Must-know: Alcoa’s third quarter portfolio transformation


Nov. 20 2020, Updated 5:33 p.m. ET

Portfolio transformation

In the last part in this series, we discussed the portfolio transformation in Alcoa’s (AA) upstream operations. Another key highlight of this transformation is moving up the aluminum value chain. Alcoa intends to focus more on value-added sales at its midstream and downstream operations. In this part of the series, we’ll discuss the development in value-added sales in the third quarter.

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  • Firth Rixson acquisition – Alcoa announced the acquisition of Firth Rixson. Firth Rixson is the largest jet engine rings manufacturer. It gets ~75% of its revenues from aerospace industries. It adds new products and customers to Alcoa’s aerospace portfolio. The deal is expected to be complete before the end of the next quarter. Alcoa raised the capital for this deal in the third quarter. The deal is expected to boost Alcoa’s aerospace revenues by ~20%. Firth Rixson’s revenues are expected to grow at twice the growth in the aerospace industry. The previous chart shows the ongoing progress in this deal.
  • It signed multi-year contracts with Boeing and Pratt & Whitney. The combined value of these contracts is over $2 billion.
  • Alcoa opened the world’s largest aluminum-lithium facility in Indiana. Please be aware that this facility will produce components for the aerospace industry. For 2017, Alcoa already contracted $100 million in revenues from this plant.
  • Alcoa’s joint venture (JV) in Saudi Arabia is on track. This is expected to be the lowest cost smelter in the world. The JV generated profits in the third quarter.

In the next part of the series, we’ll analyze how Alcoa’s various business segments performed in the third quarter. Please be aware that investors can access the aluminum industry through Rio Tinto (RIO), Century Aluminum (CENX), Constellium (CSTM), and the SPDR S&P Metals and Mining ETF (XME).


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