Aluminum giant, Alcoa Inc. (AA - Free Report) announced that it plans to permanently close its Fusina primary aluminum smelter in Italy. The announcement was made to reduce costs as well as to improve its competitiveness. Alcoa had already curtailed activities at the facility in Jun 2010.
The planned closure of the facility will reduce Alcoa’s global smelting capacity of 4.2 million metric tons per year by 44,000 metric tons. The move is in addition to a bigger restructuring plan announced by Alcoa last month.
In May, Alcoa announced the possibility of a cutback in aluminum production. The company stated that it will review 460,000 metric tons of smelting capacity over the next 15 months for potential curtailment. These initiatives by the company are aimed at maintaining competitiveness in the market as aluminum prices declined by more than 33% from their peak levels in FY11.
Alcoa stated that it will work with the affected communities to explore ways to redevelop the Fusina smelter and has also promised to consult local unions on how to help the laid-off employees. The facility employs only 14 people.
As a result of the closure, Alcoa expects to incur total restructuring-related charges for 2013-second quarter in the range of $30 million and $35 million after-tax, or about 3 cents per share, of which approximately 50% is non-cash.
Alcoa, which is among the prominent players in the mining industry along with Aluminum Corporation of China Limited , Atlatsa Resources Corporation and BHP Billiton Limited (BHP - Free Report) , is a world leader with respect to production and management of primary aluminum, fabricated aluminum, and alumina as well as the world’s largest miner of bauxite and refiner of alumina. Alcoa currently retains a short-term Zacks Rank #4 (Sell).
Alcoa released its first quarter 2013 results in Apr. The company’s profit surged roughly 59% in the quarter, buoyed by strong aluminum demand. It posted a profit of $149 million or 13 cents per share in the quarter, exceeding the profit of $94 million or 9 cents recorded a year ago. The results were driven by strong demand across the aerospace and auto markets.
Excluding one-time special items, Alcoa earned $121 million or 11 cents a share in the quarter, beating the Zacks Consensus Estimate by a penny and exceeding $105 million or 10 cents per share posted in the year-ago quarter.
Revenues declined roughly 3% to $5,833 million from $6,006 million in the year-ago quarter and were below the Zacks Consensus Estimate of $5,857 million. Sales were hurt by lower aluminum prices and reduced production in Alcoa’s primary metals business in Europe.