Aluminum Producer Posts ‘Record-Setting’ Net Income & EPS in Q3

Source: Streetwise Reports   10/16/2021

Shares of Alcoa Corp. traded 15% higher to a new 52-week high after the company reported it achieved record net income of $337 million and earnings per share of $1.76 in Q3/21. The firm advised it is instituting a new $0.10 per share quarterly dividend and is raising its corporate share buyback program by $500 million.

After U.S. markets closed for trading yesterday, global bauxite, alumina
and aluminum products company Alcoa Inc. (AA:NYSE) announced financial results for the third quarter of 2021 ended September 30, 2021. Alcoa reported that it posted its highest ever quarterly net income and earnings per share in Q3/21 and stated that the results “eclipsed the prior quarter’s record-setting financial performance as the firm continues to capture benefits from strong aluminum pricing.”

The company reported that revenue in Q3/21 grew by 10% sequentially to $3.109 billion, compared to $2,833 million in Q2/21 and $2.365 million Q3/20. The firm noted that gains were mostly attributed to higher aluminum and alumina prices and higher premiums for its value-added products.

“Today, Alcoa is stronger and better poised for the future and we plan to continue our positive momentum and consistently deliver value through the commodity cycle.” —Roy Harvey, President & CEO

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Alcoa advised that for Q3/21 it posted net income attributable to Alcoa Corporation of $337 million, or $1.76 per share, compared to $309 million, or $1.63 per share in Q2/21 and a net loss of $49 million, or $0.26 per share in Q3/20. The company noted that “these record-setting results in Q3/21 were primarily due to higher aluminum and alumina prices, partially offset by the absence of the second quarter’s gain on the sale of the former Eastalco site and higher raw materials and energy costs.”

The company reported that adjusted net income rose to $391 million in Q3/21, which represents a 39% increase over the $281 million achieved during Q2/21. Similarly, adjusted EBITDA excluding special items increased to $728 million in Q3/21, which was 18% higher than the $618 million recorded in Q2/21.

Alcoa Corp.’s President and CEO Roy Harvey commented, “The strategic work we’ve been implementing across our company has helped us effectively capture the benefits from very strong market fundamentals and deliver another excellent quarter with record profitability…Today, Alcoa is stronger and better poised for the future and we plan to continue our positive momentum and consistently deliver value through the commodity cycle.”

The company advised that production of remained consistent in the latest quarter following the second quarter’s strong output. The firm mentioned that production in its alumina business decreased by 4% as a result of lower production in Western Australia, and a damaged ship unloader at the Alumar refinery in Brazil in July. The issue has mostly been rectified and production has returned back to about 95% of prior capacity at Alumar while permanent repairs are being made. Alcoa expects that the operation which is capable of handling 268,000 Mt of aluminum will be 100% operational in Q4/22.

The firm stated that it continues to evaluate the level of its production assets company-wide. The firm has been engaged in an analysis of its 1.5 million metric tons of smelting capacity since 2019. The review’s purpose has been to look for ways to improve, curtail, close or divest unproductive or underperforming assets.

Alcoa listed that to date, it has addressed more than 700,000 Mt of global aluminum smelting capacity since the review was first announced and as a result, “has curtailed the Intalco smelter in Washington State, repowered the Portland smelter in Australia, and announced the restart of 268,000 Mt of capacity at the Alumar smelter in Brazil.” The company noted that it is also still working on a solution for the 228,000 Mt San Ciprián aluminum smelter in Spain.

Alcoa announced also that it is instituting a new quarterly cash dividend on its common stock and will pay a $0.10 per share cash dividend to shareholders of record as of October 29, 2021, on November 19, 2021. In addition, the company advised that it is initiating a new $500 million share repurchase program which raises its current total share buyback authorization limits to a total of $650 million.

The company indicated that it continues its dedication to advancing sustainable growth initiatives. The firm noted that on October 4, 2021, it presented its goals of reaching “net zero greenhouse gas (GHG) emissions by 2050 for direct (scope 1) and indirect (scope 2) emissions.” The firm stated that the objectives are closely aligned with its ongoing efforts to reduce GHG emissions from aluminum smelting and alumina refining operations.

Alcoa commented that it believes that 2021 will continue to be a strong year as the economy keeps recovering and increased demand for aluminum across all end markets persists.

The company advised that “its Aluminum segment is forecasting double digit growth on year-over-year shipment volume of value-add products, and the company expects annual global demand for primary aluminum to increase approximately 10 percent relative to 2020 and to surpass the pre-pandemic levels in 2019.”

The firm said its outlook for shipments in both the Alumina and Aluminum segments remains unchanged and projects FY/21 Alumina shipments of 14.1-14.2 million Mt and expects Aluminum shipments of 2.9-3.0 million Mt.

The company stated that its outlook for Bauxite shipments is reduced by one million dry Mt to 49.0-50.0 million dry Mt mostly due to lesser demand at the Alumar refinery due to the previously mentioned unloader outage.

Alcoa advised that it anticipates continued positive financial results in Q4/21 and is well positioned to participate in strong market pricing.

Alcoa is based in Pittsburgh, Pa. and is global icon in the bauxite, alumina and aluminum products industries. The company owns one the world’s largest bauxite mining portfolios and operates global alumina refining systems and aluminum smelting networks. The company also produces large amounts of cast and rolled aluminum products.

Alcoa Corp. started Friday with a market cap of around $9.1 billion with approximately 187 million shares outstanding and a short interest of about 5.0%. AA shares opened nearly 7% higher at $51.92 (+$3.32, +6.83%) over Thursday’s $48.60 closing price and reached a new 52-week high price yesterday morning of $56.93. The stock traded Friday between $51.00 and $56.93 per share and closed at $56.00 (+$7.40, +15.23%).

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