Aluminum giant, Alcoa Inc. (AA) announced that it will permanently shut down its Portovesme primary aluminum smelter in Italy that has been curtailed for nearly two years now.
The closure of the Portovesme smelter will cut the company’s smelting capacity by 150,000 metric tons to 3.6 million metric tons a year. Alcoa curtailed the plant in 2012 as it was one of its highest-cost smelters and displayed little scope of becoming competitive.
Due to the closure, Alcoa expects to book restructuring-related charges between $170 million and $180 million after-tax, or between 14 cents 15 cents per share, of which roughly 60% is non-cash, in third-quarter 2014.
Alcoa is making capital investments and remains on track to move down the cost curve and curtail capacities in its upstream business. The curtailments will improve the competitiveness of the company’s Primary Products business.
Alcoa’s second-quarter 2014 adjusted earnings skyrocketed 157% to 18 cents per share from the 7 cents earned in the year-ago quarter. Strong results from its downstream and primary metals businesses aided by higher aluminum pricing, led to the improved results.
Alcoa’s adjusted second-quarter earnings outpaced the Zacks Consensus Estimate by a healthy 38.46%. Moreover, the company continues to expect aluminum demand to rise 7% this year.
Alcoa has implemented a number of restructuring measures and is aggressively pursuing cost-cutting actions. The company, during the second quarter, completed the curtailment of 147,000 metric tons of smelting capacity in Brazil at Sao Luis (Alumar) and Pocos de Caldas.
The closure of the Italian smelter is in sync with Alcoa’s strategy of lowering its position on the world aluminum production cost curve to the 38th percentile by FY16.
Alcoa, a prominent mining company along with Aluminum Corporation of China Limited (ACH), currently holds a Zacks Rank #2 (Buy).