Alcoa Arconic segments reported combined YoY profit growth in Q3 2016

The global lightweight metals major Alcoa reported third quarter 2016 results today. Arconic segments reported combined year-over-year profit growth despite near-term market challenges. Revenue totalled at $3.4 billion, ATOI $267 million, and adjusted EBITDA $517 million during the period under review.

Combined ATOI and adjusted EBITDA of the  innovation and technology-driven downstream segments increased 4 percent and 2 percent, respectively, year over year. The combined Arconic segments also generated $187 million in productivity as part of their business improvement programs, announced in the first quarter of 2016. Arconic segments are on track to deliver $650 million productivity savings in 2016.

Segment performance

Global Rolled Products

In the third quarter, Global Rolled Products reported ATOI of $58 million, compared to $62 million in the third quarter of 2015. Excluding the $18 million impact of transforming the Warrick rolling mill into a cold metal plant, the year-over-year change reflected a $14 million improvement, up 23 percent. Strong productivity and higher volumes in automotive more than offset cost increases, unfavorable product mix across most market sectors and pricing pressure in global can sheet packaging. Global Rolled Products continues to grow its automotive business and had a record quarter for automotive sheet shipments, up 49 percent year over year.

Engineered Products and Solutions

In the third quarter, this segment reported revenue of $1.4 billion and ATOI of $162 million. Year over year, revenue was up 1 percent driven by the RTI acquisition. ATOI was up $11 million, or 7 percent, year over year as productivity improvements in all business units and the positive contribution from the RTI acquisition were mostly offset by unfavourable price and product mix, cost headwinds and investments in growth projects.

Transportation and Construction Solutions

In the third quarter, Transportation and Construction Solutions delivered ATOI of $47 million, up 7 percent year-over-year. Results were driven by strong productivity, mostly offset by cost increases and lower volume. Growth in this segment’s building and construction business was more than offset by the performance of its commercial transportation business, which continued to feel the impact of softness in the North America heavy duty truck market.

Target Update

Global Rolled Products targets revenue of $4.8 billion to $5.0 billion for full year 2016. This is revised from $5.0 billion to $5.2 billion for full year 2016, a target adjusted from the earlier $6.0 billion to $6.2 billion.

Engineered Products and Solutions targets revenue of $5.6 billion to $5.8 billion for full year 2016, revised from $5.9 billion to $6.1 billion.

Transportation and Construction Solutions targets revenue of $1.7 billion to $1.8 billion, revised from $2.1 billion.

"Arconic’s results underline its strong position in higher margin markets where innovation, technology, process skills and cost focus pay off even under demanding circumstances, said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer.

"The Arconic segments are adjusting their targets to reflect current economic realities in their relevant industries. Looking ahead, fundamentals in key markets remain very solid; commercial aerospace demand is strong with an order book in excess of nine years and the aluminization in automotive continues. We are well positioned to further increase our market position and profitably grow,” Kleinfeld added.

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