Alcoa reports net loss of US$199 million in first quarter of 2019; dismissal of Spain smelters impact results

Alcoa Corporation released first quarter 2019 results yesterday and reported a net loss of US$199 million compared to net income of US$51 million in Q4 2018. The 2019 first quarter results include the impact of US$156 million for special items driven by the dismissal of two smelters in Spain.

Commenting on the results, President and Chief Executive Officer Roy Harvey said, “We improved our operations in the first quarter, even as alumina and aluminium prices weakened.” “Our Bauxite and Alumina segments increased their production rates, and we took steps last quarter to restructure our Aluminum portfolio.”

Excluding the impact of special items, first quarter 2019 adjusted net loss dropped to US$43 million from net income of US$133 million in 2018.

Adjusted EBITDA excluding special items dropped 39% sequentially to US$467 million in Q1 2019. Revenue was down 19% to $2.7 billion. Both were attributed to lower alumina and aluminium prices. Cash from operations stood atUS$168 million and free cash flow was US$99 million. Cash in hand stood at US$1.0 billion and total debt stood at US$1.8 billion.

Alcoa’s shipment outlook for Bauxite, Alumina and Aluminum in 2019 remains unchanged YoY. Total annual bauxite shipments are expected to be between 47.0 and 48.0 million dmt. Total alumina shipments are projected to be between 13.6 and 13.7 million tonnes.  Aluminum shipments are likely to be between 2.8 and 2.9 million tonnes.

Lower bauxite and alumina costs are likely to bring moderate benefit to alumina and aluminium business in Q2 2019.

Alcoa projects a global aluminium deficit ranging between 1.5 million and 1.9 million tonnes in comparison to 1.7 million and 2.1 million tonnes projected in Q4 2018. The company projected a global aluminium demand growth of 2 to 3 per cent in 2-1 per cent in 2019, down from 3 to 4 per cent projected in the previous quarter, predominantly due to lower transport and electrical demand growth in China. Lower production expectations in Europe and South America are likely to lead to a global deficit.

Alcoa projects a surplus market for alumina in 2019 in the range of 200 thousand tonnes to 1 million tonnes. Alcoa estimates around 1 million tonnes of Chinese alumina surplus in 2019 contributing to global deficit.

The bauxite market is expected to have a slightly larger surplus in 2019 with stockpile growth ranging between 8 million and 12 million metric tons, driven by higher production projection in Australia, Guinea, and Southeast Asia.

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