Alcoa Corporation's stock experienced a 1.2% movement, with shares currently trading at $32.12 each. The company has released an 8-K filing, announcing the full curtailment of the Kwinana alumina refinery in Western Australia.
According to the filing, Alcoa Corporation will incur restructuring charges between $180 million and $200 million in the first quarter of 2024 due to the curtailment. These charges will include expenses for water management, employee-related costs, asset retirement obligations, and other costs. The company expects its share of the related cash outlays to be approximately $115 million, to be spent in 2024 and 2025.
The decision to fully curtail the refinery was based on various factors, including the refinery's age, scale, operating costs, current bauxite grades, and market conditions. The refinery, owned by the Alcoa World Alumina and Chemicals joint venture, is expected to see a significant reduction in the number of employees, from approximately 800 to about 250 in the third quarter of 2024 and further down to approximately 50 by the third quarter of 2025.
Alcoa Corporation anticipates an annual net income improvement of approximately $70 million (pre-tax and noncontrolling interest) beginning in the third quarter of 2024, compared to the refinery's net loss of approximately $130 million in 2023. It is expected that the curtailment will result in annual non-cash depreciation, depletion, and amortization expenses of about $40 million while curtailed.
Roy Harvey, President and Chief Executive Officer of Alcoa Corporation, stated, "The decision to fully curtail the Kwinana alumina refinery is a difficult but necessary one based on the current operating conditions and the outlook for the global alumina market. This action will improve Alcoa's cost structure and strengthen our overall business portfolio."
The company's full 8-K submission is available here.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $13,403 | $10,433 | $9,286 | $12,152 | $12,451 | $10,619 |
| Revenue Growth | n/a | -22.16% | -10.99% | 30.86% | 2.46% | -14.71% |
| Operating Margins | 12% | -4% | 2% | 10% | 6% | -7% |
| Net Margins | 2% | -11% | -2% | 4% | -1% | -8% |
| Net Income (MM) | $250 | -$1,125 | -$170 | $429 | -$123 | -$896 |
| Net Interest Expense (MM) | $122 | $121 | $146 | $195 | $106 | $105 |
| Depreciation & Amort. (MM) | $733 | $713 | $653 | $664 | $617 | $616 |
| Earnings Per Share | $1.33 | -$6.07 | -$0.91 | $2.26 | -$0.68 | -$4.76 |
| EPS Growth | n/a | -556.39% | 85.01% | 348.35% | -130.09% | -600.0% |
| Diluted Shares (MM) | 189 | 185 | 186 | 190 | 181 | 178 |
| Free Cash Flow (MM) | $49 | $307 | $41 | $530 | $342 | -$503 |
| Capital Expenditures (MM) | $399 | $379 | $353 | $390 | $480 | $514 |
| Current Ratio | 1.48 | 1.38 | 1.64 | 1.56 | 1.75 | 1.66 |
| Total Debt (MM) | $1,801 | $1,799 | $2,463 | $1,726 | $1,806 | $1,809 |
Alcoa has weak operating margins with a negative growth trend, declining EPS growth, and irregular cash flows. On the other hand, the company benefits from healthy debt levels and weak revenue growth and increasing reinvestment in the business.
