Alcoa Reports Q1 Earnings Amid Tariff Turmoil
Alcoa CEO Admits Tariffs Haven't Triggered Plans to Reactivate Idle Production Facilities
Double-edged tariffs got Alcoa Corp's executives in a spin. Bill Oplinger, CEO, and Molly Beerman, CFO, shared the details during a conference call post-earnings, revealing a net loss of $100 million due to tariffs this year.
The Numbers (approximate): First-quarter earnings clocked in at $548 million on sales of roughly $3.4 billion. These figures encompass a $20-million chunk of Canadian tariff costs incurred between March 12 and April-end.
The dust of tariff-related speculations hasn't quite settled, yet Alcoa's leadership remains confident, sticking to production and shipment targets for alumina and aluminum by 2025. The same team, however, has trimmed off a minor $20-million in depreciation due to currency exchange rate swings.
Market Indicators: Demand-wise, the first quarter showed some promising signs, Oplinger hinted, though higher North American volumes could be a result of companies bulk-buying before tariffs kicked in
Oplinger also reiterated his point from a couple of months back when asked about restarting idled parts of the Warrick plant in southern Indiana. Quoting "tariffs can change," he hinted the uncertainty in making such a significant decision.
Rather than restarting idled equipment, Oplinger endorsed the "most efficient aluminum supply chain" - shipping from Canada. About 70% of the 4.2 million metric tons of primary aluminum US companies imported last year came from Canada, compared to idled U.S. smelting capacity of just 600,000 metric tons.
Building new smelters to meet U.S. demand for primary aluminum is an arduous task requiring many years and several new nuclear reactors or over a dozen Hoover Dams' worth of additional energy production, Oplinger asserted.
Stock Performance: Shares of Alcoa (Ticker: AA) slid roughly 6% to $23.55 during afternoon trading the day following the earnings call. The share's six-month downturn translates to a steep loss of almost 40% of its value, a drop that slashes Alcoa's market capitalization to approximately $6.1 billion.
In the Loop
Alcoa's 2025 Production Targets:- Alumina Segment: Production between 9.5 and 9.7 million metric tons, shipments between 13.1 and 13.3 million metric tons.- Aluminum Segment: Production between 2.3 and 2.5 million metric tons, shipments between 2.6 and 2.8 million metric tons.
Impact of Tariffs: U.S. Section 232 tariffs on Canadian imports to the U.S. could cost Alcoa approximately $105 million by 2025, when combined with smelter restart costs.
- Despite the reported net loss of $100 million due to tariffs this year, Alcoa's leadership remains confident, maintaining production and shipment targets for alumina and aluminum by 2025.
- In an effort to mitigate depreciation due to currency exchange rate swings, Alcoa has trimmed off a minor $20-million.
- The first quarter shows promising signs in terms of demand, but higher North American volumes might be a result of companies bulk-buying before tariffs kicked in.
- With about 70% of the 4.2 million metric tons of primary aluminum US companies imported last year originating from Canada, shipping from Canada could be a more viable solution than building new smelters, which Oplinger asserted would require several years and considerable energy production.
