPA and other stakeholders. The EPA explored 10 different cleanup alternatives and PRAP is one of the options mentioned in the “A of A” analysis. The PRAP is also open to suggestions from the public till November 15, 2012. After the comments are received from the public, EPA will issue a final Record of Decision (ROD).

The ROD will be reviewed, after which the planning and designing is expected to take two to three years, followed by the actual remediation field work that is expected to take nearly four years. The majority of funding for the project will be spent between 2016 and 2020. Alcoa expects to incur an associated after-tax charges of about $85 million or 8 cents per share in its third quarter 2012 results.

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 company’s bottom line was hit by lower aluminum prices during the quarter.

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 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 (ACH) and RioTinto plc. (RIO - Analyst Report), currently retains a short-term Zacks #3 Rank (Hold) and we have a long-term Neutral recommendation on the stock.