Alcoa, the global aluminium manufacturer, has announced a disappointing fourth quarter loss, which the company claims is due to one-off charges. A planned restructuring will include the sale of a number of the group's packaging activities.
The company announced a fourth quarter loss of $223 million (€212m), or $0.27 per diluted share. Sales for the fourth quarter were $5.06 billion compared to $5.10 billion in the fourth quarter of 2001. Sales for the year were $20.26 billion compared to $22.50 billion for 2001
The company said that the 2002 results were negatively impacted by significantly lower realised prices for primary aluminum and alumina, and lingering weaknesses in key end markets.
Excluding one-time charges, income from continuing operations was $133 million. Included within the income from continuing operations was approximately $40 million in various non-recurring after tax charges, the largest of which is an increase to its environmental reserves, principally for the Grasse River site in New York.
"Global manufacturing weakness has persisted longer than we anticipated," said Alain Belda, Alcoa CEO. "In particular, aerospace, industrial gas turbine and telecommunication markets remained soft, reinforcing the need to increase the scope of our cost savings and restructuring initiatives. These initiatives will give us increased flexibility for future profitable growth opportunities in our core activities."Alcoa recorded a special after-tax charge of $95 million in the fourth quarter of 2002 to restructure operations of businesses serving the aerospace, automotive and industrial gas turbine markets, and in the U.S. smelting system. The restructuring costs were mainly due to redundancy pay-outs for these divisions. Job losses are expected to be as much as 8,000 workers.
Alcoa also announced that it has conducted a portfolio review of its businesses and the markets they serve. It has established ongoing criteria for aluminum and non-aluminum businesses, including the ability to grow in excess of GDP or deliver superior returns in sectors where Alcoa has a sustainable competitive advantage. As a result of this review, Alcoa intends to divest certain businesses that do not meet these criteria in other sectors which will include its packaging division. Certain of the businesses to be divested include specialty chemicals and specialty packaging equipment in North America. Proceeds from the sales will be deployed primarily to reduce debt, increasing the company's flexibility for future growth opportunities in its core businesses.
"These actions further Alcoa's drive to improve our cost position in ongoing operations around the world, focus on customers in key downstream sectors, and grow in core markets," said Belda. "These initiatives, in conjunction with our continued focus on the application of the Alcoa Business System, will ensure that we will exceed our cost savings targets for 2003."
Alcoa is the world's leading producer of primary aluminum, fabricated aluminum and alumina, and is active in all major aspects of the industry, including packaging for the drinks can industry.