(AA) Alcoa in Joint Venture

Alcoa Inc.(AA) the largest U.S. aluminum producer, signed a memorandum with JSC Holding Inter-regional Distribution Grid Companies (JSC Holding IDGC), OJSC RUSNANO to set up a joint venture to develop and produce nano-coatings.

The new JV project will manufacture anti-icing nano-coatings for use in ground wires, cables and other parts of power transmission lines. In addition, the JV will produce advanced cables and wires with enhanced anti-icing and conductivity features for JSC Holding IDGC.

RUSNANO and Alcoa will be responsible for installing a pilot manufacturing line for nano-coatings application. As a part of the project, JSC Holding IDGC will support R&D, testing and new product certification.

The major issue faced by power engineers in Russia is the icing and breakage of power transmission lines because of bad weather conditions. This problem is expected to be fixed through the development of nano-coatings and production of advanced cables.

The production of next-generation cables and wires will help meet the demands of Russia’s power distribution grid. The joint venture will provide new opportunities for the Russian aluminum industry.

Alcoa Inc., a Pennsylvania-based corporation, is among the world’s leading producers of primary and fabricated aluminum and alumina. It involves the technology of mining, refining, smelting, fabricating and recycling of aluminum. We believe that Alcoa’s cost reduction efforts are, to some extent, offsetting the negative impact of higher energy and raw material costs on profitability.

The company is divesting underperforming assets through its restructuring program. The annual global consumption of aluminum products, both upstream and downstream, is expected to double over the next 15 years. This consumption boom will be driven primarily by growth in China, India, Russia and Brazil, whose demographics are accelerating development.

In April 2011, the company kicked off another earnings season with its first quarter posting an EPS of 28 cents and exceeding the Zacks Consensus Estimate by a penny. This does not account for the negative impact of special items or 1 cent per share. Should that be taken into account the EPS is 27 cents.

Revenues for the quarter were $5.96 billion, which missed the Zacks Consensus Estimate of $6.112 billion. Revenues, however, increased 22% year over year, helped by rising prices for aluminum and alumina.

The company posted improved profits across all its segments. This was followed by revenue growth in the end markets led by double-digit increases in packaging, automotive, commercial transportation and industrial products.

Currently, Alcoa has a short-term (1 to 3 months) Zacks #3 Hold rating and a long-term (6 months) Neutral recommendation.

Alcoa faces stiff competition from Aluminum Corporation Of China Limited (ACH), Rio Tinto Plc. (RIO) and BHP Billiton Ltd. (BHP).

ALCOA INC (AA): Free Stock Analysis Report

ALUMINUM CP-ADR (ACH): Free Stock Analysis Report

BHP BILLITN LTD (BHP): Free Stock Analysis Report

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