not great newsAlcoa to Cut 6,500 Jobs, Shut Plants as Prices Fall (Update3)
June 23 (Bloomberg) -- Alcoa Inc., the world's biggest aluminum maker, said it will shed 6,500 jobs and close plants because of a drop in prices and higher energy costs, resulting in a second-quarter expense of $220 million to $250 million.
The cuts will save about $150 million a year before tax, Pittsburgh-based Alcoa said today in a statement. The plant shutdowns will include a smelter in Hamburg, Germany, and a factory in Kentucky that makes auto parts, the company said.
Chief Executive Alain Belda, 62, wants to reduce costs this year by $620 million by making factories more efficient and reducing purchasing costs as the cost of chemicals and energy used to make aluminum rises. Aluminum for delivery in three months has fallen 13 percent since this year's peak on March 11.
``Given their lack of delivery on the bottom line in the last year or so, it's the right thing to do,'' said Lloyd O'Carroll, an analyst for BB&T Capital Markets. O'Carroll has a ``buy'' rating on Alcoa's stock, which he owns.
Sale of Shares
Results in the quarter also will include $100 million to $120 million in benefits from tax settlements and $219 million for the sale of shares of Norwegian aluminum maker Elkem ASA in April, Alcoa said. The gains will be 36 cents to 39 cents a share, and the expenses will total 30 cents to 33 cents a share, Alcoa spokesman Kevin Lowery said.
``Alcoa's trying to offset increases in costs that are outside its ability to control such as rising oil prices and currency fluctuations,'' Charles Bradford, an analyst at Soleil Securities in New York, said in a telephone interview.
Bradford said Alcoa is behind schedule on a three-year plan unveiled in January of last year to trim expenses by $1.2 billion.
The company's first-quarter profit fell 27 percent to $260 million, or 30 cents a share, from $355 million, or 41 cents, on costs to fire about 1,800 workers and expenses related to the Elkem sale. Analysts expect the company in the current quarter to earn 49 cents a share, not including the special losses or gains. In the second quarter last year, the company had net income of $404 million, or 46 cents a share.
Alcoa's shares today fell 50 cents to $27.19 in New York Stock Exchange composite trading. They have declined 17 percent in the past year. They have risen 34 cents to $27.53 since the close of New York trading.
The company has 131,000 employees.
Last Updated: June 23, 2005 18:10 EDT