Aluminum giant to take a charge of at least $900 million
Shares of Alcoa Inc. fell as much as 7% in premarket trading Wednesday, a day after the aluminum giant announced plans to cut 13,500 jobs, close plants and further curb output to conserve cash.
Pittsburgh-based Alcoa also said late Tuesday that it will sell four businesses and take other steps that will result in a charge to fourth-quarter earnings of $900 million to $950 million.
But analysts at J.P. Morgan said in a research note Wednesday that these actions still may not be enough.
"Despite the moves announced yesterday by Alcoa to address the 'economic downturn,' we believe that even more decisive actions will have to be taken, including the elimination of the dividend, to preserve cash unless the aluminum price stages a quick rally back to the $1.00/lb level," they wrote.
Alcoa said it is slashing its global workforce by 13%, including 260 corporate staff. The company is also jettisoning 1,700 contractor positions, instituting a global salary and hiring freeze and buying raw materials from alternatives suppliers.
In all, the aluminum company is cutting capital expenditures by 50% to $1.8 billion. Annual aluminum output will drop by 18%, bringing its total yearly output cut to 35%, compared to the year before.
The global recession began to take a toll on Alcoa last fall. The company slowed output at its plants as aluminum prices tumbled and demand soured.
Alcoa sells its metal products to aerospace, automotive and construction companies.
"These are extraordinary times, requiring speed and decisiveness to address the current economic downturn, and flexibility and foresight to be prepared for future uncertainties in our markets," Alcoa Chief Executive Klaus Kleinfeld said in a statement.
Alcoa said it will divest its electrical and electronic systems unit that makes products for the heavy truck market and its global foil unit that sells to industrial and packaging firms. European transportation products and cast auto wheels will also be divested.
The company expects to get $100 million in proceeds from selling the four businesses that posted a combined 2008 after-tax operating loss of $105 million on sales of $1.8 billion.
The businesses employ 22,600 people at 38 locations.
Alcoa's stock is down 65% over the past year. It is a component of the Dow Jones Industrial Average.
